My family is not a scholarly family. When my father first joined MetLife as a clerk, he didn't even graduate from high school. As for my mother, I'm not sure whether she has finished high school education, but she is really a great person, intelligent and curious, and has played an important role in my knowledge development. In addition, some of my elders have a considerable influence on me. They introduced me to the world of classical music. Even today, my menstruation Adelaide North is still a very special person in my life.
When I was in college, I got the acceptance letter from Harvard, but because my father was transferred to the head of MetLife's West Coast, we moved to San Francisco. Because I don't want to be too far away from home, I decided to study at the University of California, Berkeley. There, I became a Marxist believer and my life was completely changed.
Marxism was attractive at that time because it seemed to be able to answer the most pressing questions of that era, including the great economic panic we were facing-the economics I studied before the Keynesian school at 1939 ~ 1940 did not touch this point. I was against World War II, but when Hitler invaded the Soviet Union on June 22nd, 194 1, I suddenly found that my position of supporting peace became very lonely, because others turned to support the war based on their belief in capitalism.
Because I was busy taking part in the student movement, my undergraduate grades at the University of California were just average, with an average score slightly better than "C", but I chose three majors: political science, philosophy and economics. I originally planned to go to law school, but with the outbreak of the world war and my strong will not to kill people, I entered the merchant service on May 1942 after graduating from Berkeley.
Shortly after going out to sea, the captain called me to the bridge and asked me if I would like to learn to pilot: most senior crew members only have basic education, and our ship is sailing from San Francisco to Australia. Later, I really became a navigator and enjoyed it. We traveled back and forth between San Francisco and Australia and entered New Guinea and Solomon Islands.
The years of sailing at sea gave me three years to read continuously. In the process of studying, I decided to become an economist. In the last year of World War I, I taught pilot courses in Alameda, California. At this time, I came into contact with photography again and fell into a dilemma; Do you want to be a photographer or enter the world of economics? In the summer of 194 1, I went to the valley in central California to take photos of migratory birds with Rangi, director of the photography department of the Ministry of Rural Security. Lanji has been trying to convince me to be a photographer. Her husband, PaulTaylor, works in the Economics Department of the University of California, but encourages me to develop economics. As a result, Mr. Wang won.
Dig into economic history
I entered the Graduate School of the University of California, Berkeley-it was the only school that accepted me because of my poor academic performance. As a graduate student, my goal is to find out what determines the operation mode of the economic system and its success or failure. Obviously, economic history is the category that best meets this goal. I dare not say that I learned any form of economics at Berkeley College. At that time, the professors who had the greatest influence on me did not belong to the mainstream of orthodox economics-for example, robert brady and Leo Rogin, who played an important role in the history of economic thought. As for M·M· Knight (Knight's brother), although he didn't believe in theory, he knew the facts and background of economic history like the back of his hand, and later he became my tutor and thesis director in Berkeley. I used to memorize some necessary theories, but I couldn't really understand the essence.
In fact, it was not until my first job, when I was teaching at the University of Washington in Seattle, that I really learned economic theory by playing chess with the excellent young theorist Don Gordon. For three years, we played chess every day from noon to two o'clock in the afternoon, and the chess skills were better, but he guided me in economic theory; More importantly, he taught me how to think like an economist, and this skill is still my most important research tool.
My doctoral thesis is the development history of American life insurance, and I have been funded by the Social Science Research Council to engage in basic research work on the east coast of the United States. This has been a fruitful year. I not only attended robert merton's sociology seminar at Columbia University, but also contacted the Cole Entrepreneur Center at Harvard University. Because Schumpeter is the mentor of the entrepreneurial school, I am greatly influenced by him. My early research and works mainly focused on the life insurance analysis extended by doctoral thesis and the relationship between life insurance companies and investment banks.
Later, my research work turned to developing an analytical framework for observing regional economic growth. I published my first paper in the Journal of Political Economy, entitled "Location Theory and Regional Economic Growth". Based on this research result, I developed a set of major economic growth theories.
At a meeting of the Economic History Society, I had the honor to meet Fabriken, then head of the research department of the National Bureau of Economic Research. From 1956 to 1957, I was invited to be a researcher in the bureau, which was a crucial year in my life. Not only did I get to know the important economists who interacted with the bureau, but I also went to Johns Hopkins University in Baltimore every week to learn from Gu Zhinai. His guidance had a very far-reaching influence on me. The empirical research I did in the Bureau of Economic Research that year laid the foundation for my early major quantitative research-the balance of payments in the United States ranged from 1970 to 1980.
1944 first marriage. When I was in graduate school, my wife's income from teaching at school was the main source of our family's economy. Douglas, Christopher and Malcolm were born between 195 1 and 1975. After all three children went to school, my wife became an outstanding politician in the Washington state legislature.
During the ten years from my work in the Economic Research Bureau to 1966 to 1967, I received a Ford teacher's grant and went to Geneva to do research. My main research is American economic history. The result was the publication of my first book: American economic growth from 1790 to 1860. The book makes a straightforward analysis of the market operation under the export-oriented growth model.
The new face of economic history
By 1960, the younger generation of economic historians have been in turmoil, trying to change the theme from the initial narrative and institutional to the emphasis on analysis and quantification. 1957, I worked in the Economic Research Bureau. The Bureau and the Economic History Society jointly launched the first quantitative research project on American economic growth, and held a meeting in Williamstown, Massachusetts. I also published a paper on the balance of payments of the United States from 1790 to 1860. This meeting can be said to be the beginning of a new research method of economic history. However, it was not until two of my early students, Hughes and Davis, who taught at Purdue University, brought together economic historians who were interested in introducing economic theory and quantitative methods into historical research for the first time. 1960 In February, everyone held their first meeting in Purdue. This meeting was a great success, and it will become a regular annual meeting in the future. Participants include economic historians, theorists and econometricians. During the meeting, it can be said that the speaker in "Everyone is Happy" was often severely criticized. However, we are all excited to know that we are reshaping the subject of economic history.
We are very popular in economics. The economics department of the university quickly expressed their interest in hiring new economic historians, or we call them Creole econometricians. Therefore, when I planned the postgraduate courses in this field with my colleague Maurice David Morris at the University of Washington, we did attract some of the best students to join the research of economic history. In the 1960s and early 1970s, the job market responded well, and our students soon found jobs all over the country.
From 1966 to 1967, I decided to shift the focus of my research from American economic history to Europe. Therefore, when I was sponsored by Ford to go to Geneva for a one-year research, I decided to readjust my research methods, which led to a complete change in my academic career. Because I soon found that the tools of neoclassical economic theory are not enough to explain the basic social changes of European economy since the Middle Ages.
Looking for a new analytical framework
Neoclassical theory focuses on the operation of the market, and assumes that the operation of the market has preconditions, but it does not mention how the market evolves. Furthermore, neoclassical theory is static analysis, and we need a dynamic theory to explain the process of economic evolution with time. The new analytical tools we need do not exist in neoclassical theory. For a long time, I have been looking for a framework that can provide new analytical tools, which has aroused my interest and concern in new institutional economics. As early as in graduate school, I read the works of Weiblen and Cornion, and deeply felt their thorough views on the operation of the economic system, but they did not put forward a theoretical framework. What we need is a theoretical structure that can be used to explain and analyze economic history. Old-fashioned institutional economics, because it can't provide this theoretical framework, can't really become another choice to replace neoclassical theory. From the very beginning, Marxism showed its concern for the system, put forward some pertinent good questions and explained the long-term changes, but there were too many loopholes in its model. The main defect is that the class is the analysis unit, and the change of population is not taken as the main source of change. As for the strength of neoclassicism theory, it focuses on the problem of scarcity, so it takes competition as the key of the whole economics, and at the same time takes individuals as the unit of analysis and analyzes it by economic methods. How to integrate the advantages of the above methods into a set of theoretical structure is exactly what we have done for the new institutional economics.
Why pay attention to the system? In the uncertain world, human beings try to establish the interpersonal interaction structure with the system. System is a social game rule, so it becomes an incentive structure to shape economic, political and social organizations. The so-called system includes formal rules (constitution, laws and regulations) and informal restrictions (conventions, codes of conduct and codes of conduct), as well as the effective implementation of the above rules and restrictions. The person subjected to execution may be the third party (law enforcement and social exile), the second party (revenge) or the first party (self-demanded code of conduct). System plus technology determines the transaction and conversion (production) costs that constitute the total production cost, thus affecting the economic performance. Because there is a close relationship between the system and the technology adopted, the efficiency of the market can be said to depend directly on the structure of the system.
I put institutional factors into the analysis of economic history, and the initial results are shown in two books, one is Institutional Change and American Economic Growth co-authored by Davis 197 1, and the other is The Rise of the Western World: A New Economic History co-authored by Thomas 1973. These two books try to develop some institutional analysis tools and apply them to the study of economic history. The former is to find out how new institutions and organizations have evolved in the process of American economic growth. In the study of Europe, we think that the formation of property rights is the key factor of economic performance, and we also discuss the evolution of property rights in the Netherlands and Britain, as well as France and Spain.
The above two books are still based on the assumptions of neoclassical economic theory, but there are too many unreasonable defects, such as the efficiency of the system (no matter what definition). More seriously, under the framework of neoclassicism, the long-term economic downturn cannot be explained. Therefore, I began to explore what went wrong. Personal belief is obviously an important factor affecting their choices, and only short-sighted economists will not attach importance to thoughts, ideologies and prejudices. Once we realize this, we must critically review the principle of rationality. It is a long process to form a new analytical framework, including: (1) putting forward a set of views on the system, which can explain why the results caused by the system cannot produce economic growth for a long time; (2) Develop a political and economic model to explain the basic source of the system. Finally, economists must also understand why people form ideologies and concepts that can influence their choices.
Economic organization cost
Coase put forward the key link of architectural evolution. In the article "The Essence of Enterprise", Coase makes us think about the cost of economic organization. But Coase is concerned about the transaction costs that determine the survival of manufacturers, while I am concerned about the transaction costs related to the overall performance of the economy. Steigler once mentioned to me that he thought that in the process of historical development, the importance of economic organization efficiency can be compared with the importance of technological change, and I share the same feeling. Transaction cost provides me with a starting point to examine the cost of economic organization. Another important contribution of Coase is social cost, which links neoclassical theory with institutional analysis. The idea conveyed in this paper is that when the transaction cost is greater than zero, the system will shape the market structure, and its importance cannot be ignored.
Fortunately, several of my colleagues at the University of Washington studied Coase's works carefully in their early years. Zhang Wuchang is a student of Ai Zhiren at UCLA. He met Coase when he was doing postdoctoral research at the University of Chicago, and then he came to Seattle. Zhang Wuchang has made some important contributions to the transaction cost theory-especially when he made many achievements in loans, labor services or agents in quantitative finance, he emphasized that measuring the cost is an important source of transaction costs (because incomplete measurement will lead to incomplete definition of property rights). After Zhang Wuchang left Washington University for Hong Kong University, YoramBarzel continued his work. I learned a lot from them, and my next book is obviously influenced by them.
In the book Structure and Change of Economic History published by 198 1, I gave up the assumption that the system is efficient and tried to explain why the "inefficient" rule came into being or even existed for a long time. I began to explore the transaction costs of different forms of economic organizations in history, and also studied how ideological changes affected political and economic decisions. After the introduction of the theory, I reinterpreted the economic history in eight chapters, which spanned from the era of agricultural origin in 8000 BC to the 20th century.
Because our understanding of the political process is still lacking, I have been looking for like-minded people to develop political-economic models together. Levi is a Marxist political scholar. She and I planned a political and economic research plan, and other colleagues lacked interest in it. Therefore, I decided to leave the University of Washington where I taught for 33 years and transfer to the University of Washington in St. Louis. 1983. There are a group of energetic young political economists here, hoping to develop a new political and economic model. This change later proved to be a wise move. I founded the Political and Economic Research Center in this school, and continued to carry out extremely creative research.
The role of government
The core problem of political science in theory is embodied in the pluralistic and conflicting views derived from the theory of public choice. There are three classic works in the field of new public choice: Buchanan and Duroc's consent calculation, Olson's collective action logic and Downes's democratic economic theory. Is the government organization really a behemoth that Buchanan and the Virginia School advocated by the public must control? In their eyes, the country is like a huge stealing machine. However, I once put forward the property right argument that the government can create safe and productive property rights, which is the key to economic growth. Obviously, my view is diametrically opposed to the above-mentioned view that the government is evil. This question is nothing new. The Federalist newspaper written by Madison, Hamilton and Jay has a wonderful explanation of this problem. In fact, there is no country, and there is no country. From a deeper analysis, Arrow's impossibility theory is valuable to sum up the whole process of individual selection. In fact, in the face of individuals with multiple values and preferences, it is impossible to get a collective rational choice by adding up their choices.
These problems have yet to be solved, which also leads to basic political problems and subsequent economic performance. In Structure and Change, I put forward a set of neoclassical theories about the state to analyze the following themes; Since an efficient property right system can increase the total income and the ruling income, why do some rulers want to create an inefficient property right system? In fact, the sources of these inefficient rules are nothing more than competition restrictions (the threat that the dominant position will be replaced by competitors) and transaction cost restrictions (efficient rules may consume too high tax costs, thus leading to a decrease in the income of rulers).
Political market is inefficient.
In the article "The Transaction Cost Theory of Politics", I put forward a more general model to explain why the political market is inherently less efficient than the economic market. In this paper, I also use the basic transaction cost structure developed by myself to discuss the economic market.
Transaction costs include measurement costs and contract execution costs. In the economic market, there are objective standards to measure the physical poetry of traded goods and services (such as size, weight, color, etc.). ); As for the execution of the contract, it depends on the strength of the judicial system. Competition is certainly a sharp weapon to reduce transaction costs, but in the economic market, high transaction costs are still inevitable. However, in contrast, the political market is less efficient. In the political market, candidates exchange votes for political views; Because the weight of each voter is very small, the motivation of voters to fully understand political views is not strong; At the same time, the political market does not have a mechanism to ensure the implementation of contracts like the economic market; Therefore, the competition in the political market is very incomplete. Due to the complexity of political issues (coupled with the lack of motivation of voters to understand political views), ideological platitudes are full of them. In other words, due to the structural characteristics of the political market and the complexity of political issues, the incentive of market efficiency has been diluted.
Throughout the 1980s, I devoted myself to developing a political and economic framework to explore long-term institutional changes, and published the book "Institution, Institutional Change and Economic Performance" in 1990. In this study, I hope to develop the theory of institutional change. My first step is to pull the system out of the organization. System is the rule of competition, and organization is the participant. In other words, an organization is made up of individuals with some objective function. Organizations can be manufacturers, trade associations, cooperatives (above economic organizations), political parties, legislatures, competent units (above political organizations), churches, sports associations and clubs (above social organizations). In the process of pursuing goals (whether the goal is to maximize profits for manufacturers or win elections for political parties), organizations and their internal pioneers can be regarded as agents of change. Due to the induction from the institutional framework, it creates opportunities for the organization itself to survive. The economic system has the characteristics of scarcity and competition, so the organization is in a position of survival and competition. Competition also urges organizations to try to modify the institutional framework to improve their competitive position. The strength of competition will determine the speed of institutional change, and the direction of change will reflect the participants' cognition-their mental model of explaining the external environment.
I use this framework to compare the development experience of the Netherlands, Britain and Spain. The government evolution of the first two countries gave birth to the property right of building modern economic growth; As for Spain, due to political drag, the economic development has stagnated.
Cut into the factors of subjective understanding
In this book, I began to seriously think about the basic assumption of "rationality". Obviously, we should explain why people make existing choices; We should also understand why ideologies such as productism or Islamic fundamentalism can dominate people's choices and guide economic operation for a long time. But only by digging deep into the category of cognitive science and understanding the way of spiritual learning and decision-making can we grasp the connotation of ideology. After 1990, my research mainly turned to this topic.
Simon took the lead in advocating that social science researchers should also explore human subjective cognition of the real world. He also believes that if the knowledge and computing power of decision makers are seriously insufficient, there will inevitably be a gap between the real world situation and the cognition of decision makers, which we must clarify when understanding their decisions. In addition, for the formation of subjective opinions, we should also understand the reasoning process. However, Simon emphasizes bounded rationality-the limitation of decision makers' computing power; I am concerned about ideology, the information that actors can grasp and the incomplete feedback after making decisions.
The best way to interpret and explain the mental construction of the world around us is to understand the human learning process. However, learning is not only the product of personal life experience, but also covers the cultural experience accumulated by past generations. Hayek believes that the experience contained in collective learning has been tested for a long time, and it is embodied in our language, system, technology and ways of doing things. The stock of knowledge accumulated by past experience will be deeply rooted in our study and form an important source of influence on our actions-past experience will have a great impact on the present and the future. Therefore, learning is a process of gradual accumulation, but it should be filtered through social culture in this process to determine subjective value. However, the accumulation of a society's past experience may not be helpful to solve new problems. The learning process can be said to depend on: (1) how an established belief system filters the information generated by various experiences; (2) Different experiences faced by individuals and society in different periods.
This research orientation, which emphasizes cognitive science/system, is expected to help me understand the past economic history and the performance of various economic differences at present. The impersonal market derived from modern production economy will not automatically form the condition of low transaction cost. This is the topic discussed in game theory. In the game, we are willing to cooperate with others. Only when the game will be repeated can we fully grasp the past performance of our opponents, and only a few people will participate-in other words, a small-scale society that can conduct personalized transactions. As for the difficulty in forming a lasting cooperative relationship, it is because the game is not repeated (or there is a final game), the opponent's information is lacking, and the number of participants is large-in short, this is the world where human transactions are prevalent and interdependent in modern production economy. Therefore, to improve economic performance, the most important task is to create a system that can change the cost-benefit ratio, so as to encourage everyone to adopt a cooperative approach, because economic performance depends on creating an effective, productive economic and political system. Since the political market is inherently inefficient and the political system plays a key role in economic performance, it is not surprising that the economic performance has been unsatisfactory for a long time.
We still have a long way to go, but I believe that if we want to make further progress in social sciences, we must understand some unavoidable fundamental problems: how do people make choices? Under what conditions, rational hypothesis is a useful tool; In the case of uncertainty or ambiguity, how individuals choose and so on.
Fulfilling life
I married Elizabeth Keyes for the second time on 1972; Since then, she has been playing the role of wife, partner, critic and editor, and she can also be said to be a partner in various projects I have studied. As a commentator and editor, she played a very important role in my personal development as an economist. She turned my plain words into beautiful articles, and more importantly, she had a correct intuition. She could point out the parts that I didn't think well enough, and urged me to face vagueness and confusion and reorganize my thoughts.
If the above makes you think that I have spent my whole life on academic research, I am not clear enough. In fact, I am evolving into an economist in a colorful life. Yes, economic research has always been the focus of my life, but other activities have also been mixed with it, enriching my life. I never forget photography; I always like fishing and hunting with a close friend; I also have two farms, one in Northern California, and later I bought one in Washington State. I also learned to fly a plane. In the 1960s, I had my own plane. Food and wine have always been my hobby. Besides, music continues to occupy a very important part in my life.
At present, my wife and I live in northern Michigan in summer, which is a suitable environment for research. In the past fifteen years, most of my work has been done here. The whole morning is my research time. In the afternoon, I walk my dog, play tennis or swim. At night, because my residence is only 16 miles away from Inkinlocan Music Camp, we will listen to music two or three nights a week. This is really an excellent place for academic research and leisure, so that I can fully experience a rich life.