ABSTRACT
Mainland China enjoyed a greater abundance of natural resources than Taiwan or Hong Kong, which suggests that other factors such as political stability, economic institutions, secure property rights, the rule of law, and individual incentives play a role. Meanwhile, on the Southeast coast of China, the British restored administrative rule over their Crown Colony of Hong Kong, which the Japanese had sundered during World War II. In Taiwan, Chiang Kai-shek’s government initially undertook policies of land reform and import-substitution-based industrial development, which entailed substantial government participation in the economy. In the real world, economic activity always takes place in some political, institutional setting, where government officials make a wide variety of economic decisions and allocate large amounts of resources. The notion of a free-market economy is a simplified model employed by economists, a point that is helpful in understanding the concept of economic efficiency.
