Theory and path of social governance in the fuzzy zone between public and private power: an economic analysis of law on the basis of the routine dispute settlement mechanism

TANG Qingli1,2 HE Zhen3

(1.School of Law and the Collaborative Innovation Center for Financial Security, Southwestern University of Finance and Economics)
(2.Division of Politics, Department of Justice, Sichuan Province)
(3.Law School, Southwest University for Nationalities)

【Abstract】The foundation of science for social governance is the effective management of routine conflicts by law. China’s social governance order is subject to the system of public and private laws’ separation, and all social conflicts are also derived from the interest game under the system. In general, the analysis on the game of routine disputes also shows that any retaliatory breach by any party with enforcement power within any special organization to punish the speculation of the other party may lead to a fuzzy zone between public and private power beyond the system and social conflicts, for which the traditional management mechanism is inefficient. If institutional design aims at social welfare maximization, the social management mechanism under various market types shall be designed as follows: (1) limited judicial intervention should be sought in the oligopolistic market; (2) in the market with complete monopoly or perfect competition, given general norms with certainty and definite preference of adjudicators towards the norms, any third party recognized by the two parties shall be allowed to intervene in the dispute settlement. The theory could provide support for scientifically defining the boundaries between government and market in the social governance of the fuzzy zone between public and private power, reasonably distributing the rights and obligations of government, society, and individuals, and developing the validity space of technical or managerial norms. Meanwhile, it also provides theoretical grounds for scientifically establishing diversified dispute settlement mechanisms.

【Keywords】 fuzziness between the private and public power; routine conflicts management; routine dispute; economic analysis of law;

【DOI】

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(Translated by GENG Qingyou)

    Footnote

    [1]. ① Case 1: a university of Shandong stipulates by enrollment guide that anyone obtaining 640-659 points in the college entrance examination will enjoy the exemption from tuition fees and accommodation fees as well undergraduate-graduate education. However, a student failed three basic disciplines in the first year after enrollment, and then the university deprived him of the above preference according to the Students’ Teaching Management Regulations. The student then sued the university for breach before Court A. The university defended itself by the reason that it managed, while the student should receive management. The court recognized the claim of the university for independent management power and then rejected the prosecution by deeming it not covered by civil procedure (Dong Zhen, 2003). Case 2: in 2004, a male and a female students behaved intimate by kissing among others in a classroom of some university, which was found by the classroom monitor. The university dismissed the students according to the College Students Management Regulations, the Rules for Students of the university and other documents on norms. The student then challenged the decision and raised administrative procedure before the people’s court of District A, and then the court rejected the prosecution after trial by deeming it not covered by administrative procedure (Nie, 2004). The two cases, though both as unimpressive old cases, are still very typical in China today. Meanwhile, since they occurred in universities as typical the fuzzy zone between public and private power, this paper chose one of them for analysis. [^Back]

    [2]. ② The criticism is inaccurate or experiential at least about judicial corruption, imperfect legal system, over national administrative intervention and so on. Similar cases also include Liu Yan vs. Peking University, Tian Yong vs. University of Science and Technology Beijing, and the case of female student dismissed for pregnancy. [^Back]

    [3]. ③ Because no separation of public and private laws exists. [^Back]

    [4]. ④ Path Dependence means that the technological or institutional evolution in the human society has inertial similar to that of physics, namely one may depend on any path (good or bad), when entering it. Once making any choice, people almost embark on a road of no return. The strength of inertia may constantly strengthen the choice and make you hard to escape. It is Douglass North (Douglass C. North, 1955) who made the theory of Path Dependence well-known. [^Back]

    [5]. ⑤ To prove the opinion, Zhang Weiying took such examples as the failure of China’s Firework Prohibition Order and the U.S. Alcohol Prohibition Order (Zhang Weiying, 2006). [^Back]

    [6]. ⑥ For example, the Civil Code, formulated to pursue logic and democracy, excludes the intellectual property law with more and more important influence on the society. [^Back]

    [7]. ⑦ Though the case has been closed for years, repeated occurrence of similar cases shows that it is still very typical. It clearly demonstrates how the parties with the traits of both public and private laws conduct game by law. In addition, for better understanding and summarizing the third parties, this paper failed to adopt litigation, persecution, litigation fees and other concepts by the analysis method of economics of law and in strict sense of procedure law. [^Back]

    [8]. ⑧ The third party mentioned by this paper refers to court or any party intervening in the dispute settlement of the parties. [^Back]

    [9]. ⑨ The ability of social order maintenance beyond the internal management and internal norms of law has been fully recognized by the scholars (Richard A. Posner, 2001). [^Back]

    [10]. ⑩ That lawsuit is caused by the opportunism of the party other than the party with public power means that the principal seeking third-party intervention may be the party other than the party with public power against, for example, non-performing of the party with public power (party in an advantageous position) (when the party other than the party with public power takes opportunistic action, if exogenous institution does not prohibit breach, the party with public power (party in an advantageous position) as rational person must choose breach rather than lawsuit before the third party, for cost of the party with public power (party in an advantageous position) with recourse to public law is lower than that to private law), or the party with public power (party in an advantageous position) against, for example, the opportunistic action of the party other than the party with public power. However, if the party other than the party with public power does not take opportunistic action, persecution may not occur against two-stage dynamic game. [^Back]

    [11]. ⑪ In fact, before the start of the game, Participant I (namely the party with public power (party in an advantageous position) ) and II (namely the party other than the party with public power) had carried out dynamic game in advance, namely Participant I may choose action a from the feasible set A = {providing contract, not providing contract}; and II observe a and then choose action b from the feasible set B = {accepting contract, rejecting contract}. Since this paper pays much attention to the performance, diligence strategy options as well as interaction of the two parties, the part of game is not presented. However, since the strategy that the party with public power (party in an advantageous position) provides preferential contract contains the the fuzzy zone between public and private power mentioned by this paper, namely about the belonging of the interpretation power of the rest of contract, this part of game as the forward link of the subsequent formal dynamic game has certain effect on the game parties. Meanwhile, if the party with public power (party in an advantageous position) chooses to abandon formal game and has theoretical conditions for exit (if it chooses no contract in the forward link), this paper may present it by dotted line in the game tree.In fact, before the start of the game, Participant I (namely the party with public power (party in an advantageous position) ) and II (namely the party other than the party with public power) had carried out dynamic game in advance, namely Participant I may choose action a from the feasible set A = {providing contract, not providing contract}; and II observe a and then choose action b from the feasible set B = {accepting contract, rejecting contract}. Since this paper pays much attention to the performance, diligence strategy options as well as interaction of the two parties, the part of game is not presented. However, since the strategy that the party with public power (party in an advantageous position) provides preferential contract contains the the fuzzy zone between public and private power mentioned by this paper, namely about the belonging of the interpretation power of the rest of contract, this part of game as the forward link of the subsequent formal dynamic game has certain effect on the game parties. Meanwhile, if the party with public power (party in an advantageous position) chooses to abandon formal game and has theoretical conditions for exit (if it chooses no contract in the forward link), this paper may present it by dotted line in the game tree. [^Back]

    [12]. ⑫ Suppose the output of the party other than the party with public power has the following relationship with its diligence: y=e+ε, where e denotes diligence andε random disturbance term, ε~N (0, σ2). The party with public power (party in an advantageous position) may observe the output of the party other than the party with public power (such as the students’ academic performance) rather than its diligence. However, in general, with the expected value of random disturbance as 0, we may equal the output of the party other than the party with public power to its diligence in terms of expected value. In fact, with Case 1 as an example, the high learning ability (namely with high scores of entrance examination) of the students involved in Case 1 may remove the uncertainty of learning output in terms of expected value.Suppose the output of the party other than the party with public power has the following relationship with its diligence: y=e+ε, where e denotes diligence andε random disturbance term, ε~N (0, σ2). The party with public power (party in an advantageous position) may observe the output of the party other than the party with public power (such as the students’ academic performance) rather than its diligence. However, in general, with the expected value of random disturbance as 0, we may equal the output of the party other than the party with public power to its diligence in terms of expected value. In fact, with Case 1 as an example, the high learning ability (namely with high scores of entrance examination) of the students involved in Case 1 may remove the uncertainty of learning output in terms of expected value. [^Back]

    [13]. ⑬ For example, in Case 1 the students were enrolled by first-class universities or public-funded for studying abroad. [^Back]

    [14]. ⑭ For example, in Case 1 the university obtained the capital of promotion, and the students the chance. [^Back]

    [15]. ⑮ In Case 1, it can be understood as the treachery of any of the two parties made the benefits obtained from the governing authorities (such as chance of public-funded education abroad) not consumed. Meanwhile, the two parties obtained just the incentive from the common wish for the future in signing the preferential contract. Such a benefit is obviously lower than that created by the students’ consuming the preference (namely chance of public-funded education abroad) to both parties. [^Back]

    [16]. The Litigation Fees Charging Measures of the People’s Court requires the following about charging litigation fees: “firstly, litigation fees are prepaid by the plaintiff”; and “secondly, the case acceptance fees are paid by the losing party”. However, the gist of this paper expands the meaning of litigation fees into those paid for seeking third-party payment, where the payment principle is consistent with the procedure law. [^Back]

    [17].