Orthodox economics systematically and rigorously (using mathematical methods) analyzes the rational behavior of consumers and producers to maximize under constraints, and the equilibrium achieved by their mutual relations (especially in resource allocation), as well as the change or comparison of equilibrium. This includes the following points:
1. 1
1.2 Rationality
1.3 Resource allocation (relative to system and organization)
4 Equilibrium (as opposed to disequilibrium and history)
1.5 Most scholars emphasize the efficiency of the market and the inefficiency of the government.
Generally speaking, it is assumed that consumers maximize the utility representing their preferences, and utility is only a function of the number of consumer goods consumed by consumers themselves. The constraint condition is that the total expenditure cannot exceed the consumer's budget or income. The producer assumes that the profit is maximized, and the constraint condition is the production function influenced by the existing technology. Individual consumers and producers assume that they cannot influence the prices of products and factors of production determined by the balance of supply and demand in the whole market.
2. Advantages of orthodox economics:
Economics, known as the queen of social sciences, has its own advantages, including:
2. 1 is an important aspect of economic behavior.
2.2 There is a rigorous analysis and many insightful conclusions.
2.3 The constrained maximization analysis method can be used to analyze unorthodox factors; This will be very important in the future.
In fact, orthodox economics is very useful for analyzing many problems in real economy and social life. For economists, this point is relatively unnecessary to repeat. Therefore, I will talk more about the shortcomings. Please don't mistake me for thinking that orthodox economics is useless.
disadvantage?
3. 1 Many economists are superstitious about simplified models. Even an unrealistic simplified model is not without its merits. For example, when it comes to the motion of objects without friction, mechanics is also useful for the real world with friction. However, we should not be superstitious about the simplified model, and we must consider the complex factors of the real world when applying the simplified model to the real world. Superstition in simplified mode can be illustrated by an example. Many years ago, I attended the annual meeting of American economics. A speaker said that, for example, a moderate price increase of 3% is beneficial, because different industries need to be adjusted because of changes in preferences and technologies, and resources, including manpower, must be transferred from shrinking industries to growing industries. To achieve this transfer, wages in shrinking industries must fall. If prices don't go up, nominal wages must go down. However, people have great resistance to the reduction of nominal wages, so it is better to keep nominal wages unchanged and reduce real wages by raising prices. One participant asked, "This is impossible. Whether real wages are reduced by price increase or nominal wages are reduced, the impact on consumption and utility is the same. It is irrational to resist the reduction of nominal wages. " I think I am a person with a very high level of rationality, but I also have resistance to the reduction of nominal wages. Rather than saying that this is impossible or irrational, it is better to say that the utility function commonly used in economics only considers the number of its own consumer goods, ignoring other factors that may affect people's utility, including the decline in nominal wages, which will be considered more unacceptable by people (compared with actual wages, the same amount of decline will occur through price increases), regardless of whether this is due to face problems or other reasons. Rather than saying that people are irrational, the simplified model of economics ignores some related factors in the real world.
3.2 Simple economic analysis ignores many important factors, such as comparison, environmental protection, incomplete rationality, system and culture. Many important factors have been valued by some economists or studied in a certain department, but they have been ignored in the main part of economics. For example, the incompleteness of competition is almost everywhere in the real economy. For example, if you ask 100 manufacturers if they can sell more if the current price remains unchanged, at least 90 will be willing to sell more, and they are not complete competitors. Perfect competitors in equilibrium are unwilling to sell more. Microeconomics in orthodox economics, especially about industrial organization, is incomplete in analyzing competition. However, in comprehensive equilibrium analysis and macroeconomics, the incompleteness of competition is generally ignored. 1980 or so, I introduced the incompleteness of competition into macro-analysis, combined with micro-,macro-and simple comprehensive equilibrium analysis, and came to the conclusion that the situation that no one (including myself) had thought of before, such as the Monetary School and the Keynesian School, was a special case.
3.3 excessive mathematical formalism. Mathematical analysis has undoubtedly played a very important role in the development of economics. If necessary, I also use a lot of mathematical economic analysis myself. Besides proving my original ideas, I often draw unexpected conclusions. Economists in China, especially graduate students, must strengthen their training in mathematics and metrology. However, I also support what Wu Jinglian just emphasized. Many people blindly pursue the frontier, but they have not done a good job in microeconomics and macroeconomics. My experience supports Mr. Wu Jinglian's view. When I ask graduate students or candidates about basic microeconomics at home and abroad, including famous American universities, most of them will not answer. Basic microeconomics and macroeconomics are the most important tools to analyze and discuss real economic problems and put forward economic policy suggestions, which are much more important than advanced mathematics theory. Just like building a house, if the foundation is rotten, what's the use of glittering doors and windows?
In the introduction and appendix B of Efficiency, Fairness and Public Policy (Chinese version published by Social Science Literature Publishing House in 2003), I illustrate that many complicated and profound mathematical analyses can actually draw the same conclusion with a simple graph, and the reasons are more obvious. However, without advanced mathematical analysis, it is almost impossible to publish the original text in first-class journals. In this regard, editors and reviewers should reflect.
I also have a story about excessive mathematical formalism. Many years ago, during my visit to Oxford University, I asked another economist at a party, "What do you study?" He said, "I study SP-Space." I asked, "What is SP-space?" He said, "You don't know what SP-space is?" It seems that every economist should know what SP-space is. I said, "I only use Euclidean space." The implication of "Euclidean space is possible". It seems that Euclidean space is too simple. After that, I didn't check what SP-space is, and is SP ***y pedantic? Because I'm sure Euclidean space is enough. Secondly, as an economist, even if any special mathematical method is needed, it should only be a tool, not a research topic.
Another time, I criticized a well-known economist's model as unrealistic. The result of his defense is: "I don't think my model has anything to do with the real world." Doesn't this turn economics into a math game? However, as mathematics, their analysis is neither profound nor interesting.
4. How to expand in the future?
4. 1 Realistic importance is more important than preciseness. Improving the rigor of analysis is of course the pursuit of scholars. However, I would rather have some rough or even vague answers to important questions than very accurate answers to irrelevant questions. The correlation between the last five digits of people's bank accounts and their height or weight or ID number can be analyzed very accurately, but what's the point?
4.2 Absorb the results of unorthodox research: institutional, cultural, behavioral and experimental economics, happiness research, etc. In fact, economists and economists have made great progress in this field, but textbooks have not caught up with other economists. For example, textbooks and many economics professors are still teaching students, and the utility is only ordinal, without a base, so it can't be compared with others. For consumption or demand theory and comprehensive equilibrium analysis, ordinal utility is enough, and there is no need to assume the cardinal number of utility. According to Occam's razor principle, cardinal utility hypothesis should be shaved off. However, in social choice, it is necessary to have a basic utility equivalent to others. Master economists, including Nobel Prize winners such as Hasani, Mirlis, Sen, etc. Utility analysis of interpersonal comparable cardinality was used decades ago, such as Mirrlees 197 1' s award-winning book on optimal income distribution. Stick to the cardinal number of shaving utility in the field of interpersonal comparability cardinal number utility analysis, just like a man with a beard, you insist that he must shave off his beard because he doesn't have to eat with it. But he grows a beard, not necessarily for eating, but to increase his male charm!
4.3 Because there are many factors affecting economic variables, common sense and comprehensive ability are very important, especially in policy. Ten years ago, when Dr. Wang Jianguo, a professor in Peking University, was my doctoral student, he made a mathematical analysis and came to the conclusion that the influence of an exogenous variable on an endogenous variable was negative. From a common sense or intuitive point of view, I think it should be positive. I told him that you might have missed a negative sign, so go back and check it. A few days later, he came back and said, I checked, and there is nothing wrong with it. I said it must be wrong. Go back and check again. When he came back for the third time, he said that he had checked it many times and there was no problem. I insist that this must be wrong. He lost his temper that time. (I said later that he struck the table. Wang Jianguo denied striking table, only admitted to losing his temper and talking loudly. He said, "You didn't count, so you insisted that I was wrong. How can you suppress me like this?". I go back to rural Hunan to farm at most. I don't want this doctorate, and I can't be bullied by you unreasonably. " I'm surprised. I didn't know he would react so violently. I didn't mean to suppress him at all, so I said to him, "Don't get too excited, you don't need to go back to Hunan. There must be something wrong with the mistake, check it slowly. " He stopped losing his temper when he saw my gentle tone. The fourth time, he said that a negative sign was missing in the end, and the conclusion should be the other way around.
There is also a story about missing the minus sign. There was a Nobel Prize winner who did a seminar at Oxford University many years ago when he didn't win the prize. He said, "I have proved many fascist (extreme right) theorems, and I am glad to prove a left-leaning theorem today." As a result, john fleming found that he missed a minus sign, which was an extreme right-leaning theorem after revision.
Regarding Wang Jianguo, for the sake of fairness or balance, it should be pointed out that, as far as I know, he is the only one who can stop me from candidly admit defeat to his poems. My so-called killer weapon is not terrible, just a few undergraduate students' questions about basic economics in grade one or two, but because most graduate students can't answer them, including the first-class graduate students in most first-class universities, it is called killer weapon. But Wang Jianguo can answer. I thought my poems were well written, but after reading Wang Jianguo's poems, I realized that they were far apart, and I candidly admit defeat. There are two obvious candidates who may be able to overturn Wang Jianguo's uniqueness. One is Professor Li Yining; The other is Professor Zhang Wuchang. Although Professor Li Yining has no experience in studying abroad, he has a profound understanding and exposition of modern economics and has made great contributions to China's economic reform ideologically. His collection of poems also made me admit defeat. Zhang Wuchang has made an important exposition on the theory of tenant farmers, the importance of property rights and the market, and combined with China's economic reform, he has written many articles in simple terms, which is amazing, although some views may be extreme. I haven't read Zhang Wuchang's poems, but I am impressed by his calligraphy and photography. Genius like Li Yining and Zhang Wuchang should be able to stop my killer. However, although I have had many contacts with them, I have no chance or courage to throw a killer at them. So, I can only say that I believe they can block it, but I can't say that I know they can block it. So the uniqueness of Wang Jianguo is still valid.
Another possible candidate is Yang Xiaokai. On the basis of systematic analysis of the classic division of labor and specialization, he established a new framework that broke through the traditional economics, and also had many original opinions on the deep-seated problems of China's reform, although some views were obviously extreme and even had great blind spots. However, unlike Wang Jianguo and Zhang Wuchang, who were more or less "idle", Yang Xiaokai spent all his non-leisure time and his spare time on work. I don't know what his interest in literature and art is. In addition, I know masters or rising stars like Liu Zunyi, Zhang, Zhou Lin, but I don't know enough about their interests outside economics to comment.
Regarding the importance of integrating various related factors in policies, we can consider the example of automobiles. Most economists only consider congestion and come to the conclusion that Singapore has too strict control over cars. However, we should also consider pollution, conspicuous consumption (which partly leads to the role of diamond goods), and transitional materialism caused by people's natural accumulation instinct and the influence of commercial advertisements. Singapore's control over cars may not be too strict. Big cities such as Beijing and Shanghai should learn from Singapore. Impose heavy taxes on gasoline and cars, develop public transportation and avoid riding a tiger like Bangkok.
4.4 eclecticism, such as giving consideration to resource allocation and division of labor, specialization and economic organization. It cannot be said that the problem of resource allocation is very important, so the problem of division of labor is not important; Vice versa, another example of Dallas going to the auditorium is; Consider the importance and limitations of market economy (especially for environmental protection). China's move towards a market economy is definitely a correct decision, and I am very supportive of China's reform. However, although property rights and markets are important, they are not omnipotent. For example, the external influence of production and consumption, especially the damage to the environment, must be compensated by government policies such as taxation. Some far-right economists completely deny the existence of external effects. When I refute the facts, they say that even if the external role exists, it is better to assume that it does not exist, because letting the government handle it will often make things worse. This may be true for some external effects. However, there must be an effective public policy for environmental protection that has threatened people's health and human survival.
Some people may think that China should pay attention to economic development and protect the environment when it is rich. Of course, investment in environmental protection is limited by economic level. However, several points must be emphasized. First, in many cases, the damage to the environment is irreversible, or many times of resources must be used to remedy it in the future. Second, in some cases, the destruction of the environment will not only affect people's future well-being, but also affect economic production. Third, environmental protection does not necessarily require a lot of government investment, but can also be achieved by taxing (or charging) or restricting activities that damage the environment. But it also depends on an effective government with a low degree of corruption.
4.5 When applying economics to policies, we should consider the ultimate goal of people's well-being or happiness. Of course, economics itself is an empirical science, but it is often used to make policy suggestions. When it comes to policies, it inevitably involves values. Although the issue of values is different from that of science, it is not completely impossible. I think the ultimate goal of people is happiness. Therefore, the government's policy should be to maximize people's long-term well-being (that is, happiness) without involving other countries and animals. But most economists only talk about preference (or utility) and not happiness, which is not ultimate enough. Most economists also doubt the measurability and interpersonal comparability of happiness. Of course, it is difficult, but it is not impossible. Economists should also look at their own backyards. Gross national product (GNP) or gross domestic product (GDP) is the most important economic variable that has been used for hundreds of years, but once the purchasing power level is considered, China's GDP must quadruple and Indian GDP must quadruple. Although the standard of measuring happiness is not very accurate, I don't think it needs to be adjusted four times!
6. Taking China as an example, great progress has been made in mastering modern economics in the past two or three decades, and efforts have been made to enter the forefront of international economics research. This is certainly gratifying. Start as early as possible, even if it takes decades to catch up with the forefront. However, in addition to paying attention to the above points, we should also realize that the most important task of China's economic research now is how to combine orthodox economics with the specific situation of China and analyze the conclusions applicable to the current situation in China. Some characteristics of China's current situation include cultural and institutional differences, such as the cultural differences between the East and the West, the differences in the degree of law-abiding, and the degree to which the party and government dominate the economy; It also includes some characteristics of China's transition period, such as state-owned enterprises and related financial problems, and the huge urban-rural differences caused by the previous urban-rural segregation policy. Of course, there is also a division of labor in research. This main task does not exclude that some people are engaged in pure theoretical work, and some people are engaged in the work of "learning for learning" advocated by Professor Li Weisen, vice president of the School of Economics of Fudan University (but as the direction of all scholars, I can't agree). The accumulation of knowledge is often of unexpected use.