The Rise and Fall of the Sand Monopoly in Colonial Hong Kong

36 Pages Posted: 9 May 2016

See all articles by Lawrence Wai-Chung Lai

Lawrence Wai-Chung Lai

The University of Hong Kong - Department of Real Estate and Construction

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Frank T. Lorne

Universitas 21 Global - Economics; University of Hong Kong

Date Written: April 8, 2016

Abstract

A state monopoly over a scarce natural resource under open access can arguably reduce the costs of supply by constraining rent dissipation. A monopoly over the collection and trading of sand was formed in Hong Kong by legislation in 1935 in the wake of disputes between sandmen and villagers and imminent shortages of sand. Arguably, a monopoly at this stage of Hong Kong’s development was a better alternative to merely defining rights over sand extraction in terms of the transaction costs of enforcement. During the 1950s and 1960s, when Hong Kong’s economy and construction industry began to boom, the monopoly’s existence was further justified due to the politics of China being the sole source of Hong Kong’s sand supply. However, this case study of the sand monopoly and its post-war operation as a bilateral monopoly shows that it did not protect coastal villagers, as violations of the sand law were not infrequent. The local sand supply was huge, and its abolition in 1981 was followed by a long period of falling, rather than rising, real wholesale prices of the resource. Nor was there any sign of scale economies, as claimed by the government. The policy implications of this are discussed.

“Where monopoly rests on man-made obstacles to enter into a market, there is every case for removing them.” (Hayek 1960:pp.265-266)

Keywords: Schumpeterian innovation, transaction costs, open access property, sand, state monopoly

JEL Classification: A10, B25, D42, H00, L12, L30, L72, N55

Suggested Citation

Lai, Lawrence W. C. and Chau, Kwong Wing and Lorne, Frank T., The Rise and Fall of the Sand Monopoly in Colonial Hong Kong (April 8, 2016). Ecological Economics, Vol. 128, 2016, Available at SSRN: https://ssrn.com/abstract=2777300

Lawrence W. C. Lai (Contact Author)

The University of Hong Kong - Department of Real Estate and Construction ( email )

Hong Kong
China
(852) 259 7988 (Phone)
(852) 2559 9457 (Fax)

Kwong Wing Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)28592128 (Phone)
(852)25599457 (Fax)

Frank T. Lorne

Universitas 21 Global - Economics ( email )

5 Shenton Way
#01-01 UIC Building, 068808
Singapore

University of Hong Kong

Pokfulam Road
Hong Kong, HK
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
56
Abstract Views
461
rank
405,086
PlumX Metrics