Economic Imperialism. Volume 5

Author: Gao Xiaoyong, Editor-in-Chief
Publisher:
Publish Date: 2005-07-01
Features: The term "economic imperialism" refers, of course, to the "invasion" of economics into the traditional domains of other social sciences. This invasion is not a whimsical or baseless endeavor but one that genuinely analyzes aspects previously unexamined, offering new insights and fostering the development of disciplines. The ability of economics to achieve this is linked to its unique analytical methods. First, economics is fundamentally not, as some superficially observe, the "study of money." It examines human behavior—how individuals, under the condition of scarcity (including time), can achieve the greatest effects through changes in behavior and choices. Therefore, in a certain sense, economics is a "behavioral effectiveness science," and its basic logic and analytical methods can be universally applied wherever human behavior is involved. Second, economics not only studies individual behavior but also the relationships between individuals. This is, of course, nothing special, as all social sciences examine the interdependent and mutually influential social relationships between people. However, in reality, the need for survival is always people's fundamental need, and all human activities rely on the consumption of resources and the distribution of income. Economic interests form the foundation of all other interests, so understanding economic relationships can indeed provide deeper insights into the issues studied by other social sciences. For this reason, economics appears very "dominant" and "assertive," a "preeminent discipline." The concept of "economic imperialism" was, of course, first proposed by economists to describe the expansionary trend of economics. After it gained traction, the term might lead to misunderstandings about economics, making it seem all-powerful or self-aggrandizing. In reality, true economics as a science is quite "humble" or even "meek." To be more precise, if someone truly understands economics, they would be humble, knowing that what economics can explain and address is actually very limited. First, how an individual chooses and decides is something only they can do—even if an economist understands human basic behavior thoroughly—they cannot make decisions for others. This is because the fundamental concepts economics relies on—"happiness" or "pain," "utility" or "cost"—are entirely "individualistic." Each person has their own unique evaluation standards and value systems (economics calls these "preferences"), ranging from small things like food preferences and clothing tastes to larger issues like ethics, morals, and ideology. Moreover, the specific conditions each person faces—abilities, interests, family background, social relationships, and expectations about future changes in their environment—are all different. Therefore, even if an economist knows that individuals always act according to the widely accepted "axiomatic assumption" that people pursue the maximization of interests, we still don't know what the specific "interest maximization" system is for each individual. Economists may provide more information and knowledge to help people make more informed and correct decisions, but that is all—they still cannot replace the choices and decisions of each individual (both individuals and enterprises)! Economists do not even have the right to judge the correctness of others' decisions, because you simply don't know what preference system they are based on! This "individual specificity of preferences" leads to significant limitations in economics' quantitative analysis and "scientific falsification." We can use abstract concepts like "preferences" and "utility" to make some "theoretical hypotheses" about the basic patterns of human behavior, including issues like marriage, divorce, crime, institutional reform, and the pursuit of equality, as part of "economic imperialism." However, since the "goods" or "bads" involved in these behaviors do not have market prices (transaction costs of pricing are too high), our quantitative analysis must stop here. Due to the individuality of preferences or utilities and the incomparability of utilities between people, we can only propose some general logical patterns of social behavior in the form of "hypotheses," but we cannot conduct precise quantitative analysis or rigorously falsify these hypotheses. Second, economics not only cannot replace individuals in making decisions but also does not intend to change people's values or ethics. Economics always takes the different values of different people as its premise for analyzing economic and social phenomena and does not consider changing people's beliefs its responsibility. Whether you prefer sour or sweet, enjoy traveling or drug use, whether you care only about yourself or also about friends and the nation—these are merely your personal preferences and value judgments. Perhaps you can change your values and behavior choices under the influence of preachers, inspirations, or persuasions from ethicists, politicians, priests, writers, or journalists, but that is not the mission of economics as a discipline. Economics only takes your special preferences as its analytical premise. If you change, it will take your new preferences as the premise, but economists do not, in principle, intend to change your thoughts. Some people always want to give economics more missions, including changing people's moral concepts, but if you do that, it is no longer "economic imperialism" but becomes an "economic banditry," because that is seizing something that does not belong to you. Someone once asked me, in a market economy, because of "repeated games," people who lack credibility will eventually face punishment. If people realize this, they will be more trustworthy, so in a market economy, people's credit ethics will improve. Does this not show that economics is related to morality and ethics, and that economic operations can change people's morality and ethics? But if you think carefully, so-called commercial credit is not because people have changed their credit ethics but because they realize that lack of credibility in a market economy is ultimately "not cost-effective" (they will be punished), meaning it is still based on "calculation" that changes their behavior, not because they have "become better" and changed their behavior. Making people "better" is a very meaningful thing that is worth every one of us striving for as individuals, but economics does not consider it its own core work. The core work of economics is to change people's behavior through changes in systems and policies (e.g., punishing those who lack credibility). Third, based on these two limitations, economics' role in public policy issues is also quite limited. Economics can indeed make contributions to public policy issues because one of its tasks is to study the relationships between people, how the behavior of one person pursuing interest maximization becomes a constraint on others pursuing their own interests, and how the effort of each person pursuing their own interest maximization must take the behavior of everyone else pursuing interest maximization as a constraint (all based on the axiomatic assumption of resource scarcity); therefore, economics can use basic concepts like "equilibrium" to tell everyone that our so-called interest maximization is actually "conditional extremum," "unreachable," and that to reach this equilibrium point, we all need to compromise with each other. If you take too much advantage, others and other interest groups will "rebel," and in the end, your losses will be greater. For example, social equality. Under market economy conditions, the general logic is that as long as there is equal opportunity, legal competition, no deception, no privileges or corruption, the emergence of wealth gaps can only be attributed to innate differences, postnatal efforts, and opportunities, with an unavoidable nature. However, given any society at any specific point in time its ideology (which is an "exogenous" constraint condition for economics), if the wealthy group completely ignores the consequences of widening social wealth gaps leading to increasingly tense social relations and refuses to carry out necessary or reasonable income redistribution and social welfare support (what is necessary or reasonable? This is also a question that economics finds difficult to answer easily, and here economists must be very humble!), society may eventually descend into turmoil or even civil war. The conditions and environment for the wealthy to get rich and enjoy wealth will change for the wealthy, which is also "not cost-effective" for them; while if the wealthy pay a bit more in taxes for social welfare, within a certain range, it may be "cost-effective" for their long-term interests (please note that here, economics relies not on the "goodness" of the wealthy but on their "calculation." Those who hope the wealthy will "have a change of heart" should think about what they can do if people's consciences never change! Here, the "policy recommendations" economics provides to society are not to "divide and conquer" but to tell everyone that extreme income inequality is not good for everyone, but overly hasty public policies and social welfare systems, like those in developed countries, are also not good for everyone. We should avoid extremes and pursue a certain "sustainable equilibrium."