【10】R.H.Coase，“The Problemof Social Cost,” Journal of Lawand Economics（October 1960）.In an earlier and equally impor-tant paper，Coase wrote: “What does not seem to have been under stood is that what is being allocated by the FCC，or，if there were a market，what would be sold，is the right to use apiece of equipment to transmit signals in a particular way.Once the question is looked at in this way，it is unnecessary to think interms of ownership of frequencies or the ether”.Coase，“The Federal Communications Commission,” Journal of LawandEconomics（October 1959），p.33.amount to a contract granting the private use of resourceswithout private title.The development of the responsibili-ty contract is central in this paper，so I will defer a more detailed discussion to a later section.
I pass on to Beijing，circa August 2006.Zhou Qirenshowed me two books of mine，the collections of essays The Future of China（1985）and On China Again（1986）.11 Both were originally Hong Kong publications,but photographed and reprinted，with the fly-leaf bearinga stamp that says: For Internal Reading Only.The books were listed as internal or ‘secret’ reading materials for Beijing comrades，and I have never been so happy to seemy books pirated（reportedly 2000 copies each）.The influence of Coase is clear and pervasive through out these two collections of papers.
Ⅲ.A General Concept of Contracts
12Armen Alchian advanced the thesis that competition is implied in any society where there is scarcity，and the
【11】张五常，《中国的前途》与《再论中国》，二者皆再版多次，目前由花千树出版。
【12】On July 31，2002，Milton Friedman’s 90th birthday，I wrotein Chinese on “The General Theory of Contracts,” which appeared in a chapter entitled “Contract Theory and the Nature of the Firm.”（张五常，《制度的选择》，第五章。
） From May 24 to August 9，2007，I published eleven articles discussing“The Missing Link in Economics.”（张五常，《经济学的缺环》与《从安排角度看经济缺环》，后者分十篇。《壹周刊》）Thissecond series of articles was written to prepare myself for the present paper dedicated to Coase.In my view，Section Ⅲ，when combined with the above articles，yields a complete general the-ory of contracts.
rules which determine winners or losers can be interpret-ed as property rights.As Armen’s student and inspiredby China’s experience，I have tried to understand theworld froma modified angle.In my view，competitionfor the use of scarce resources must be restrained for social survival，because rent dissipation under unre-strained competition would result in starvation for all.These restraints can assume a variety of forms or differ-ent structures of rights，which then define the institution-al nature of the economic system.
Rights structures restraining competition are of fourbroad types，and they generally co-exist in any society.First is the delineation of rights in terms of property，orprivate property rights.Second is the delineation of rights in terms of hierarchical ranking，or the comrade-seniority system which prevailed under China’s previousregime.13 Third is to restrain competition through regu-lation.
【13】In a different way，hierarchical ranking is also observed infirms in a capitalistic economy.However，the ranking of com-rades in a communist system differs in important aspects with the ranking of personnel in a private firm，with the former being clos-er to the ranking systemof a government-funded enterprise suchas a public hospital or a public university.In so far as rankingsgo，the main point of departure fromcapitalistic firms is that,under communist China，a citizen did not have the right of notjoining and had no right to change jobs without governmentapproval.Freedomto choose jobs would bring about the collapseof the comrade-ranking system.When this began to emerge inthe Pearl River basin in late 1983，I immediately wrote that eco-nomic reformin China had reached the point of no return.Upnorth，this freedomof choice did not occur until around 1992,after Deng Xiaoping toured the south in the spring of that year.
Finally，competition may be restrained by cus-toms or religion.Because restraining competition implies mutually-agreed actions，implicit or explicit，voluntary or involun-tary，it implies the existence of contracts.The latter need not be market contracts using market prices to transferrights.I noted in 1982 that a country’s constitution is acontract.14 Private property rights，hierarchical rankings,regulations，customs and religion——all are in my viewcontractual arrangements of different types.
The broad concept of contracts introduced here isessential.We may in principle classify one type of con-tracts as intended for the delineation of rights for the pur-pose of restraining competition，and another type asintended for the transfer of rights，or market contractsusing market prices（though the use of market prices is also a way to restrain competition）.15 Difficulties arisebecause these two types of contracts are not always easyto separate，and in China the two are frequently inter-woven.We shall come to this interesting arrangementlater.