The Review of Western Incentive Regulation Theory

Western incentive regulation theory emerged from the end of 1970's to the beginning of 1980's;it is based on the theory of information asymmetry that will lead to the problem of entrust and agent between the person who makes the regulation and the person who will be regulated,that is the so called reverse choice and moral risk.So,the western incentive regulation theory is mainly on how to avoid the problem of entrust and agent.The authors also analyze the approaches of incentive regulation in the western countries.The authors conclude that,though we are the developing socialism market economy country that is during the period of transformation and is different from other advanced capitalism market economy countries,the problem of entrust and agent is also important for the government while implementing regulations on enterprises.The theory of western incentive regulation can not only be used to solve the problem of the low efficiency of distribution and production for the regulated enterprises,but also can provide more experiences for Chinese regulated enterprises in terms of technology.Certainly,there are some shortages in this theory.So,while learning from the experience of this theory,we should consider the shortage of that and the problem of the suitability,especially the characteristics of China's market economy,such as the characteristics of socialism,transformation and undeveloped.