The HSE Chinese Performance

On October 10-11th, an International forum on "The History of Economic Thinking and Methodology" took place at the HSE. This event was organized by the HSE Economics faculty in cooperation with Wuhan University, China.

On October 10-11th, an International forum on "The History of Economic Thinking and Methodology" took place at the HSE. This event was organized by the HSE Economics faculty in cooperation with Wuhan University, China.

In his opening speech Oleg Ananjin, the head of the HSE's Department of Economic Methodology and History, spoke about some common trends in the internal development of Russia and China.  China is a good example of non implementation of the Washington Consensus recommendations, but Russia, on the other hand, can be said to have implemented the Washington Consensus recommendations badly.  And this assumption can be used as a starting point for exchanging experiences within scientific co - operation.

Jiandong Wen, a delegate from China, delivered a session on "Mainstream Economics: The Reconciliation of New Classical and New Keynesian Economics and further"

The lecturer defined mainstream economics as those theories that modern textbooks teach.

According to this profile, economic theories in the domain of mainstream economics try to distinguish themselves from other humanities and social sciences by labeling themselves as economic sciences and by using deductive reasoning to develop models. In addition, modern mainstream economics is principally an extension of classical economics since it uses methodological individualism to develop models on the basis of optimizing behavior.

International forum on "The History of Economic Thinking and Methodology"

The two dominating schools of thought in macroeconomics are new classical macroeconomics and new Keynesian macroeconomics. Jiandong Wen discussed the reconciliation of new classical and new Keynesian economics. Firstly, they both develop macroeconomic models based on optimizing individual behavior. This is methodological individualism. Secondly, both of them rely on rational expectation theory. Thirdly, the game theory approach is widely applied to both NCM and NKM models.

However, there are many disagreements between NCM and NKM. The source of these disagreements is their different assumptions about market perfection or price flexibility. According to NCM, the market is clear because of price flexibility. In contrast, NKM emphasizes the inflexibility of some factors: price and wages cannot change immediately in response to exogenous changes. As a result, although they share the same methodology in terms of research and both put emphasis on optimizing behavior, their theories have different conclusions. However, Jiandong Wen  concludes that both are correct if they are tested in the corresponding environments.

Two problems in mainstream economics were also presented in the report.  The first concern is about fundamental methodology involving simple causal relationship and deductive reasoning, the validity of rationality, and the existence of equilibrium. The second is the limitation of some basic theories such as the Nash equilibrium and rational expectation.

Finally, the speaker emphasized modern trends in mainstream economics such as the rise of behavioral economics as a complementary theory of neoclassical economics, the development of experimental economics as one of cornerstones in economics, and the extensive use of inductive reasoning as an important method, in parallel with deductive reasoning.

Chusheng Ye, Economics Professor at the Economics & Management School, Wuhan University, China, spoke on the question; "Why is "development economics" still not an independent science?"

He said that in the field of economics today there is still controversy as to the legitimacy of "development economics" willingness to exist independently. Chusheng Ye argued that the reason for this is that "development economics" lacks its own microfoundations, and consequently, lacks a distinct paradigm. According to the speaker, the characteristics of developing countries and the particularity of their economic issues just provide ground or "soil" for "development economics", and the further and crucial problem is what the "root" for "development economics" will be.

International forum on "The History of Economic Thinking and Methodology"

Structuralist "development economics" rejected the neo-classical economics as the microfoundations of their theories, but did not construct a new microfoundation for their theories, and can not generate a relatively independent paradigm due to a lack of microfoundations, so it is just a "pre-science". Neoclassical development economists take neoclassical microeconomics as the microfoundations of their theories, and apply neoclassical theories and tools to analyze issues about underdeveloped economies. Although neoclassical "development economics" has "roots", which are grafted onto neoclassical microeconomics, it lacks independence.

Until now, without relatively independent microfoundations, and consequently, with no distinct paradigm, "development economics" has not existed as an independent science of developing economies. The speaker particularly emphasized that neoclassical microeconomics is not sufficient to provide microfoundations for "development economics" because it deals with economies which are at or near equilibrium, and is not adequate for analyzing developing economies which are far from equilibrium. In a sense, neoclassical microeconomics can be viewed as a "physiology of economy", and the microfoundations of "development economics" can been considered as the "pathology of an underdeveloped economy". Accordingly, "development economics" is neither an extension of mainstream neoclassical economics domain, nor the outcome of the revolution of paradigms within the domain of neoclassical economics. Rather it is a new companion economic science of standard neoclassical economics, based on its own microfoundations and done in a special paradigm within a far-from-equilibrium analysis-space according to the characteristics of an undeveloped economy.

Ma Ying, Professor at Centre for Economic Development Research, Wuhan University, China, outlined some crucial points in the history of economic thought.

Traditionally, in the history of economic thoughts, Friedrich List has been considered to be a pioneer of the German historical school. But professor Ma Ying is keen to change our perspective and believes we should treat List as a pioneer of development economists.

International forum on "The History of Economic Thinking and Methodology"

Based on the conditions of Germany as a developing country and the international environment which it faced in the mid - 19th century and in terms of history, theory, and policy, List expounded how Germany, which was then relatively backward as compared to England and France, promoted  productive forces to grow with the state intervention to make Germany powerful industrial state. As one of pioneers in development economics, List discussed such topics as the stages of economic development, the relationship between industrialization and economic development, a theory of productive power, a theory of government intervention, and a doctrine of trade protection. Most of these points were very similar to those of contemporary development economics.

When studying ideas of economic growth and development, it is necessary to put List in a fairly prominent position in the history of European economic thought. Judging by his ideas and his contributions to the knowledge of "development economics", we should definitely view List as one of the true pioneers of "development economics" in the Europe of the mid-19th century.

 

Dmitrii Petrov, the HSE News service