Guan Xi 关系- Kirzner and the Chinese

Kirzner's writes in Uncertainty, Discovery, and Human Action, "it appears equally plausible to associate entrepreneurship with that aspect of human action in which the alert individual realizes the existence of opportunities that he has up until now somehow failed to notice".

GuanXi (关系, pronounced goo wan shee) is a word in Chinese literally translated as "relationship". What it really means is your social network. Hayek teaches us in Use of Knowledge that the totality of information in a market is limited. No one individual, according to Hayek, can attain comprehensive knowledge about a market condition. Chinese have known this principle for ages. That is why GuanXi is vital. You know in your limited frame, inputs of production that are vital for someone else's pure profit potential. Your neighbor likewise has knowledge that may benefit you. It is through the network or GuanXi, that the awareness of entrepreneurial opportunities of pure profit arise.

So, if you want to do business in China, make sure you bring a strong stomach to eat strange things, and a patience to sit for long hours doing business in a restaurant or tea house.

China's Substantive Property Protection Law

Hayek defines in Planning And The Rule of Law "formal rules" and describes them "as a kind of instrument of production", meaning the Rule of Law drives economic prosperity. An anomaly of this is the fact that a land rife with human rights abuses, corruption, and bribery has one of the largest GDP growths in the world. You know who - China. Let's assume that China's government officials are honest and report their GDP growth fairly, what do we make of this anomaly?

Surprisingly, Chinese officials have decided to become a modern society and attempt at property protection law (Economist March 10th - 16th 2007). This isn't something to cheer about because a look under the hood shows a substantive law rather than a formal one.
We learned from Hayek that a substantive law serves a unique group and must define the terms and conditions of every situation. As Hayek writes, "It must provide for the actual needs of people as they arise and then choose deliberately between them...It must set up distinctions of merit between the needs of different people."

Hayek's description of substantive law is just what China's property law applies. In fact it serves to benefit a remnant of their society while the pheasant populations do not. However, just this week in the Economist (Apr 7th-13th 2007), there is news of a family who fought AND WON for their compensation over their forcefully confiscated home! They are the first in China who fought for their property rights and won!

I'm not saying Americans are better than Chinese that made us inherently form a formal law system of government. It is something in our history that made a group of human beings who otherwise would accept and perpetuate a central authority, form a rule of law. My question is, why did the rule of law spontaneously develop in America? What made our history special that our country's foundation is stewardship of the rule of law? Understanding this, I think, would help understand how we can translate otherwise non-rule of law cultures into thriving societies.