China Needs New Economic Thinking

After talking to economics students, professors, consultant, investors, and people working in the finance industry in China, the general consensus is that the Chinese society and the government is paying little attention to economic thinking in China, let alone "new" economic thinking. Currently, Chinese society is collectively obsessed with making money, and has little patience for "thinkings" which doesn't materialize in six months. Also, to get rich in the short run, people find that they don't really need much new economic thinking. This is a very particular historical stage for the nation.

Economics students report that they do not learn much in college. They go to classes and take tests to get the degree. They also spend time on taking extra exams for various diplomas and certificates that enable their entry into accounting and finance. One economics professor told me: "teaching is teaching, real world is real world. When you teach, you don't need to worry about economic thinking." Some professors make more money by recommending stocks on TV shows than their university salary.

The economics and finance department in Chinese universities is being dominate by professors educated in American universities. There are very few Chinese-educated economics professors in the leading Chinese universities right now. Good universities in China all teach economics and finance using English textbooks. Which textbook they choose depends on what the teacher himself used when he was in school in the U.S. There isn't much presence of the division among different school of thoughts because thoughts are not important for people's career.

Also, in order to be promoted in top Chinese universities, the economics professors are required to publish articles in English language journals. Publication on Chinese journals doesn't count as much because of the low credibility. This situation is also created by the fact that many universities care a great deal about their international ranking, which looks at publications on globally recognized journals.

Another interesting point is that several people (students and professors) mentioned to me that they feel that the Chinese language is unsuitable or even inadequate in dealing with modern economics. My own experience confirm their feeling to a certain degree. The whole modern economics is built upon western system of thoughts and is thought out and developed in the English language. As a result, many notions and logic in economics couldn't find satisfying counter-part in Chinese. When an English textbook or article is translated into Chinese, I usually find it confusing and inaccurate.

One other thing to notice: economic thinking can not be separated from the political reality, and this is especially true for China, where the government (namely, the Party) still plays the most important role. If the business runs the government in the US, then in China, the government runs the business. If the government exists to serve the needs of the market in the US by providing regulations, public goods etc., then in China, the market exists to serve the needs of the government by strengthening state control and delivering political legitimacy. The government can use executive orders to stop retailers from raising prices; the government can ask the statistics department to "come up with" the exact data that it wants. The state owned companies has been consolidating control over national industries. All these signs tell us that we can't simply apply market economy model to China's situation. Chinese economy is a unique hybrid of past and present, of Confucian central control and modern economics. The situation also tells us that any economic model is only useful to a certain degree --- and a less degree in China than in the US.

It is at first surprising to think about how China is able to develop so rapidly without much real economic thinking. But the reality is that China's per capita GDP still ranks behind Albania and Ecuador, so China's economic growth up to this point is largely picking the low hanging fruit --- it is more precisely a "coming-back-to-normal" instead of real development. China is exploiting its own labor force, social well-being and environment to increase the GDP. Now the low hanging fruit is gone, and in order for China to go forward, it definitely needs new economic thinking.

Why I Love Hampshire

There is no unconditional love, so here I wish to explain why I love Hampshire College.

I love Hampshire because it is imperfect. An imperfect school makes a perfect place for critical thinking. Hampshire College is never a finished product, it is a constant experiment and improvement. The students are not just service receivers, we are the creators and we take this responsibility eagerly and seriously.

I love Hampshire for its paradoxes, and let me name a few. Hampshire has the tradition of breaking the traditions; Hampshire is in the business of thinking out of the box. Therefore, Hampshire has an inherent restlessness in its gene. It has to keep reinventing itself and to engage in painful self-reflection and self-criticism.

Another paradox is that the best Hampshire students are the most critical of the school, and they are often the ones who take the most off-campus classes. This is a sign of Hampshire success, just as the parents are successful when the child leaves home and recognizes the parents' mistakes. But the child only loves the parents more.

A third paradox: Hampshire was very unique in 1970s, but less so now because other schools has borrowed Hampshire's idea. This is exactly what Hampshire set out to achieve --- to unsettle the rigid higher education. But Hampshire's success has led to the loss of its comparative advantages, so Hampshire has to find a new edge to be the pioneer in the next round of progress. The appointment of Jonathan Lash as Hampshire's new president is a decisive step.

I love Hampshire because it is doing the society a great favor by being the "venture capitalist" in education. Amherst College is like a successful pension fund, investing in only those blue chip stocks with low risk and sure returns. And Amherst students would probably still be successful without Amherst --- they will be admitted to other Ivy Leagues, or their daddy will figure something out. In contrast, Hampshire is the venture capitalist who welcomes unconventional students, giving them a chance to discover and express themselves, and in many situations, to have a second life. Also, there's no other place like Hampshire. Hampshire shows the world that there is more than one definition of success --- all roads lead to Rome. But more importantly, Hampshire makes you realize that probably Rome is not where you really want to go.

I love Hampshire because I am pushed to work extra hard. First, we must have a command of the orthodoxy; then we have to critique it; finally we have to create something new and better. Another way to look at it: Hampshire students have to take care of spiritual and material worlds at the same time --- being successful is not enough; we have to do good.

Of course, Hampshire is full of its own shortcomings. My biggest objection is people's showing up late for appointments. Also, critical thinking might turn into self-righteousness. Sometimes, I am quite disturbed by the situation in the College, but soon to realize that this disturbance is an invaluable education.

To conclude, I will tell a story. At the age of eighteen, I meet a girl. She is unique, creative, energetic and sometimes crazy. She is sincere, unpretentious, not totally mature, and she loves nature. I decide to spend my four precious year with her. She makes me laugh, and makes me angry. Sometimes we fight and try to break up. Eventually, I get to know a lot about her, and through her, I have learned even more about myself. We are growing together, and this mutual growth will never end.

I love her, and I think you know her name.

Money Dominance

Living in New York makes me realize the dominance of money. I don't mean a fancy car or big house, but human dignity and access to fresh air. Here are some other thoughts on how money is transforming the society.

1. Money and knowledge

We all know that knowledge is power, but we also start to realize that knowledge is getting more and more expensive. In order to have meaningful impact in the world, we need to understand the system. However, the system has become so complex that it takes at least a master degree to comprehend it. But given the rising cost of education, if your parents are not rich, you will be hundred of thousands of dollars in debt when you get your degree. In other word, by the time you have the knowledge, you have lost your freedom; by the time you have the power to chance the system for better, you are already subject to the system. To pay off your student loan, you probably have to take the highest paying job you can get, which means you are more likely to work for Goldman Sachs instead of Securities and Exchange Commission, and more like to work for BP and not for EPA.

Sometimes, I have to marvel at the design of the system: by the time you understand how the prison works, you are already a prisoner yourself. This is achieved simply by raising the cost of education.

2. Money and Human Capital

The reward structure of our society is very biased. With the same intelligence and work ethic, you can get much richer in finance industry than anywhere else. That's why so many of our smartest students are going into finance. It would be less unfortunate if these smart young people are creating social value as they make themselves rich, but more often than not, the finance industry is just making the rich richer at the cost of making the poor poorer. This widening wealth gap is still a smaller cost compared to the opportunity cost of losing our best young people to the unproductive industry. These young people could have been brilliant engineers who invent new energy storage system, or artists who produce breathtaking pieces. The society is suffering a huge human capital lost due to the biased reward structure.

Why is there such a bias? The answer might be specialization. A car mechanics specializes in fixing cars. The finance industry specializes in dealing with money, a commodity that happen to be the medium of exchange. When a car mechanics practices his expertise, he creates value for other people by fixing their car. But when the finance industry practice their expertise, they creates more chaos than they create value, but they are rewarded handsomely for the chaos they created.

3. Money and Government

The government is broke. It has no money and too much debt, but it still has to pay the bill for Wall Street's mess. What's the consequences?

First, the government has to roll back its social service, especially education and health care, which further worsens the position of the middle class and the poor.

Second, the government will lose its best people to the private sector. There has already been a brain drain in New York, where judges leave court to go back to private employers because the government can't compete with the private sector to pay the lawyers. How can you expect someone with a annual salary of $50,000 to regulate the financial innovation coming out of someone whose salary is seven digits?

Third, there will be increasing moral hazard between the financial industry and the government. On one hand, the politicians are funded by Wall Street and big corporations. On the other hand, the powerful private companies are too big to fail, so they are certain that the government will bail them out if they mess up. So why not take on more risk?

Our government might soon become a government of the money, by the money and for the money.

4. Money and Globalization

Locke in his Second Treatise said, "Thus, in the beginning, all the world was America, and more so than that is now; for no such thing as money was anywhere known. Find out something that hath the use and value of money amongst his neighbors, you shall see the same man will begin presently to enlarge his possessions. "

Money never sleeps. Once money is born, it will expand till its own demise. Globalization is exactly propelled by the logic of money. It transform the whole world and make all societies a subject of its own logic. China and India, formerly isolated, are now embracing the money logic more eagerly than anyone else.