ABSTRACT
Legislator Lim takes an institutional economics perspective on resolving the cross-straits impasse between Taiwan and the People’s Republic of China (PRC). Using the theories of several renowned economists such as R.H. Coase, Yang Xiao-kai, and Stephen Cheung, Lim sets forth a theory of contracts based on economic efficiency. He argues that economic efficiency requires an institutional framework based on free competition among different institutions. A vital element of an efficient system is an equitable legal framework that safeguards various rights associated with private property—the free negotiation of contracts.
Applying these considerations to the PRC–Taiwan relationship, Lim argues that the optimal contract conditions for the cross-straits relationship parallel those for economic efficiency—that is, a framework that “safe-guardfsj the right to appropriate resources and the right to exclude encroachment by others, and expressly safeguard[s] bilateral rights to freely negotiate contracts.” In essence, these are Taiwan’s rights to independent sovereignty and self-determination. The PRC’s failure to respect these basic ground rules, he continues, is the main culprit behind the current cross-straits impasse.
Lim concludes that a possible resolution of the impasse is one based on pragmatic considerations. The most economically efficient conditions, then, are those that adopt the ground rules of self-determination and mutual respect for sovereignty.
