Li Daokui: Promoting the Development of Chinese Economics through the Founding of a New Branch: Government and Economics

Excerpts from David Li's presentation at The 2nd International Conference on Government and Economics.

A review of China’s economic development and the mission of economists in the new era

Economics is different from other disciplines in that our work is closely tied to the destiny of the nation. I would like to give a brief review of the historical development of China's economics. After 1959, China's economy experienced a major setback, the Great Leap Forward. Mao Zedong, the leader of the CPC and the Chinese nation, personally called on economic scholars to reflect on the mistakes of this period. He spent more than a year studying Stalin's Soviet Socialist Economic Issues and the section on socialism within the third edition of the Political Economics Textbook compiled by the Institute of Economics of the former Soviet Academy of Sciences. For some time, Chairman Mao even arranged for everyone to read, discuss, and take notes on these works every afternoon. Later, the well-known EconomicPerspectives journal was published, and Comrade Sun Yefang implemented Chairman Mao's instructions to promote the development of the field of economics.

In the 1980s, during the early stage of reform and opening up, a group of young economic scholars returned to the city from the countryside, some of whom had not even graduated from college. Yet, all of them finished their graduation theses on economics while actively participating in the reforms. This was the golden age of economic development, during which a series of economic theories were born. Even today, we are still coming to understand some of these theories.

In the 1990s, many economic scholars went abroad to study Western economic theories and introduced them to China upon their return, including the theory of property, company governance, and asset pricing. Many of these scholars later joined the economics departments of universities. This was the second wave of economics following reform and opening up.

Today, I believe we have reached the third wave of economics in China’s history. Why? Because the Chinese economy has made great achievements in the past 40 years, but we have received criticism from many developed countries as a result. You can compare China to an athlete who has improved his 100-meter race performance from 13 seconds to 10 seconds without an explanation, resulting in accusations of doping and cheating from the international community. The US now accuses us of this, stating that too much government intervention is indicative of national capitalism, and is a counterproductive development path.

The third wave of economic research and innovation should clarify China's economic practice, and in this regard, promote the development of the field of economics. These efforts also fit nicely into the mission to shape Chinese universities into double first-class schools. How can we improve our economic theory? Let’s go back to 1867 and review a paragraph of the preface in Marx’s Das Kapital German edition, which describes the book as “a study of the capitalist mode of production.” At that time, this mode of production was concentrated in the UK, which could have led many economists from Germany and other parts of Europe to shrug their shoulders and say, “This is not relevant to us.” And yet, it was. What Marx meant was that he refined Das Kapital from the early development of British capitalism, but the work had implications extending far beyond British economics.

We should be inspired by rereading the classics to think about how we can succeed in building a strong foundation for the field of Chinese economics. We must draw lessons from China's unique practices to reveal findings of general significance that transcend China's national borders, can be accepted by our international peers, and will finally be included in the first-year economics courses of universities around the world. When we accomplish these feats, we can deem our efforts a success. Of course, this task will be very difficult, but it is the mission of the third generation of young scholars following China’s reform and opening up. Therefore, I am very glad to have invited the head of the Economics Department of Peking University to be here today. In addition, Gao Peiyong, Vice Director of the Chinese Academy of Social Sciences, would have attended, but regretfully was not able to make it due to a previous engagement. Based on this consensus around the future of Chinese economics, we have repeatedly studied the spirit of the speeches of General Secretary Xi Jinping, who has endorsed this direction on many occasions, including at the recent meetings of theForum of Experts in Economic and Social Fields and the Forum of Scientists.

The mission of ACCEPT and the establishment of the field of Government and Economics

How can we implement this consensus? Under the leadership of the CPC Party Committee of Tsinghua University, we were able to establish a research institute two years ago—the original Tsinghua University Center for China in the World Economy (CCWE) was upgraded to the Tsinghua University Academic Center for Chinese Economic Practice and Thinking. The English abbreviation is ACCEPT, in which “A” stands for academic, not politics, the second “C” stands for Chinese, “E” is for economic, “P” is for practice, and “T” is for thinking—thinking that is being generated in the new era, rather than from the past. The acronym ACCEPT is particularly fitting, as we hope that our international colleagues can come to accept economic theories from China.

In the two years since its establishment, ACCEPT has made significant progress in promoting and developing Chinese economics under the care of the leaders of Tsinghua University and with the support of our donors. We have three major endeavors to report:

First, we established the Society for the Analysis of Government and Economics, or SAGE. “S” stands for society, “A” is for analysis, “G” is for government, and “E” is for economics. Additionally, the acronym of SAGE in English represents our earnest hope that Chinese economics can produce theories with wisdom befitting a sage. The goal of this society is to create a new branch of economics—government and economics. Through our research, it has become clear that one of the most academically valuable aspects of China's economic development is the insights it can provide into the relationship between government and the market economy. The academic contribution we hope to make is akin to the field of Swedish economics. Sweden's most distinctive economic characteristic is its focus on social welfare, and while “Swedish economics” is not widely recognized as its own field, welfare economics is. To launch SAGE as well as the field of government and economics, our first order of action was to invite the 2007 Nobel Prize laureate, Eric Maskin, to be the co-chair of the society. Today’s international seminar, our second annual meeting, is an important step on our journey to create a new branch of economics that takes Chinese practice and thinking into consideration, and which is internationally recognized. Last year’s international seminar was also a resounding success, and we even received congratulatory letters from the Chairman of the Federal Reserve and the Chairman of the International Economic Association.

Second, SAGE is launching a new journal called the Journal of Government and Economics (JGE). This journal is under active preparation and is currently awaiting the final review results. The editorial board boasts four Nobel Prize laureates and more than 20 top international scholars. These world-renowned economists recognize that government and economics is an important subject, see the value of incorporating China’s experiences into this new field, and are excited to participate in this new endeavor.

Third, we hope to spark reforms in economic education. Economic education is difficult all over the world. For example, many undergraduates across the globe use the textbook Principles of Economics compiled by Professor Mankiw of Harvard University, but Professor Mankiw himself stopped teaching this subject two years ago. When students began striking in the fall of 2008, they were baffled that they had taken his class and yet were not able to understand why the financial crisis had occurred. In fact, engineering students who read the Wall Street Journal were more capable of grasping the economic realities of the time. The fundamental problem was that Professor Mankiw’s course was designed to teach economics, not the economy, and it was necessary to apply the teachings of economics to an understanding of the economy in order to comprehend the full picture of the financial crisis. Economic knowledge is limited, and requires a constant interaction between theory and practice. So, what reforms have we proposed?

This fall, I began teaching a “General Economics” course at Tsinghua University for all undergraduates. In the course, I first introduce concepts of economics, including how agriculture is organized, the differences in production inputs between agriculture and industry, how to solve the land problem, and the characteristics of the industrial sector, the information industry, and the service industry. After providing this foundation, I then teach the art of critical economic thinking. Why did Adam Smith put forth his theory? Why is David Ricardo's theory so popular? Why did the Germans fail to recognize Adam Smith’s theory at that time and proceed to found the German historical school? Why did Marx appear on the scene of economics? Why is reform necessary? How should we view contemporary economic theories? Through this method, we are able to reform economic education.

To summarize, ACCEPT has founded SAGE and launched a journal and a course, which will hopefully include textbooks soon. In the near future, we plan to compile English textbooks to make our reforms in economic education accessible to everyone around the world. Thank you again for participating in our second International Conference of Government and Economics. It is a pleasure to have you here, and I hope that we can unite in joint efforts toward our shared vision. This will have implications not only for the development of a discipline, but for the future global standing of Chinese economics and the destiny and development prospects of the nation. I once again appeal to you to join us in our hard work, which we are confident will soon yield satisfactory results.