Selected Papers of Li Yining

Author: Li Yining
Publisher:
Publish Date: 2005-01-01
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IV. The Conflict Between Effective Investment and Rational Investment
As previously mentioned, the criteria for judging effective investment are different from those for judging rational investment, and their roles in the economy are also distinct. Therefore, effective investment is not necessarily rational investment, or conversely, even if effective investment is a rational investment, it may not be the most rational (i.e., most rational) investment. On the other hand, rational investment must be an effective investment, but it does not necessarily have to be the most effective (i.e., most effective) investment. There is clearly a conflict between effective investment and rational investment.
For example, a certain investment or aspect of investment may appear effective from the perspective of increasing the supply of total social products. However, before it achieves production capacity, the large investment amount and prolonged capital occupation period may affect the money supply, leading to adverse effects on price stability. Alternatively, after achieving production capacity, the employment it generates and the employment in related sectors or enterprises may even decrease. Or, even if it achieves production capacity, changes in prices and employment, or a decline in labor productivity, may result in a reduction in the actual income level of workers, and so on. From the perspective of balancing multiple objectives and maintaining national economic stability, such an investment would be considered irrational or of lower rationality.
For instance, a certain investment or aspect of investment may be considered rational from the perspective of balancing multiple objectives and maintaining national economic stability, as it can improve at least one of the following four aspects—economic growth, basic price stability, providing more employment opportunities, or increasing the actual income level of workers—without any aspect worsening compared to the past. However, since it must balance multiple objectives, it may not necessarily be an investment that promotes the increase in total social products (e.g., it may not involve building a new automated factory). Instead, it could be an investment that, while pursuing other objectives, does not involve purchasing new equipment but still contributes to the increase in total social products to some extent, making it not the most effective (or most effective) investment.
How should we address this conflict between effective investment and rational investment? This question can be analyzed using either normative methods or positive methods. With normative analysis, the multiple objectives of investment are prioritized based on their importance and urgency. Then, considering the actual conditions, the problems to be addressed through investment and the potential means of resolution are comprehensively evaluated to determine the extent to which effective investment and rational investment can be coordinated.
According to the above definition, if at least one of the four aspects addressed by the investment improves compared to the past, while the other three do not worsen, it is considered a rational investment. Then, which aspect should be prioritized to improve compared to the past? Of course, this involves the objective feasibility of achieving goals, so the analysis must be based on conditions. However, there is also a value judgment involved—i.e., what tasks are considered