Water Governance and State Governance: A Transaction Cost Perspective of China’s Unitarianism

Abstract: Unitarianism (da yi tong) is both an important characteristic of Chinese civilization and a key to understanding it, yet there are still issues about China’s unitarianism that remain a puzzle. The theory of the water governance school as represented by Karl Mark, Karl Wittfogel and Ray Huang is perhaps the most useful explanation of why China embarked on unitarianism more than 2000 years ago. This paper attempts to deduce this theory by using the transaction cost approach, and constructing a choice model of governance structure based on the relevant literature. Using the framework of this model, the paper adopts historical materials as evidence for the structure choice in China’s water governance and then explains how the hierarchical structure of water governance led to a unitary empire, and how it can be used to interpret the mechanism of the formation, operation and disintegration of China’s unitarianism. The study suggests a move away from a unitary system towards a federal system of state governance in contemporary China.