Introduction: At the "China Political Economy Forum 2021" held at the School of Economics of Sichuan University on July 10, Professor Li Ling of Peking University delivered a speech, the following is the full text of the speech, and the Observer Network has been authorized to publish it.
Li Ling:
The background of the Centennial Celebration of the Communist Party of China is the new crown epidemic, which can be said to be a challenge that the world has never encountered in modern times. At present, the epidemic has caused more than 180 million people worldwide to get sick, with nearly 4 million deaths, nearly one in ten people in the United States, more than 33 million infected, and more than 600,000 deaths.
The epidemic has not only added a time and space coordinate to the centenary of the Communist Party of China, but also made us reflect on why China can?
Looking back at the communist party's struggle over the past century, The achievements China has made today, especially the great achievements made by the epidemic, I think we, as people who do economic research, are a bit ashamed, because practice is far ahead, and our political and economic theories are far from being refined.
Last year, China quickly brought the epidemic under control and the economy recovered in full swing, with our economy growing at a rate of 2.3 percent and the United States down 3.5 percent.
I saw this data at the time and thought there must be something wrong, China had a little half a year last year, everyone stayed at home to cook, and cooking at home has no GDP, because housework is not a market activity, and the United States and Europe they have to go out to eat, drink coffee, these economic activities make them have a high GDP, and at the end of last year, the death and infection cases in the United States need to be treated, and also create GDP.
We have less than 80,000 infections and more than 4,000 deaths, which means that China has controlled the epidemic, but these positive effects are not reflected in GDP.
So, last year I led my team, and we tried to do a study on the economic benefits of China's fight against the epidemic, and China successfully controlled the epidemic, comparing how much morbidity and mortality were avoided abroad, and how many lives were saved. According to the life value table, how much value is created.
The results of the calculations are also shocked by our own, this number is too big, but in reality these are not reflected in our GDP, that is to say, the current economic theory and economic measurement methods are problematic.
Today, we see the U.S. economy largely paralyzed, not just because of the pandemic. The first two days especially sighed, I have worked and lived in the United States for many years, the National Day of the United States is July 4th, in my impression is a very beautiful season. In the 80s and 90s, I was studying at the University of Pittsburgh, and there was a large lawn and a fountain on campus, and on July 4th, everyone spontaneously went to the square to lay a blanket and sit down to eat and drink, listen to the symphony, set off fireworks, and everyone was happy.
At that time, I felt that the invisible hand put society in a state of equilibrium, which was very good, but now I see the U.S. state of New York entering a state of disaster emergency, because the shooting was so bad, the United States is now a paralyzed, disorderly state.
In addition, regarding the fight against the new crown epidemic, we scholars have published articles on economic research, using data to compare the situation between China and the United States, comparing the United States is much better, because the United States pays money to individuals, but it does not look at how much money the United States has spent on the macro level, the United States has almost 6 trillion US dollars, how much has China spent, our finances total 500 billion, and the special national debt is about 3 trillion yuan.
We spend a lot less than others, and our effect is much better, but it is not reflected in economic research, so I think there must be something wrong with our theory.
After studying economics for so many years, I feel that Western economics only has micro, but lacks macro and meso. For example, consumer theory, market equilibrium, etc. are all from a microscopic perspective.
In fact, Western economics does not talk about the middle way, let alone macro. I also communicate a lot with my colleagues abroad, and they are still waiting for the results of the measurement return to prove why wearing masks can help fight the epidemic. We Chinese have a lot of wisdom, we don't have to wait for regression data. The first time all the people isolated, the virus was suffocated, this is the result of macro control, macro is 1, with this 1 there is all the 0s behind.
The United States has money and some people have technology, but it lacks macro control, so the epidemic in the United States has risen and fallen one after another and cannot be determined. You see now the Delta virus, "Lemda" is also coming, wave after wave.
I think we should use China's practical experience to rewrite modern economics, and we can't take the little Western economic theory we are learning now as the whole of economics.
Through this epidemic, we have more deeply realized that a country is first of all to maximize macro benefits and the overall interests of the country. Our first moment of national isolation also fully reflects the maximization of national interests.
Then, the meso is the structure of the industry, regional coordination, such as our current investment in the technology industry, the new energy industry, there were many economists at the time criticizing, and now they also recognize that the trend is right, the short-term cost performance may not be high, but it is a long-term benefit.
The micro is actually only the interests of the market, enterprises, and consumers that we are talking about now in economics, but I think this time the epidemic has made everyone see that when the West pursues the maximization of personal interests and personal utility, it loses national security and loses more than 600,000 lives.
Nearly 33 million people in the United States are sick, and we may have far underestimated the impact of this epidemic on the entire West and all mankind, after the new crown epidemic, although the mortality rate is not so high, but the new crown patients have brought very large sequelae.
At present, The Lancet's research has proved that one-third of people have mental sequelae, and various malignant events such as shootings in the United States are associated with these effects.
If we only consider the micro, after our reform and opening up, everyone knows that "it is better to build than to buy, and it is better to buy than to rent." I was a student of semiconductor physics in 1978, when Chinese semiconductors belonged to the first camp in the world, because our "two bombs and one star" were all made by ourselves, and at that time it was not that we were closed or semi-closed, but that others blocked us and did not sell us, just like today.
But why is the semiconductor industry cleared to zero. Because the semiconductor industry investment is huge, when our semiconductor for the military service, it was not civilian at that time, so its production capacity is not enough, the investment in research and development costs are very high, it must be a loss, in the 80s and 90s, loss-making enterprises went out of business, so the semiconductor industry was completely cleared.
And the good GDP we just said, the bad GDP. The GDP of the United States fell by only 3.5% last year, in fact, many of them are bad GDP, and so many people who have diseases to treat are counted in GDP. We have successfully controlled the epidemic, we do not need to spend so much medical expenses, but our GDP is not high.
From this epidemic, we can see that macro efficiency is definitely not simply the sum of micro, that is to say, there is no macro control, and there is no "1" behind which it is actually "0", which is either summed up or the social benefit is the largest.
And we in economics are all hypothetical, there is a social planner, the utility of each person is the total utility of society, in fact, this is the founder of the theory of growth, Paul Romer, he has long questioned, the optimal of the individual does not represent the overall optimal, I think this time is basically to completely break the theory of Adam Smith, this is the first generation of economics theory.
Nobel laureate Paul Romer. Image source: Baidu Encyclopedia
When Adam Smith proposed the invisible hand, the background was the era of small farmer economies and small workshops, not the era of mass production, so the Great Depression of the financial economy throughout North America in the 30s of the last century has proved that the invisible hand has no effect.
This epidemic in the United States has killed more than 600,000 people, no one is responsible, you look for the "invisible hand" to go, it turns out that you can't find it. It is a great pity that we today in mainstream economists still cling to the theory that failed in the last century as the yardstick for our reforms.
After the Great Depression of the last century, Keynesianism arose, but in fact, this is the second generation of economics, which needs governments and the mechanisms of the market.
If you think about the social situation at that time, after the government intervened, the government was also composed of people, so there was also the problem of government failure, and by the 70s neoliberalism had risen and returned to more of the role of the market.
In recent years, I don't know if you noticed it, economics is actually rewriting, from the Nobel Prize in 2007 to the mechanism design theory in 2012, usually a theory once, did not expect that last year's 2020 Nobel Prize was issued to the market design team, why is this?
2020 Nobel Laureates in Economics Paul Milgrom and Robert Wilson. Image source: Screenshot of nobel prize social media account
I think experts have also seen that whether it is the economic crisis or this epidemic, there are huge problems in traditional economic theory that need to be rewritten, and market design is to use a more scientific method to repair the market.
The market can be designed, especially in the current era of large-scale production, informatization and intelligence, in addition to the small farmers' market, it is completely able to shop around and achieve complete competition. In all the markets in our lives, there is a problem of failure to a greater or lesser extent.
Market mechanism design, in fact, is a clear set of trading rules, this market is designed by you, you can completely use this set of theories we learned, you need to consider the incentive mechanism, you need to consider the interests of all parties, etc., you design this set of rules, and then to match, and finally can also achieve efficient results.
What is different from the Invisible Hand? It is the top-level design, this system is designed out for everyone to abide by, the implementation process fully respects the differences of individuals, why from 2012 to 2020, this team won the Nobel Prize again, is that the development of technology provides them with excellent support.
In the past, the design to the grassroots to use, although the design is perfect, but in the process of use there may be a lot of problems, because the market is too complex, so we let the disorder relatively orderly, after the design into order, you need to dynamically feedback at any time, and now in the era of big data we can do this.
The more far-reaching significance of the third generation of economic theory is that people begin to re-understand this important and ancient question: How can the market economy and the planned economy be more efficiently combined?
This is actually our socialist market economy with Chinese characteristics, the international frontier theory can provide us with reference, that is to say, the two hands can cooperate, the "invisible hand" is actually this set of mechanism settings and incentive mechanisms, but first of all, do macro control. So I think we all have to do macroeconomics and really write about China's macroeconomics, because the Western macro is a fake macro.
Why market design has won the Nobel Prize many times is that our time has provided them with opportunities and provided big data. Big data and intelligence on our human society will change far more than industrial civilization, and I think most of our thinking, still stay in the linear thinking of industrial civilization, big data, artificial intelligence to bring us three-dimensional space thinking, the future, human beings may be in a three-dimensional space in the continuous adjustment, continuous dynamic balance.
Big data, intelligence is driving the world is undergoing drastic changes, we in China have a natural advantage, China already has the foundation of the system, and on this basis, we can give full play to the economy of scale, the scope of the economy effect, which is also needed in the era of big data.
The Communist Party of China has 95 million members who play a pioneering and exemplary role, have the strongest party leadership, we are a socialist system, we have a super market size. All of these are integrated, and informatization will help the COMMUNIST Party of China create greater glory in the new century, and truly bring a new form to human civilization, not only in the economic aspect, but also in the political, cultural, ecological, and social aspects.
For Lenin taught us long ago that "the productivity of labour is, in the final analysis, the most important and important thing which is the victory of the new social system," we caught up with this wave.
Therefore, I think that the political economy of socialism, it is the reconstruction of the productive forces and the relations of production, it is the multiplicative utility, we must firmly grasp it, economics really studies the relations of production, it needs the matching of the productive forces. Western economics only studies scarcity, only scratching the skin, just like my foreign colleagues are still studying whether wearing masks is effective in controlling the epidemic. This kind of research makes no sense at all.
Everyone has also noticed that Chinese the happiness and satisfaction of these years have accelerated, new productivity has played a great role, we are already in the initial stage of intelligence, today's Chinese live happier than the emperors in the past, and have everything at home, including the health code in the process of fighting the epidemic. On the basis of such a new productive force, we can form a positive feedback system of force integration, comprehensive decision-making, dynamic adjustment, whole-process supervision and scientific evaluation around the national development goals, truly realize "practical understanding, practice and re-understanding", and form an intelligent country, from the controversial computational socialism of the year to the wisdom socialism of the future.
Our goal is to give priority to macro efficiency, is a systematic, integrated, holistic goal, while personal interests and national interests are compatible, short-term and long-term coordination.
On this centennial celebration, I took my team to the library of Peking University, which is the birthplace of the Communist Party of China, and Comrade Li Dazhao was the pioneer of our Communist Party, and 100 years ago he wrote an article about "Socialism in China and Capitalism in the World." After 100 years, we have not yet answered this question, China has begun a new journey of socialist modernization, and we must redouble our efforts to answer what is China's socialist economic theory.
Looking forward to working together with my peers, this is an era that requires theory and must be able to produce theory, and this is also an era that requires ideas, and can certainly produce ideas.
Thank you!
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