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XU Xiaonian:Independent Spirit in Studying Economics

 

As much as I can see, need of independence has hampered the development of economics in China. Independence, not only means independent from influence of administrative authorities or impacts of domestic public emotions, but also should be independent from impacts of foreign trends. Foreign trends actually mislead or even hamper the development of economics in China.

 

For example, following the recent flood of overseas populism, the book named Capitalism in 21st Century becomes popular. With the Chinese version published, we started to follow the trend discussing on income distribution, which is the impact of foreign populism on domestic research. I read the book, wrote a critical essay, but did not cause response at home. We are not that concerned about such opposition.

Apart from impact of overseas populism, we neither thoroughly grasp the gist of foreign economic theories or apply them into practice adequately. Besides that, we are bound by the mainstream theory, hampering the development of economics. For instance, recently I was on a research project with my assistant to establish a mathematical model with overseas standards and analyze data to prove that the financial crisis in 2008 is not due to market failure, but the failure of Fed's monetary policy in consisting with the market. Market failure is believed as the main reason contributing to financial crisis, so that such conclusion is not accepted overseas. On the contrary, I hold that the government failed to make appropriate monetary policy, which led to the financial crisis. Financial derivatives flooded before the crisis, which definitely accounted for the crisis. But the model we made proved that surplus financial derivatives was only the secondary reason, and that the main reason should be attributed to inappropriate monetary policy. However, such non-mainstream opinion is hard to be accepted at home and abroad.

 

Following trends at home and abroad blindly, we cannot identify or study problems independently, thus no contributions can be made, which hinders the development of economics in China. We have accumulated rich experience and met loads of issues that have never been studies in the past three decades since China’s economic reform. We need to creatively solve those issues with existing theories and models, making our due contributions to the development of economics. Independent spirit and freethinking are prerequisites for making contributions. Even with rich experience, excellent projects cannot be made with limits on thoughts or research. I agree with Mr. Zhang (Shuguang) that independent study and research are vital to the development of economics.

 

We should both learn from and be aware of limitations of overseas trends and mainstream methodologies. With more research I have been done, the feeling that fixed methodology has deprived overseas mainstream economics of vitalities grows stronger. It is widely accepted by the mainstream economics that research must involve with mathematical models and data. However, back in the history, great philosophers and great economists, namely Adam Smith, Ronald Coase and etc., did not establish any models at all. Nowadays, models and data prevail, without which essays cannot be published. Such standard should be doubted. Many major problems in modern economics, innovation for instance, cannot be explained by mathematical models. Innovation is such an important economic issue that can be regarded as of vital importance to economic growth. But it does not receive due attention at home and abroad. Why? Because it is difficult to describe innovation with dynamic mathematical models. Can you mathematically picture Schumpeter’ theory of innovation? Can you establish a mathematical model of Jobs? Almost impossible. But essays cannot be published without models nowadays, that’s why few scholars work on innovation.

Institutional issues, which the Chinese are suffering from, serves as another example that is not been thoroughly studied by international mainstream economics. One of the reasons that neoclassical economics does not involve with institution or innovation is that it is difficult to produce or publish essays on first-class magazines with standard methods accepted by the majority. It does not mean that these issues are not important, but that essays without models or data won’t be approved. I once learned economics in the States, studied economics in the States and taught economics in the States. But after I came back to China, constraining from analytic tools poses a striking contrast. We failed researches on major realistic economics issues, which are the negative impacts from international mainstream economics.

 

To sum up, independent spirit is vital to promote economic studies in China and earn us a proper place in the world.

 

 

 

 

◆please indicate the source if authorized: National Economics Foundation

◆photo:National Economics Foundation