Senior Seminar on The Wealth and Well-Being of Nations: ach year, seniors in the department of economics participate in a semester- Elong course that is built around the ideas and influence of that year’s Upton Scholar. By the time the Upton Scholar arrives in October, students will have read several of his or her books and research by other scholars that has been influenced by these writings. This advanced preparation provides students the rare opportunity to engage with a leading intellectual figure on a substantive and scholarly level. Endowed Student Internship Awards: portion of the Miller Upton Memorial Endowments supports exceptional A students pursuing high-impact internship experiences. Students are encouraged to pursue internships with for-profit firms and non-profit research organizations dedicated to advancing the wealth and well-being of nations. Charles G. Koch Student Research Colloquium and Speaker Series: ith generous support from the Charles G. Koch Charitable Foundation, Wthe department has initiated a research colloquium that gives students the opportunity to read and discuss seminal articles aimed at deepening their understanding of the market process. Students also develop original analysis that applies economic ideas to novel contexts. Colloquium participants receive close mentoring as they craft an article with the eventual goal of publication in a newspaper, magazine, or academic journal. The themes of the research colloquium and annual forum are supported with a speaker series featuring the next generation of scholars working on questions central to our understanding of the nature and causes of wealth and well-being. Annual Proceedings of The Wealth and Well-Being of Nations: he keynote address presented by the Upton Scholar is an important Tcontribution to the public discourse on the nature and causes of wealth and well-being. Further, the annual forum includes presentations by noted scholars who expand upon or challenge the work of the Upton Scholar. These presentations are assembled in the Annual Proceedings of the Wealth and Well- Being of Nations, which serves as an important intellectual resource for students, alumni, and leaders within higher education. The Annual Proceedings of the Wealth and Well- Being of Nations 2015-2016 Volume VIII Warren Bruce Palmer Editor Jennifer Kodl Managing Editor Copyright © 2016 Beloit College Press. The Annual Proceedings of the Wealth and Well-Being of Nations, 2015-2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form, or by any means, electronic, mechanical, recorded, photocopied, or otherwise, without the prior permission of the copyright owner, except by a reviewer who may quote brief passages in a review. Printed in the United States of America ISBN: 978-0-578-18317-6 Contents Introduction Warren Bruce Palmer................................................................................ 9 State Capitalism in China Yasheng Huang....................................................................................... 19 Barriers to Entry and Regional Economic Growth in China Loren Brandt ......................................................................................... 51 Entrepreneurship with Chinese Characteristics: China, Taiwan and the Tech Industry Carrie Liu Currier ................................................................................. 63 Yasheng Huang and the Turning Points in China’s Transition Barry Naughton ..................................................................................... 83 The Values of Entrepreneurship in Early Modern China S.E. Kile ................................................................................................ 97 Divine Entrepreneurs: Buying and Selling (the Same Thing, Over and Over) on China’s Southern Sacred Mountain Robert André LaFleur ........................................................................... 115 An Economy of Words: Observations on Fictional Narrative and Entrepreneurship in Early Modern China Daniel M. Youd ................................................................................... 141 Contributors Warren Bruce Palmer is the Elbert H. Neese, Jr. Professor of Economics, Beloit College. Yasheng Huang was the 2015 Miller Upton Scholar and is the International Pro- gram Professor in Chinese Economy and Business and a Professor of Glob- al Economics and Management at the MIT Sloan School of Management. He is also an Associate Dean at MIT Sloan School of Management. Loren Brandt is Professor of Economics, Noranda Chair in Economics and Inter- national Trade, University of Toronto. Carrie Liu Currier is Associate Professor of Political Science & Director of Asian Studies, Texas Christian University. Barry Naughton is Sokwanlok Chair of Chinese International Affairs, Professor of Chinese Economy, International Relations and Pacific Studies, University of California, San Diego. S.E. Kile is Assistant Professor in the Department of Asian Language and Cultures and a postdoctoral fellow at Michigan’s Society of Fellows, University of Michigan. Robert André LaFleur is Professor of History and Anthropology, Chair, Asian Studies and History, Beloit College. Daniel M. Youd is Professor of Chinese Language and Literature, Beloit College. I 9 Introduction Warren Bruce Palmer1 s the Elbert H. Neese, Jr. Professor of Economics, it was my pleasure to organize the eighth Wealth and Well-Being of Nations: a Forum in Hon- or of Miller Upton, and now, in turn, to introduce the eighth Annual PrAoceedings of the Wealth and Well-Being of Nations, a selection of papers presented at the Forum. rough its Miller Upton Programs, the Department of Economics at Beloit College focuses the attention of its students, faculty, broader College community and alumni on the core issues of human freedom and on what promotes and what impedes the wealth and well-being of nations. e centerpiece of this suite of programs is the annual Wealth and Well-being of Nations: A Forum in Honor of Miller Upton. Held each fall, the Miller Upton Forum features one of the world’s most inuential thinkers on the ideas and insti- tutions necessary for advancing the freedom, wealth and well-being of the nations and peoples of the world. Each year’s Miller Upton Scholar is joined on campus by a group of other thinkers and practitioners who engage us in a week of en- lightening classroom discussions, forums, and one-on-one conversations, capped o by the Miller Upton Scholar’s keynote address -- e June B. Martin’40 and Edgar W. Martin Memorial Lecture. e Miller Upton Programs and the Miller Upton Forum are named in hon- or of Miller Upton, the sixth President of Beloit College, and are inspired by Miller’s unagging dedication to the ideals of a liberal society: political freedom, the rule of law, and peace and prosperity through the voluntary exchange of goods and ideas. In this eighth forum, we turned our attention to “Entrepreneurship and the Chinese Economy”. e economic well-being of one-fth of the world’s popula- tion depends on the performance of the Chinese economy; more than 1.3 billion people make their living in this ancient land that holds less than 7 percent of the 1 Warren Bruce Palmer is the Elbert H. Neese, Jr. Professor Economics, Beloit College. 10 T A P W W-B N world’s cultivated acreage. No other event in the last forty years has done more to advance wealth and well-being in the world than the revival of entrepreneurship in China.2 Historical Context China had a long history as the dominant Asian power with a vibrant, com- mercial economy. In 1800, China’s economy was the largest in the world, ac- counting for over 25 percent of global output. But the industrializing world soon eclipsed traditional China, which suered through 150 years of domestic crisis and economic stagnation exacerbated by foreign invasion. By 1949 one-fourth of the world’s population lived in China, but its economy produced only 5 percent of global output, and most of its citizens lived in terrible poverty. e triumph in 1949 of the Chinese Communist Party in its civil war with the Nationalist Party produced China’s most eective national government in more than 100 years. e new government achieved some remarkable successes, particularly in public health, raising life expectancy from less than forty years in 1949 to near seventy years by 1978. Yet, the economic record was very mixed. e Chinese Communist Party adopted a Soviet-style command econo- my, bringing to a halt China’s rich history of entrepreneurship and commerce, shutting down private market activity and putting ‘politics in command’ of the economy and people’s daily lives. By the late 1970s, China had established itself as a major industrial power, but its industry was ine¡cient, producing inferior products using antiquated technology, and its industrial expansion served mainly to expand heavy industry itself, not to expand consumption or rapidly improve living standards. Even in urban China, which received preferential treatment, consumer goods were low in quality, lacking in variety and hard to get, even with ration coupons. In rural China, with 80 percent of the nation’s population, the growth of agricultural output had barely kept pace with the growth of population. Hundreds of millions of China’s rural citizens still lived in severe poverty, and China was substantially poorer than Sub-Saharan Africa. After thirty years attacking market activity and repressing individual freedom and