The Incentive-constraint Cognitive Framework, Basic Thought, Principles and Recommendations for the Optimization of Income Distribution

Abstract

Income distribution is a major and complex issue that directly affects the vital interests of hundreds of millions of people. To deepen the reform of the income distribution system, it is necessary to clarify the accurate connotation of the relationship between “fairness and efficiency” under the framework of “incentive-constraint”, make a correct analysis on the causes of income differences, and lay a foundation for understanding the rationality of the policy. The basic idea of optimizing income distribution in China should be to use the vision of common prosperity as the “goal-orientation” and combine the “problem-orientation” to accelerate the strategic transformation from “getting rich first” to “getting rich together”. The basic principles to be followed are the following: encourages entrepreneurial innovation with reasonable income distribution; recognizes the contribution of each factor and combines the distribution according to work with the distribution according to other factors; and appropriately allows and tolerates the expansion of the income gap in the first half of the “inverted U curve”, that is, actively adjusts and holds “polarization”; builds a system-engineered distribution system with promoting transparency, encouraging enthusiasm, promoting harmony and helping the weak as essentials; promotes the dynamic optimization of the distribution system and policy system with reform, namely effective institutional supply as the leader. On this basis, establish a system of initial distribution of national income with sound rules and fair process; establish a system of national income redistribution with appropriately equalized results; improve the third distribution system of national income; and promotes the reform of the supporting system for national income distribution.