I. State and Market: An Eternal Main Line
It can be said that as early as the birth of economics as an independent discipline, there have been differences and disputes between the two major ideological trends of advocating state intervention and laissez-faire. The main line of the development of western economics in the 20th century still closely revolves around this ancient and brand-new main line. The only difference is that the schools of both sides are more complex, the scope and content of the debate are more generalized, the two ideological trends are changing, and the cycle of alternating ups and downs or being used by the government is shorter.
1. The debate between the state and the market before the war and the birth of Keynesianism.
At the end of 19, the laissez-faire concept of "invisible hand" is still dominant, and it is believed that in the competitive environment, the individual's maximization behavior will be transformed into the optimal social state through the power of the market; This tradition later formed a metaphor that economists prefer "laissez-faire", and finally evolved into Say's law that "production automatically creates demand", which was dominant in the19th century.
When history has just entered the threshold of the 20th century, economists have gradually seen that in the real world, the market mechanism is not foolproof, and economic cyclical fluctuations are accompanied by unfavorable economic phenomena such as unemployment. The old institutional school, represented by Van Buren and Kang Mangsi, advocated that the state should regulate and arbitrate labor-capital conflicts and opposed the laissez-faire policy. Pigou, a disciple of Marshall, founded welfare economics. Although he still refuses the government's intervention in economic life on the whole, he also strongly criticizes the laissez-faire idealism and thinks that the state should come forward to correct the externality of production in order to prevent the marginal private net output value from deviating from the marginal social net output value. The Swedish school, represented by Muir Dahl, Lindahl, Lundborg, Olin and Limbeck, gradually matured in the great crisis of 1929-33. They inherited the theoretical tradition of Vaksel, the pioneer of this school, supported by the practical experience of the Swedish Social Democratic Party in power for half a century, and used the macro-dynamic analysis method to form a more systematic "mixed economic theory", which was unique in western economics in the 20th century.
If the western economists who questioned and criticized the free market theory of classical economics are only "partial revolutions", then Keynes's General Theory published in 1936 is a comprehensive response and thorough criticism. Keynesianism believes that the spontaneous market mechanism of transforming savings into investment through interest rates and regulating labor supply and demand through wage changes cannot automatically create the effective demand level required for full employment; In the competitive private system, the "three psychological laws" make the effective demand often lower than the total social supply level, which leads to the employment level always in a balanced state of underemployment. Therefore, to achieve full employment, we must abandon the traditional laissez-faire policy, and the government must use active fiscal and monetary policies to ensure sufficient effective demand level. Keynes's most fundamental theoretical innovation lies in providing a set of economic proofs for the rationality of state intervention in the economy, which was impossible for any economics before Keynesianism appeared.
Keynes's economic theory and policy suggestions are widely used by western governments as the action guide of their economic policies through the efforts of their followers, and the importance of the concept of total demand level is widely accepted. If the American New Deal and other anti-crisis policies were only temporary emergency measures before this, let alone explicitly based on an economic theory, then from then on, macro-management with the goal of maintaining full employment level began to become the routine policy of western countries. Keynesianism influenced the trend of western economics in the 20th century, and brought a new turning point to the theoretical core of western orthodox economics. The "Keynesian era" officially began, and Keynes himself became the "father of post-war prosperity." At the same time, the free market system theory of classical economics withdrew from the dominant position of orthodox economics.
2. The debate between Keynesianism and monetarism and supply school since the war.
The 1960s-1970s was the most prosperous period of western economics, and the liberal trend of thought of "opposition" rested under the banner of neo-conservatism, and made a comeback when Kane's doctrine was in crisis in the 1970s. There are many schools such as monetarism, supply school, new institutional economics and public choice theory. , dazzling, dazzling. They are either short-lived and dominant, or narcissistic and maverick; They either call themselves "biographical" Keynesians or openly claim to be Keynesian rebels. To sum up, Chicago School advocates the comprehensive maintenance of Adam Smith's "invisible hand" historical tradition and the comprehensive restoration of the "laissez-faire" theoretical program, advocates the return of neoclassicism and the confrontation with Keynesian economic interventionism, and adheres to the theoretical economic system of economic neoliberalism represented by Hayek and the fundamental principle of free market competition. In the second half of the 20th century, many liberal schools emerged, and the debate about "market or country" heated up again, which made western economics in the last decades of the 20th century enter the Warring States period, once ascended the throne of American orthodox economics, and became British imperial economics, Thatcherism and Reagan economics, and once dominated and occupied a place. It has had a great influence on the self-development of the "mainstream" and left a deep impression on the history of western economics in the 20th century, which made western economics so dazzling and colorful in the 20th century that when we look back on its century-old development history, we have to have a special discussion on modern monetarism and supply-side school, which are enough to constitute Keynes's opponents in mainstream economics and even shake his "orthodox" position.
The founder and leader of modern monetarism, that is, monetarism school, is Jimmy Friedman, 1976 Nobel Prize winner in economics, and a professor at the University of Chicago. He is regarded as the most influential economist in the world since the war, and even a leading figure in economics. Starting with the microeconomic structure of individualism, Friedman restored the key position of money in the macroeconomic structure on the basis of the theory of "permanent income", and put forward a liberal argument against Keynesian interventionism, arguing that without any state intervention, the market turmoil in the market economy was far lower than that at the time of intervention; The real role of the state is not to influence the market in the short term, but first to ensure that the total amount of money can increase regularly and regularly. This is because, first of all, Keynes's effective demand management and fiscal policy are ineffective. Keynes believed that because people's desires were satisfied, consumption expenditure showed a decreasing trend, while savings showed an increasing trend. In this way, the government should increase public expenditure to offset the decline in personal consumption, so as to ensure sustained economic growth. Friedman refuted Keynes's law of diminishing marginal consumption, arguing that after people's original desires are satisfied, new desires will immediately arise, which is endless, and expansionary policies will lead to inflation. However, it should be the only best choice for monetary policy to implement a "single rule" monetary policy to effectively control the money supply, that is, to formulate a long-term constant money growth rate according to the average growth rate of national income. According to Freund's point of view, in the great crisis of 1929-33, about 100000 American banks went bankrupt, which led to the decline of domestic money supply in the United States13. If the Fed could play a role in this great crisis, then this great crisis could have been avoided, and at most it was only a small-scale economic recession. Second, about the "natural unemployment rate". Keynesianism believes that a high level of employment is the guarantee for the effective use of social resources, that is to say, in order to effectively use social resources, there must be a high level of employment. Friedman thinks this is a vague or even wrong idea. He believes that the high level of employment can be regarded as a sign that social resources are not fully utilized: leisure enjoyment is sacrificed for social production, and the value of the former is far less than that of the latter. In this way, the inflation policy will give people the illusion of "forcing" people to think that their real wages are higher than the actual value of these wages. Third, about unemployment and inflation. Since the natural unemployment rate is a constant and changes with time, the natural unemployment rate is an economic condition. In this way, the currency is "neutral", and it is difficult for people to change the natural unemployment rate by changing the inflation rate, that is, to change the economic situation. In the short run, there may be some proportional relationship between unemployment rate and inflation rate, but in the long run, this relationship will disappear, that is, there is no relationship between employment level and inflation rate. If we want to reduce the unemployment rate below the "natural rate", then the inflation rate will be high and the cost will be high. Friedrich pointed out that in 1960s+0960s-70s, the American government hoped to achieve the goal of full employment, and as a result, the domestic inflation rate rose from 1960 to 1% in 1979 to 13%.
The protracted "bloody debate" between Keynesians and monetarists began in 1950s and ended in 1970s. They accused and attacked each other, and even tried their best to ridicule and insult. For example, at a seminar in the late 1960s, Robert Solo of the Massachusetts Institute of Technology sneered when commenting on a paper by Freund: "Another difference between Milton and me is that everything reminds Milton of the money supply; Well, everything reminds me of sex, but I don't want to write it in my paper. " For another example, Keynes mocked the role of money in a letter to President Roosevelt: "Some people seem to imply that increasing the money supply can increase output and income. But it's like buying a thick belt and trying to get fat. In America today, your belt is really too long for your stomach. "
Modern monetarism was almost completely accepted by the British Thatcher government throughout the 1980s and became the theoretical basis of Thatcherism. Thatcherism believes that the "lesson" of the past is that the government should not try to maintain full employment artificially, but should let market forces determine the "natural" employment level. In addition, the monetarist approach to dealing with inflation means squeezing the economy (deflation) when the unemployment rate inevitably rises. In this way, at least in the short term, unemployment has basically become one of the ways to' solve problems' rather than' create problems'. "Thatcher's deflation policy led to the rising unemployment rate: in the 1950s and 1960s, the unemployment rate was only about 1-2%, while 1 was 4.5% when Thatcher came to power in 1979, and 1 soared to 9. 1% in 1985. Monetarism and Thatcherism bid farewell to full employment in Britain, and social welfare policies began to shrink and privatize on a large scale.
Friedman's monetarism is not so much against interventionism as that he only wants the government to intervene in the money supply, but in essence, intervening in the money supply is also the biggest intervention.
On the other side of the Atlantic, Keynesianism was seriously challenged by the supply school. The distinctive characteristics of the supply side are the same as their names, with special emphasis on "supply". The supply school, represented by Laveur, feldstein and Mundell, which emerged in the United States in the late 1960s, totally denied the core proposition of Keynes's demand management that "demand determines supply", believing that this was the root cause of "stagflation", because growth and stimulating demand would lead to an increase in the quantity of money supply, which would inevitably lead to inflation. It is believed that encouraging and stimulating demand is undoubtedly equal to restraining savings, which leads to the decline of investment rate and labor rate, and then reduces the promotion of accumulation to economic growth. The supply school advocates the full restoration of the liberal spirit of neoclassical economics, especially the restoration of Say's law, opposes Keynes's state interventionism of "demand management", and puts forward "supply management" in a tit-for-tat way, emphasizing that the role of fiscal policy should affect supply rather than demand in order to promote private savings and investment; Therefore, the so-called "Laffer curve" drawn by Professor Arthur Laffer of the University of Southern California on a cocktail napkin became the "prescription" of the White House. This "tax reduction" prescription is based on three theoretical assumptions: first, it is believed that the tax amount does not necessarily change in the same direction as the marginal tax rate, but will change in the opposite direction when it reaches a certain point; Second, reducing the marginal tax rate will encourage people to replace leisure with labor; Third, high taxes will also cause low investment rate, reduce investment and reduce capital stock. Therefore, reducing the marginal tax rate will encourage investment and production.
The supply school has few academic achievements, lacks the integrity of the system in theory, and is only a countermeasure to solve stagflation; Although he has been boasting against Keynes's interventionism and flaunting himself as a laissez-faire, in terms of the essence of intervention, isn't it "half a catty" to emphasize "supply management" against "demand management" and state intervention in the relationship between supply and demand? The reason why the supply school once gained power was that it was adopted by the Reagan administration under the background that the capitalist economy entered the "stagflation" cycle and Keynesianism failed: it became famous for a moment because of temporary needs.
Second, the three revolutions of mainstream economics
Three revolutionary theoretical breakthroughs in mainstream economics in the 20th century laid the foundation and paved the way for the development of modern economics in the 20th century, thus forming a basic theoretical framework that is well known and insurmountable to any economics student or professor in western schools today.
1, "Chamberlain Revolution"
The century after Adam Smith was the heyday of the development of liberal capitalism, when monopoly was still an individual phenomenon. As stigler, the Nobel Prize winner of 1982, said, "Adam Smith, as a great figure who established tradition, did not leave us a blank in the monopoly field. He created or put forward three authoritative traditions. " These three traditions are: ignoring the formal monopoly theory, treating the monopoly phenomenon of his time as a franchise granted by the state, and taking no action against monopoly and collusion. When capitalism enters the monopoly stage, economic theory can't explain it, and the widespread monopoly phenomenon in the real world begins to attract economists' attention. From/kloc-Sismondi, Mueller and mcculloch in the early 9th century to Marshall, Cournot, edgeworth and Sidvik in the late 20th century, especially Pigou and sraffa, they have done a lot of research on monopoly theory and market incompleteness. But the problem is that they always follow the "Smith tradition", that is, take free competition as a universal phenomenon and monopoly as an exception to build their own theoretical framework. Even the Economics published by Knight and Smith in 1929 still thinks that "today, it is more reasonable to regard competition as a universal phenomenon and monopoly as an exception".
It was not until the mid-1930s that Chamberlain of Harvard University and Mrs Robinson of Cambridge published Monopoly Competition Theory and Imperfect Competition Economics, respectively, that the Smith tradition officially ended. The main contribution of Chamberlain Revolution is that they abandoned the traditional assumption that "perfect competition" is universal and monopoly is an exception in neoclassical economics represented by Marshall for a long time, and thought that perfect competition and monopoly are two extreme situations, and put forward a set of market models still used in economics textbooks to illustrate "monopoly competition" between the two extremes. Micro-economic revolution is completed by marginal analysis in reasons comparison, equilibrium conditions and welfare effects, and the market structure is divided into four types that are more in line with the actual situation of capitalism entering the monopoly stage, namely, perfect competitive market, monopolistic competitive market, oligopoly market and complete monopoly market. The economic significance of "Chamberlain Revolution" is that the natural logical starting point of macroeconomic development in the mid-20th century is the analysis of monopoly. From this starting point, western economics accurately describes and expresses the essence and present situation of the century-old economic history.
2. "Keynesian Revolution"
If the great crisis of 1929-33 was a reaction to microeconomics at that time, then Keynesianism was a revolution to neoclassical economics. The general theory of money made western economics separate micro-analysis from macro-analysis, and Keynes himself became the originator of modern macroeconomics and even western economics in the 20th century, thus becoming the eternal protagonist of the evolution and development of western economics throughout the 20th century.
Just like the title of Keynes's General Theory of Employment, Interest and Money published by 1936, the deductive logic of Keynesianism begins with full employment: first, the previous assumption of full employment equilibrium is based on Say's law, and its premise is wrong, because the analysis results of total supply and aggregate demand function show that the equilibrium under normal circumstances is less than that of full employment; Second, there is a balance between involuntary unemployment and underemployment because of insufficient effective demand; Because the total supply will not change greatly in the short term, the employment depends on the total demand; Thirdly, the reason of insufficient effective demand lies in "three basic psychological factors, namely, psychological consumption tendency, psychological elasticity preference and psychological expectation of future return of capital". Fourth, the government's non-intervention is tantamount to allowing the lack of effective demand to continue, allowing unemployment and crisis to continue; The government must adopt fiscal policy instead of monetary policy to stimulate the economy, increase investment and make up for the lack of effective demand in the private market. "This is the only practical way to avoid the current economic situation being completely destroyed." 5. In addition, he put forward six economic goals that the government should achieve: full employment, price stability, long-term economic growth, balance of international payments, income equality and optimal allocation of resources.
After Keynes summarized and integrated a large number of macro concepts from a macro perspective, the development of economics began to jump out of the limitations of price analysis, thus opening a brand-new page of western economics in the 20th century, because a brand-new angle and a brand-new theory were urgently needed to explain and make up for the defects of decadent free capitalism when capitalism developed into monopoly stage.
The birth of Keynesianism is an important symbol of great progress in western economics in the 20th century. In the final analysis, Keynesian revolution is a revolution of methods; After Keynes, countless followers of Keynes revised, made up and perfected various "gaps" and "hard wounds" in Keynes's system itself, making it blend in collision and fission. The conflict, fission and integration within Keynesianism are important prerequisites and manifestations for the development and enrichment of Keynesianism. For example, the "two Cambridge debates" that broke out in the late 1950s lasted for decades. The historical significance and academic value of this influential academic debate are far-reaching and great for the development and contribution of mainstream economics in the 20th century.
3. "Expected Revolution"
Neoclassical macroeconomics, represented by American scholars such as Luo Lucas, Joe Sargent, Luo Barrow and Tony Wallace, developed in the 1970s, is generally called "rational expectation school" because it uses the important economic concept of "rational expectation" and establishes its theoretical system. The so-called "expectation" refers to the prediction of economic variables related to current decision-making, such as the prediction of the future price of products when enterprises decide whether to invest in production, and the prediction of the future price level by trade unions in the wage level negotiations between employers and employees. They think that although Keynes talked about expectations many times, his expectations were just adaptive expectations, which was random and had no rational explanation, namely "adverse expectations". This is because Keynesianism is a system full of contradictions, and its assumptions are wrong: first, all parties in Keynesianism do not pursue maximization as the goal; Second, the same economic person has different behaviors in different functions and equations. The hypothesis put forward by neoclassical macroeconomics is just the opposite of the above two assumptions; Third, "rational expectation" assumes that the market is constantly clearing out, that is, through the constant adjustment of wages and prices, supply is always equal to demand and in a balanced state. Based on these three assumptions, Lucas' deductive logic is that money has an important influence on other economic variables such as output; The impact of money supply leads to the random change of money stock and causes economic fluctuation; Because the economic fluctuation caused by the impact of money supply is completed through aggregate demand curve, the impact of money supply will lead to the impact of demand; In this way, the interference of demand will lead to economic fluctuations; From the perspective of monetary policy, the macroeconomic policy on which the government intervenes in the economy is invalid, so we can generalize the "policy ineffectiveness theory", that is, the "government failure theory".
"Rational expectation" is called the "expectation revolution" of western economics in the 20th century, which has a great influence on economics in the 20th century. As a macro-analysis tool, "rational expectation" is widely used in western economics, even by its opponents, and is also widely used in the operation analysis of stocks, bonds and foreign exchange markets. Although "rational expectation" has generally entered the toolbox of mainstream western economics, many economists point out that it is unconvincing to explain the economic cycle with any "expected error" or imperfect information, and think that "rational expectation" has many limitations and its own insurmountable defects. For example, in the 1980s, neo-Keynesian economists such as Stiglitz criticized reasonable expectations and reiterated the viewpoint of government intervention: market clearing or non-market clearing, government failure or market failure, invalid policies or effective policies. This is the key to the difference in theoretical viewpoints and policy propositions between neoclassical macroeconomics and new Keynesian economics. On this issue, the idealism of the neoclassical school transcends the sense of reality, while the neo-Keynesian school is less addicted to idealism and more faced with the reality of capitalism. For another example, people are more in favor of rational expectation theory when talking about the stock market than when talking about macroeconomics. This is because, compared with most other markets, the stock market is highly liquid-people can buy and sell easily and there is almost no transaction cost; Other tangible markets that provide goods or services are more complex and rigid: resignation, employment, changing production and closing factories all have costs, because contracts enhance the certainty of nominal prices, capital and labor machinery and equipment, but reduce liquidity and flexibility.
In addition, as an important school of neo-liberalism, rational expectation school and its logical deduction of "government failure theory", together with public choice school, pose a severe challenge to Keynesianism. From 65438 to 0956, Professor barto of Massachusetts Institute of Technology first created and used the concept of "market failure", and regarded market monopoly as one of the phenomena of "market failure", and the word "market failure" became popular for half a century. In the stagflation period of 1970s, the public choice school headed by Buchanan put forward "government failure" in a tit-for-tat way. In the last decade of the 20th century, people can find that the concepts of "market failure" and "government failure" are full of economic literature. They were tit for tat, and there was no winner, which formed a unique theoretical "vacuum" state without the mainstream of economics at the end of the 20th century.
Third, the fourth "integration" of new Keynesianism.
The helplessness of stagflation in the 1970s and 1980s and the birth of Thatcherism and Reagan Economics marked the end of the Keynesian era of economics. Subsequently, monetarism and supply-side school successively lost the "orthodox" throne of economics, which made the "mainstream" theory of western economics form a "vacuum" state for a period of time in the last decade of the 20th century. As described by an American economist, this "vacuum" state is actually the "turbulent world" of the Warring States: "Because of Keynes, we are all Keynesians; Because of Friedman, we are all monetarists now; And because of the turmoil in the world, we are all eclectic now. " Just when everyone was a eclectic school, the economics textbook published by American professor Stiglitz 1993 was considered to have triggered the fourth "comprehensive" wave of neo-Keynesianism.
Before this, there were three widely popular economics textbooks in western economics, which were regarded as milestones. The first book was "Principles of Political Economy" published by Mueller 150 years ago, that is, 1848. This book is unconventional, while basically maintaining Adam Smith's "invisible hand" principle, it also boldly puts forward the policy proposition of "improving" the laissez-faire capitalist system. The second landmark economics textbook is Principles of Economics published by Marshall 1890 about 50 years later. As the founder of Cambridge School, Marshall is eclectic and eclectic, absorbing the vulgar theories of various schools, from production cost to supply, from marginal utility value to demand, and then establishing the theory of value balance. His "eclectic theoretical system" has widely influenced all schools of bourgeois economics in theory and method in the first half of the 20th century. His Principles of Economics published eight editions in his life, spanning 30 years. Since the beginning of the 20th century, before Stiglitz, the neoclassical economics represented by Marshall has undergone three major revisions: the first was the Chamberlain Revolution, which revised the traditional monopoly exception theory; The second time was the Keynesian revolution, which laid a theoretical foundation for bourgeois countries to intervene in the economy; The third is Samuelson in the mid-20th century. Saskatchewan tried to combine Marshall neoclassical economics with Keynesianism, that is, the compromise between micro-analysis and macro-analysis, and established a neoclassical comprehensive theoretical system, which became the mainstream economics of post-Keynesianism and remained orthodox for 40 years after the war. Therefore, as a sign of neo-classical comprehensive school or post-Keynesianism, the textbook Economics written by Saskatchewan became the second milestone to replace Marshall's Principles of Economics. For half a century, this book has been widely welcomed and sold like never before. It has been translated into dozens of languages and published in version 15.
Since the 1980s, the neoclassical comprehensive school has been unable to explain the existence of stagflation and put forward policies in time, and its orthodox position has begun to waver. Attacks, censures and attacks from various neo-liberal schools, including monetarism, are likely to replace them in whole or in part. In this debate, Stiglitz, praised as "the leader of economic revolution" by 1993, published the textbook Economics, which is considered as the fourth milestone. As a result, in the last few years of the 20th century, this book was quickly adopted and widely recognized by more than 300 universities around the world, and its Chinese translation was sold 197 within three years after its publication. Regarding Stiglitz's contribution, whether it is called "a response to neoclassical synthesis" or a revolution against post-Keynesianism, or the fourth milestone, or the "fourth synthesis" of neo-Keynesianism, at least, on the "century-old performance stage" of western economics, it can become a historical protagonist and make a curtain call for the economic audience who came to the stage to give warm applause to the 20th century. At least, at the end of the 20th century, it seems out of date that the neo-classical comprehensive school, which advocated state intervention in economic life and criticized the defects of the free market, was attacked repeatedly. It is stone, and his economics is unique and has become a beautiful landscape, attracting everyone's attention. At least, it is no exaggeration to say that Shi made the following efforts and explorations for the development of western economics at the end of the 20th century:
As Smith confessed, "economists have gradually realized that macroeconomic behavior must be related to the microeconomic principles behind it;" There is only one set of economic principles, not two. However, in the existing textbooks, this view has not been reflected at all. "On the premise of acknowledging Samuelson's successful integration of the two, Smith tried to surpass Samuelson's efforts and put the expression of macroeconomics above solid microeconomics. For example, the full employment model, the existing unemployment model and the comprehensive model are all directly derived from the basic model of microeconomics under the change of external constraints, and then extended to realize the gradual derivation and organic connection between microeconomics and macroeconomics. This is one of them.
After the reform, Keynesianism adhered to the "perfection" of neoclassicism, and brought many new achievements and developments of economics in the past twenty or thirty years, such as information problems, incentive problems, moral problems, adverse selection problems, etc., into its research field, making it more practical. Especially, the integration and synthesis of the neo-liberal school after the decline of the neo-classical comprehensive school not only greatly promoted and curbed the theoretical system of Keynesian economics and the neo-classical comprehensive school, but also branded with the profound rational expectation school and even the obvious traces of almost various schools developed in the second half of the 20th century, such as new institutional economics. This is the second one.
Third, perhaps because his greatest contribution is the study of finance, or because he is a top economist who studies public sector economics, he always attaches great importance to the positive role of government intervention in the economy. He believes that the "normality" of the market is incomplete information and incomplete market, and the "market failure" phenomena such as public goods, externalities and monopoly define the scope of government activities; The root of market failure is that no one is responsible for the market and no one intervenes in the market; Compared with other social organizations, the universality, legitimacy and compulsion of the government determine the reasons why the government should intervene. As for how to intervene, Smith put forward the "basic theorem of decentralization" for Coase theorem and called it "Coase fallacy". He believes that Coase theorem and its "voluntary solution" or "negotiated solution" will not be able to overcome the "free rider" problem, and the high transaction cost will lead to inefficiency. On the contrary, it depends on the government's regulation according to law, otherwise the market will not be able to allocate resources effectively.