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 absurd endeavor but one that genuinely analyzes aspects that people had not previously considered, 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, in essence, is not, as some superficially observe, the "study of money." It examines human behavior—how people, 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 as long as there are people and human behavior, the fundamental logic and analytical methods of this behavioral effectiveness science can be universally applied. Second, economics not only studies individual behavior but also the relationships between individuals. This is, of course, nothing special, as all social sciences study the interdependent and mutually influential social relationships between people. However, in reality, the need for survival is always people's basic 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 a deeper understanding of the issues studied by other social sciences. For this reason, economics appears very "dominant," "assertive," and a "preeminent discipline." The concept of "economic imperialism" was, of course, initially proposed by economists to describe the expansionary trend of economics. After it became widely discussed, the term might lead people to misunderstand economics, thinking it is all-powerful or that it is boasting about its power. In reality, true economics as a science is very "humble" and even "meek." To be more precise, if a person truly understands economics, they would be very humble, because they would realize that what economics can explain and solve is actually very limited. First, how an individual makes choices and decisions 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." Everyone has their own unique evaluation standards and value systems (the economic term for this is "preferences"), ranging from small things like food preferences and clothing tastes to big things like ethics, morals, and ideologies, which can all be different. Moreover, the specific conditions each person faces—abilities, interests, family background, social relationships, and expectations about future changes in their own and the social environment—are also different. Therefore, even if an economist knows that people will always act according to the "axiomatic assumption" that everyone seeks to maximize their interests, we still do not know what the specific "interest system" each person seeks to maximize is. Perhaps economists can provide people with more information and knowledge, making them more informed and thus making their decisions more correct, 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 whether others' decisions are correct or not, because you simply do not know what preference system they are based on! This "individual specificity of preferences" leads to significant limitations in economics in terms of quantitative analysis and "scientific falsification." We can use abstract concepts like "preferences" and "utility" to make some "theoretical hypotheses" about the basic patterns of many human behaviors, including those related to "economic imperialism," such as marriage, divorce, crime, institutional reform, and the pursuit of equality. However, because the "goods" or "bads" involved in these behaviors do not have a market price (the 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 rough logical patterns of social behavior in the form of "hypotheses," but we cannot conduct precise quantitative analysis and find it difficult to strictly falsify these hypotheses. Second, economics not only cannot replace individuals in making decisions but also does not intend to change people's values and 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 mission. Whether you prefer sour or sweet, whether you enjoy traveling or drug use, whether you care only about yourself or also about your friends and the nation—these are merely your personal preferences and value judgments. Perhaps you can change your values and behavior choices under the persuasion, influence, or inspiration of 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 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, wanting to include changing people's moral concepts within the scope of economics. If that is the case, it would no longer be "economic imperialism" but would become "economic piracy," because that would be seizing something that does not belong to you. Someone once asked me, in a market economy, because of "repeated games," people who do not keep their word will eventually be punished. 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 ethics, and that economic operations can change people's moral ethics? But if you think about it carefully, what is called "commercial credit" is not because people have changed their credit ethics but because they realize that not keeping their word in a market economy is ultimately "not cost-effective" (they will be punished). In other words, it is still out of "calculation" that changes their behavior, not because they have "become better" and thus 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 do not keep their word). Third, based on the two limitations mentioned above, the role of economics in public policy issues is also actually very limited. Economics can indeed make its own contributions to public policy issues, because one of the tasks of economics is to study the relationships between people and how the behavior of one person seeking to maximize their interests constitutes constraints on others seeking to maximize their own interests. At the same time, everyone's effort to maximize their own interests must take into account the behavior of others seeking to maximize their own interests as their own constraints (all of this is 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, and it has an unavoidable nature. However, given the ideology of any society at any given time (which is an "exogenous" constraint condition for economics), if the wealthy group completely ignores the consequences of an increasingly widening wealth gap leading to increasingly tense social relations and refuses to carry out necessary or reasonable income redistribution and support for the weak and poor (what is necessary or reasonable? This is also not an easy question for economics to answer, and here economists must be very humble!), society may eventually fall into turmoil or even civil war. The conditions and environment for the wealthy to get rich and enjoy wealth will change, which, for the wealthy, is also "not cost-effective"; while if the wealthy pay a bit more in taxes for social welfare, within a certain range, it may be "cost-effective" for them in the long run (please note that here, economics does not rely 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 pick a side and fight another," but to tell everyone that extreme income inequality is not good for everyone. However, overly radical public policies and social security systems, like those in developed countries, that aim to establish a welfare system too early, are also not good for everyone. We should avoid extremes and instead pursue some kind of "sustainable equilibrium."