China's nearly three decades' drive to reform and develop its economy has yielded, in addition to the remarkable growth of wealth, a pool of celebrated economists. They are interpreting, with old and new theories, various phenomena that happened during the transition from the State-planned economy to the market economy.

These scholars have won high public esteem with their explanations of how wealth is, and should be, produced and used. Some of them, however, are so obsessed with their theories that they sometimes ignore social reality and make stupid remarks.

A few days ago, a well-known economist commented on the government's decision not to raise train ticket prices during the Lunar New Year holidays, saying that the decision was "against the rule of market economy".

It is really shocking that a distinguished economist should have uttered such a remark that goes against common sense.

Common sense says that what is theoretically right may not be necessarily applicable in reality.

Even a beginner studying economics knows that market rules are not the only deciding force in the allocation of resources in an economy and that interference by the government is needed under certain conditions.

As a public resource operated on a national grid, railway transportation cannot be readily privatized under the present conditions in China, where trains are the largest fast carrier of passengers and cargo for long-distance travel. The railway has to be operated by the government.

With this in mind, the pricing of train tickets should not be purely decided by market supply and demand. Non-market factors should also be considered in the pricing.

According to market theory, when the demand for a certain commodity exceeds the supply, the price goes up. This in turn will reduce part of the demand and lead to a new balance of supply and demand. In the case of railway tickets, the higher price will reduce the number of train passengers, making it easier to buy a ticket and increasing the comfort of the trip.

The reality in China, however, is a far cry from this theory. Most Chinese who work away from their hometowns go back for the Spring Festival. The vast majority choose to take trains and most of the train passengers are rural migrant workers and university students.

Suppose the price of train tickets were allowed to rise to the point where supply equaled demand during the Spring Festival. Richer people would have more ease obtaining tickets for less crowded trains while most rural migrant workers would be denied the means to travel home for family reunions.

Raising railway ticket prices was tried in previous years. The reality was that all who wanted to go home by train did so anyway. Tickets were still difficult to obtain and trains were still crowded. The only difference was that poor people had to part with more of their hard-earned money.

The government's decision this year not to raise the train ticket price is correct, given its role as the only operator of the nation's railway system and keeper of public assets.

It is an unreal presumption that all things economic will fare in the most efficient, reasonable way so long as they follow the free fluctuation of supply-demand market relationships. Even in mature capitalist economies, government interference is not completely excluded. Laws and government stipulations on minimum wages, labor protection, social welfare, industrial subsidies, and other compulsory obligations forced on enterprises are in effect government interference.

Email: liushinan@chinadaily.com.cn

(China Daily 03/14/2007 page9)