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Information about ATE12

Published on April 14, 2008

Author: FunSchool


Advanced Theoretical Economics Final Conclusion May 27, 2005 :  Advanced Theoretical Economics Final Conclusion May 27, 2005  Prof. Chen Ping China Center for Economic Research, Peking University Why Equilibrium Economics Is not Working ? Why We Need Complex Economics?:  Why Equilibrium Economics Is not Working ? Why We Need Complex Economics? What is equilibrium ? > diffusion process > decreasing differences (technology diffusion, price convergence, damping fluctuations, etc.) Why needs non-equilibrium and complexity? > Biological metabolism > birth-death process > increasing diversity & complexity (technology innovation, price variation, persistent fluctuations, emerging cluster & division of labor, etc.) Why Neoclassical Economics Has Limited Applications in Real World But Dominating in Academics?:  Why Neoclassical Economics Has Limited Applications in Real World But Dominating in Academics? Limited applications: supply-demand curve for agricultural goods IS-LM curve for macro fiscal and monetary policy Financial trading strategies by portfolio diversification, index fund, and option pricing Great failures: crisis management, innovation policy, institutional design, development strategy Unrealistic Assumptions and Blind Confidence in Market Force:  Unrealistic Assumptions and Blind Confidence in Market Force Invisible hand in community market vs. regulated hand in industrial world Infinite greed (maximizing utility) vs. limited wants (balancing acts) by social animal Atomic individuals vs. complex networks (roundabout production) in division of labor Complete market (in closed economy) vs. product cycles (birth-death of technologies and industries) Complete information vs. complex information and trial-and-error process Poor Math with Strong Ideology!!! Roots of Complexity in Economics:  Roots of Complexity in Economics Open society with a series of new innovation, new resources, and new challenges Nonlinear feedback mechanism with time delay Many players with conflicting interests Multi-layer structure in economic pyramid Economic Pyramid:  Economic Pyramid World System Leader & Events Psychology & Behavior Culture & Institutions Industries & Economy Agriculture & Technology Ecological Environment Geography & Climate (Phys. Chem.) Origin of Multiple Equilibrium & Complexity: Nonlinear Demand-Supply Curves:  Origin of Multiple Equilibrium & Complexity: Nonlinear Demand-Supply Curves  mature   decline take-off  R&D:   mature   decline take-off  R&D Economic Wavelets as Living Cell (Product Cycle, Technology Metabolism, Rise and Fall of Organizations) Near-Sighted vs. Visionary Economics:  Near-Sighted vs. Visionary Economics Marginal analysis: comparing opportunity cost (price differential) and accept status quo (price is always right?) Complexity analysis: catching window opportunity and strategic decision (price is partial and biased information) Market and democracy: majority is rational > follow the crowd Mixed economy and learning by trying: role of pioneer and entrepreneurship Limits of IS-LM Curve in Macro:  Limits of IS-LM Curve in Macro Dilemma of Equilibrium Strategy in Crisis Management:  Dilemma of Equilibrium Strategy in Crisis Management Fragile “general equilibrium” in labor, financial, and international market (Great Depression, financial crisis, transition economies,..) Excess capacity > lay-off workers > decreasing aggregate demand > recession >> enhancing firm equilibrium, but increasing social instability and financial stress Stimulating economy by expansionary policy > stimulating demand > recovery >> improving social stability, but increasing budget deficit and trade deficit Inflation control > cutting budget or raising interest rate > > restore monetary stability but increasing social instability > strong currency > weakening international competitiveness and increasing unemployment >> increasing budget crisis Confusion in Neoclassical Theory of Firm and Institution:  Confusion in Neoclassical Theory of Firm and Institution Conflicting views of corporate finance and property right school : MM Theorem (irrelevance of debt structure) vs. ownership form Conflicting views of evolutionary economics and transaction cost: Increasing complexity (and entropy) vs. decreasing transaction cost (and entropy) Conflicts between institutional economics and historical events: Great Depression, rise and fall of Athens, British Empire, separation of ownership and management in industrial organization, existence of NGO-NPO Myth of Ownership and Organizational Diversity:  Myth of Ownership and Organizational Diversity Carl Zeiss (Zeiss 1846, Abbe 1866) in Germany, run by Zeiss foundation (1887,1896); profit divided into investment, R&D, worker’s welfare MIT Student House (cooperative without owner, self-selecting self-regulating organization) University Federal Credit Union: from three brunches in Austin to 1768 branches in US. Members own collectively, Board members without pay. GM vs. Ford, diverse vs. concentrated ownership Land-grant state universities (public own) in US Catholic and Mormon Churches (NGO) What Are Essential for Successful Business and Economic Development?:  What Are Essential for Successful Business and Economic Development? Proper competition for encouraging innovation (no monopoly, no over-competition, proper entry barrier) Selection mechanism for leadership and strategy Governance structure and incentive mechanism for coordination and adaptation Business mode and corporate culture Complexity (Evolutionary) Perspective in Economic Thinking:  Complexity (Evolutionary) Perspective in Economic Thinking A general framework including special cases in neoclassical economics From efficient (static) market with stability to live (resilient) market with coherence and variability Constructive role of instability, history and structure change Trade-off between stability (survival) and complexity (development) Non-Equilibrium Forces in Economic Evolution:  Non-Equilibrium Forces in Economic Evolution Arbitrage activity and linear pricing vs. innovation activity and nonlinear pricing > no efficient (random) market Limited predictability and uncertainty for existence of financial market > no (perfectly predictable) periodic market Complexity and chaos is a more realistic model between two extremes (white noise and perfect cycles) What Is New from Complex Economics?:  What Is New from Complex Economics? Persistent cycles in macro and financial market Logistic growth in industry competition and market extent and scope in division of labor Nonlinear demand-supply curve and multiple equilibrium in micro behavior Technology metabolism (birth-death process) is driving force of business cycles and financial crisis Gaussian and logistic wavelets in non-stationary time series analysis Consistent and general theory of micro-meso-macro economics What Is To Be Done for Future?:  What Is To Be Done for Future? Nonlinear demand curve with non-convex utility function New theory of firm and organization (evolutionary game theory?) More general theory of stock movements and financial crisis (birth-death process in option pricing?) New theory on technological innovation and macro adjustment New political economy for economic evolution and development economics Complexity Economics and Dialectic Thinking:  Complexity Economics and Dialectic Thinking Lao Zi (604 BC) :Tao came from one, one from two, two from three, everything came from three(老子:道生一,一生二,二生三,三生万物)。 Prigogine: Order out of chaos 混沌产生有序。 Yorke: Three implies chaos (complexity) 三即为多. Chinese dialectic thinking (矛盾,互补,相反相成): 阴阳 (Ying and Yang),危机(danger and opportunity), 续新(continuity and change),稳健(stability and resilience)

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