Impressions on Zhang Wearying’s “Principles of Economics”
Economics is a very interesting place. There are many schools, each with its own merits, and no one can convince anyone. For example, two masters, Hayek, the head of the Austrian school and Keynes, the founder of macroeconomics, are like Hong Ongoing and Loyang Feng in the martial arts. Refusing to admit defeat, love and kill each other for a lifetime, it is hard to tell.
And these two masters can basically represent the two major schools of economics controversial-one let us call them “liberal” and “regulatory”. Liberals believe that the market should be free and the state should not interfere in the market. The main idea of the regulatory school is that the market is not omnipotent, and the state’s intervention in the market is beneficial.
The two factions are stubbornly arguing. And one of the frontiers of their debate is their respective “Principles of Economics.”
The so-called “Principles of Economics” is about the most basic knowledge of economics tuition. Very comprehensive, but not deep. Therefore, the audience is very wide, ranging from economics students to ordinary fans can understand and accept it. Especially Mania’s “Principles of Economics” is easy to understand and interesting. It was once a bestseller, and was viewed as a casual book after a meal. It is precisely because of this that various factions often use the book “Principles of Economics” to introduce themselves to the society and promote themselves.
I have read several versions of “Principles of Economics”, such as Marshall, Mania, Samuelson and Gao Hinge, who is regarded as the orthodox of domestic economics. Generally speaking, they are promoting the opinions of their own school. Among them, the versions of Mania and Gao Hinge are generally accepted by mainstream Chinese economics circles. And these people are all loyal fans of the “control group”.
Therefore, as a faithful believer of the “liberal”, in order to declare war on the so-called mainstream economics, just recently, Professor Zhang Wearying launched his own “Principles of Economics.”
For evaluating this book, first of all, we should understand what kind of person the author Zhang Wearying is?
I think Zhang Wearying is a person with correct values, wisdom, thinking, innovation, courage, and non-conformity.
More than 30 years ago, in the era when the ideological haze had not yet dissipated, Zhang’s article “Justifying Money” stated that “In a normal and orderly society, money is a social medal. You can make more money, which shows that you are right. Society should make more contributions and should not avoid money and treat it as a bad thing.” Bold but extremely innovative, although it was criticised at the time, people now have to admit that Zhang’s view is correct and advanced.
Therefore, Zhang Wearying is not the mainstream, and the spirit of innovation has been there since the fledgling in the early 1980s. Later, he went to Oxford to study and further came into contact with advanced ideas in Western economics. What I have to say is that his thoughts are most influenced by the two schools-the Austrian school and the Chicago school (in fact, Zhang later thought that the Chicago school was flawed, and he believed that the most correct school should be the Austrian school-“Market and Government “). What the two have in common is that they advocate market freedom and oppose regulation.
Therefore, Zhang Wearying’s academic thinking is also very clear. With regard to the economy, he opposes government intervention. He said that “economists should be the staunch defenders of the free market.” (“The Logic of the Market”) Therefore, he also opposes the so-called mainstream economics including the understanding of market failures, externalises, and macroeconomic policies. .
In addition, he himself emphasised the role of entrepreneurs and entrepreneurship on the market. These are expressed in his “Enterprise Entrepreneur-Contract Theory”, “The Logic of the Market”, “On Entrepreneur” and other books.
Therefore, for the purpose of propagating his (school) thoughts, as reflected in this “Principles of Economics”, it is not difficult to see that he rejected many of the so-called mainstream economic viewpoints and instead introduced what he thought was correct.
For example, he added entrepreneurship to the factors of production, highlighting the role of entrepreneurs in market processes and economic development. Introduced the theory of property rights, refuted the traditional view of “market failure”, studied the efficiency loss of government intervention, introduced the Austrian school macroeconomic theory, etc. etc. These are not the so-called mainstream economic viewpoints, but Professor Zhang Wearying Think the right thought.
And this book is of great significance to the development of Chinese economics textbooks, because it is almost the first “liberal” theory textbook written by famous authors in China. However, it is very limited for the development of Chinese economics textbooks. Let alone Zhang Wearying’s influence than GAO Hinge, Mania, Samuelson and others are slightly inferior. And from the positioning of this book, its positioning is also very clear: for the core courses of general education of Peking University undergraduates. This definition seems to be regarded as a non-mainstream expandable reading. After all, the mainstream economic theory of Keynes is more marketable.
(This book tells a wonderful story about the debate between Hayek and Keynes.)
The so-called mainstream economics has a clear thinking. The market is not omnipotent, and the state’s intervention in the market is beneficial. For example, when the financial crisis occurred in the early 1930s, the regulators believed that the doctrine of achieving balanced employment through the automatic market adjustment mechanism had gone bankrupt, so they vigorously advocated the idea of state intervention in the economy, stimulated effective demand through fiscal taxation, and strengthened macroeconomic management. This idea happens to have a huge conflict with the liberals. And although both factions are very powerful, why do I say that the control faction (which is represented by Keynesian ism and China itself is represented by the principles of Marxist political economy) will be the mainstream?
The reasons are as follows:
First of all, we must know that because economics is a subject that is difficult to experiment, it is very difficult for theories to be tested. General subjects can predict experimental results and then test them. But economics is not good, you can only find theories to set the results. This is a relatively easy process. But when they are asked to predict the future, when they refer to where to play, it will not work. But everyone must have thought about it. If a wrong theory usually seems to be reasonable, but when a crisis occurs and it is found to be wrong, then it will be exposed? In fact, economists are not worried about this problem at all, because they are very particular about their speech and suggestions. US President Truman once said, I want to find an economist with only one hand. Others are curious why. He said that because of this, they would not always talk about one side…on the other hand when they make economic suggestions…
and it is precisely because of this way of speaking on the other hand that economists are making economic suggestions. Time is never all wrong. They are always wrong on one side and right on the other. This makes it difficult for people to distinguish which theory is better. Of course, a good theory must have more correct aspects than a wrong theory.
In summary, the effects of the regulatory theory in the actual market are comparable to those of the liberals, and both have their effects. Especially in response to the outbreak of the financial crisis in the 1930s, the theories of the regulatory school played a very important role. But in fact they that these acts of state intervention in the economy tuition in Singapore, appears to solve some problems. But it actually has very big side effects. For example, the efficiency loss brought about, the problem of illegal rent-seeking and even many crises are actually caused by seemingly benign state intervention. Therefore, liberal economists often accuse many macroeconomic policies of actually drinking poison to quench thirst. But why is such a theory with very big side effects widely used?
This is because economic theory is proposed by economists. But the person who uses it is the country.
This is like two different medicines. The medicine that represents freedom is cheap and has no side effects, but it is slow. The drugs that represent control are expensive and have side effects, but they take effect quickly. So the question is, if you are a doctor (excluding the doctor of conscience), what medicine would you prescribe to the patient? Of course the latter! Because of expensive medicine, the doctor can get a commission. The effect is quick, and the patient will thank the doctor when he is well. As for the side effects, it’s been a long time since the medication, you can’t rely on me. Even if it’s lingering, I’ll just say, you still take other medicine, right? I can’t mix this medicine with other medicines, I can only take my medicine, and take more!
Therefore, for this reason, the government as a doctor is to achieve quick results and to have a commission. They blatantly advocated the efficacy of “control” and even designated it as an official drug for certain diseases. And this is why the theory of regulation is the mainstream economics. Especially in authoritarian countries, his government as a doctor is very strong, and there is only “regulation” in the hospital, nothing else. Therefore, the more authoritarian the country, the more mainstream control theory becomes.
But looking at the world, the educated patients, and the conscientious pharmaceutical industry. Everyone knows that “freedom” is a better medicine, so in the academic circles of freedom, it is generally believed that the theory of freedom is the mainstream. However, they cannot force the doctor to use any medicine. They can’t control the doctor’s commission, so all they can do is to appeal and publicise-and this is the important reason why Zhang Wearying wants to launch his own “Principles of Economics.” But I have said before that the launch of my own “Principles of Economics” has a good idea and great significance, but its effect is limited.
Of course, there are smart pharmacists who grasp the doctor’s psychology. Some “mixed medicines” are often prescribed. For example, the “dual price system” proposed by Zhang Wearying. The purpose of this medicine is not only to satisfy the doctor’s benefit, but also to minimise the side effects of controlled drugs. And step by step, the preferences of doctors and patients are led to free medicine.
Of course, the problem of theoretical policies in economics is far more complicated than the problem of doctors prescribing drugs. This is just a simple analogy. As for the right and wrong of “regulation” and “freedom“, who will become the real mainstream can only rely on the test of future time.