The Bactra Review   Economic Behavior and Institutions

---

The phrase comes from Mark Elvin's excellent The Pattern of the Chinese Past (Stanford University Press, 1974), which, oddly enough, is not cited by Eggertsson, who refers to China only in the context of the Cultural Revolution. Elvin's account of post-Sung China is of a system which made extensive use of market mechanisms, but where there were almost no integrated firms, and suggests this was due to the efficency of the markets. He goes on to suggest, provocatively, that a certain degree of market failure stimulates technical progress, by allowing innovators to reap the value of their innovation, or at least a large share of it, rather than having these gains dissipated by competition.