Chapter 11 Section 4 Aggregate Supply of Jumps: The Marx-Kuhn Law

The supply side of the economy, that is, long-run economic growth, is an eternal theme of economics.In "Speech at the Tomb of Marx", Engels clearly pointed out that economic growth is the foundation of human society, "Just as Darwin discovered the law of development of the organic world, Marx discovered the law of development of human history, that is, the ideology that has always been the most complicated and complicated. It conceals a simple fact: people must first eat, drink, live, and wear clothes before they can engage in politics, science, art, religion, etc. The stage of economic development constitutes the basis from which people's state facilities, legal views, art and even religious concepts develop. Therefore, they must also be explained from this basis instead of doing the opposite as in the past. "Marshall, the master of economics, called out "the first voice to strive for the independent status of economics". In the preface of his great book, he clearly pointed out that "the question of whether poverty is inevitable should be given the greatest concern to economics", and he went on to discuss, " This progress, more than anything else, calls for a practical interest in the next question: that all men should have a fair chance of a civilized life, free from the pains of want and the dullness of over-mechanical labour, Is this really impossible? This question is being pushed to the fore by the growing demands of our time. It cannot be answered entirely by economics. For the answer depends partly on the moral and political faculties of human nature, and economists do not There is no particular way of knowing these things: he must do as others do, and speculate as best he can. But the answer rests largely on facts and inferences within the sphere of economics; Caring, that's all."

However, current economic theories are unable to provide a credible explanation for the widening income gap between human beings and the core issue of long-term economic growth.Economists have been trying to analyze, diagnose and make recommendations on this problem.However, current economic theory does not propose a consistent solution.For example, the Great Depression in the United States in the 1930s was terrible, and many Americans will always remember the Great Depression; the Japanese economy has stagnated for a long time since 1991, resulting in no improvement in the living standards of the Japanese people, and the savings interest rate has been zero for a long time, losing the opportunity to manage money ; For most East Asian countries, after the Southeast Asian financial crisis in 1997, they did not return to their former glory, and the investment rate dropped sharply; the world economic crisis that began in 2008 caused pain for all countries in the world. Miserable.These have stumped neoclassical economic theory.At a time when the world economy is changing rapidly, it is undoubtedly a serious blow to neoclassical economics that there is no countermeasure to end the long-term recession at all, and the wound continues to expand.

It is already very difficult to solve the crisis simply by using the current economic paradigm, and it may be helpful to introduce the perspective of other disciplines into economics.As Mancur Olsen puts it in his book The Rise and Fall of Nations: Economic Growth, Stagflation, and Social Rigidity, "Modern economists are the heirs of many recognized genius thinkers of the past: Adam Smith , Ricardo, Mill, Marx, Walras, Wexell, Marshall and Keynes, and hundreds of outstanding scholars. In fact, because these giants in economics themselves are also standing on the shoulders of their predecessors , so the status of today's economists is like standing on the top of the pyramid of human genius. Then, why did so many economists fail to predict the new economic phenomena that appeared in the 1970s and the mid-1980s? It may be that economists carry with them a professional bias that keeps them looking straight ahead, specifically at things they have always known. If we take the trouble to look around at other disciplines, we might You get a completely different perspective on the whole picture."Olson's feelings about the new economic phenomenon in the United States in the 1970s are the same as Drucker's feelings about management.Drucker pointed out in his article "Economics at a Crossroads" that "all current economic theories cannot explain the major economic events that occurred in the 15 years from 1975 to 1989, nor can they predict the occurrence of these events. . In other words, reality has rendered these economic theories obsolete."The productivity revolution must come from outside the existing industries, and new economic phenomena must be unfamiliar to people, cannot be deduced and reasoned, and require imagination.Therefore, the new economic phenomenon is "imagination economy".

In 1883, Keynes was born in England; the same year, Schumpeter was born in Austria-Hungary.It is both an honor and a tragedy that two masters of economics were born in the same era.There is an old Chinese saying, "Where is Yu born, how can he be bright?" In the 20th century, Schumpeter could not surpass the influence of Keynes' policies, but in the 21st century, Schumpeter's innovation theory glows with lasting charm.The innovation mentioned by Schumpeter includes the following five situations: (1) introducing new products; (2) introducing new technologies; (3) opening up new markets; (4) controlling new supply sources of raw materials; new organization.According to Schumpeter, because "innovations" are sometimes clustered, producing prosperity, and sometimes sparse, producing economic depression.Like Keynes, Schumpeter was obsessed with elucidating a general theory of economic growth, saying: "I have been trying to construct a theoretical model of economic change over time, or rather, trying to answer how the economic system generates dynamic dynamics problem.” He argues that ultimately innovation depends on entrepreneurial functions.However, this explanation is not convincing.Entrepreneurs have always existed, and it is difficult to explain why entrepreneurs were impotent in Japan's secular stagnation, and why entrepreneurs failed in the world recession that began in 2008.

Amartya Sen, a Nobel laureate in economics, was one of my teachers at Cambridge. He has always advocated that economics should explore philosophical issues.In a speech in Cambridge, he advocated that economic behavior must take into account both economic and moral consequences.I asked him a question in the audience, "What if the economic consequences are uncertain?" He didn't answer at the time, just said, "I will write down your question."Later, when I ran into the maestro at the Cambridge Economics Department's celebration of his Nobel Prize in Economics, he remembered my question and admitted that it was not so easy to answer.

As suggested by the famous American economist Mancur Olson, the key to understanding the new economic phenomenon should be found from other disciplines.In my book "Learning Economics" published in 2002, I introduced the philosophy of science into economics, discussed the establishment of the basic framework of neo-Marxist economics, and launched a "supply revolution". The Greek philosopher said, "One cannot step into the same river twice".The river of economic development is also constantly changing.Marshall pointed out in the preface to the first edition of his great work that "economic conditions are constantly changing, and each era observes its own problems in its own way."Mrs. Joan Robinson, a leading figure of the Cambridge school in the United Kingdom, believes that the Cambridge school in the United States has not grasped the central idea of ​​Keynes' "General Theory". She pointed out: "In terms of theory, the main argument of "General Theory" is to break the shackles of equilibrium and consider the characteristics of real life ——the difference between yesterday and tomorrow. As far as the world is concerned with the present, the past cannot be recalled, and the future cannot be known with certainty.” In my opinion, neoclassical economics is like Einstein’s original general theory of relativity, through a universe One item, that is, exogenous technological progress, makes the economy reach a perfect equilibrium, but in fact economic life is not balanced.In the world of neoclassical economics, the economy can achieve perfect equilibrium, and time is only a technical means of analysis, and has not been endowed with real connotation.Therefore, neoclassical economics can only be a special case.

In terms of the influence of economic thought, it is Marxist economics that transcends time.When discussing Marxist economics, Schumpeter said, "The creations or thoughts of most wise men disappear permanently after a period of time. This period of time may be just a meal, and the longest time is no more than one generation. . But other works are not like that. They have experienced loss, but they have reappeared. This is what we call greatness."In the famous "Capitalism, Socialism and Democracy", Schumpeter made such a high evaluation of "Marx as an economist":

As an economist, Marx was above all a learned man.Marx, as a writer, whom I have always called a genius and a prophet, seems odd to me to think it necessary to highlight the above.However, it is important to be aware of this.Geniuses and prophets are usually not outstanding in a particular field, precisely because they are not experts in a certain field, and therefore original.But there is nothing in Marx's economics that suggests his lack of quality as a scholar, or his lack of training in the techniques of theoretical analysis.He is a voracious reader and a tireless worker.He rarely omits important documents.He digested everything he had read, pondered every fact deeply, debated the details of unusual issues with fervor, and he was accustomed to see through the history of civilization and continuous development encompassing the whole of mankind.Either criticize, or oppose, or adopt, or synthesize, he always explores every issue thoroughly.

Also in this sense, although Schumpeter disagreed with Marx's point of view, he still pushed Marx as a master in the history of economic thought.He said: "For Marx's system, criticism, or even complete negation, cannot deal a fatal blow to Marx's system, but can only help to reveal the strength of this system." Bernard in "The Society of Science" "Function" pointed out that "the great contribution of Marxism is: it expands the scope that reason can reach in terms of human problems, and includes the possibility of new things appearing." The core argument of Marxist economics about solving the problem of human economic growth from the perspective of supply was created by Marx and Engels in the middle of the 19th century. Its most basic idea is that changes in productivity are fundamental, and production relations need to adapt to changes in productivity.Marx believed that productivity was the most revolutionary and active factor in social and economic development, and at the same time attached great importance to the role of science.Hegel believed that there was a mysterious entity called "spirit" that made human history develop according to the stages of dialectics in Hegel's "Logic".In his "Preface to the Critique of Political Economy", Marx revealed the basic form of human society for the first time, pointing out that productivity as the material basis is the most revolutionary and active factor in social life.In Marx's view, the driving force is actually the relationship between man and matter, the most important part of which is the way of production of man, that is, productivity.Marx attached great importance to the decisive role of changes in production technology and production methods in the development of human history.In his preface to The Critique of Political Economy, he made the most classic exposition of the core ideas of Marxist economics, writing:

The general result which I have obtained, and which, once obtained, has been used to guide my research work, can be briefly expressed as follows: In the social production of their own life, certain, inevitable and independent of their will relations, i.e. relations of production corresponding to a definite stage of development of their material productive forces.The sum total of these relations of production constitutes the economic structure of society, that is, the real foundation on which a legal and political superstructure is erected and to which a definite social ideology corresponds.The production mode of material life restricts the whole process of social life, political life and spiritual life.It is not the consciousness of people that determines their existence, on the contrary, it is their social existence that determines their consciousness.

When the material productive forces of society develop to a certain stage, they come into conflict with the existing production relations or property relations (this is only the legal term for production relations) in which they always move.These relations are thus transformed from forms of development of productive forces into fetters of productive forces.Then the era of social revolution will come.With the change of the economic base, more or less quickly the whole gigantic superstructure is changed.In examining these changes it is always necessary to distinguish between material changes in the economic conditions of production which can be specified with the precision of the natural sciences, and those by which men become aware of this conflict. and seek to overcome those legal, political, religious, artistic or philosophical, in short, ideological forms.We cannot judge a man on the basis of his opinion of himself, nor can we judge such an era of change on the basis of its consciousness; on the contrary, this consciousness must be derived from the contradictions of material life, from the social productive forces and production relations. explained in the context of existing conflicts between them. So, what is the source of productivity development?If the source of the development of productive forces cannot be demonstrated, it will eventually come down to Hegel's "absolute freedom". Science is the most important agent of social change.Bacon was the first philosopher who valued the practicality of science. In 1620, Bacon summarized his philosophical thoughts and published a book.In the book, he resoundingly put forward the viewpoint that "knowledge is power".He pointed out that in order to control and utilize nature, one must master scientific knowledge.He believes that true philosophy must study nature and study science. Marx attached great importance to science and placed science in a very lofty position, which can be seen from the fact that he named his theory of socialism "scientific socialism".In his famous speech delivered at Marx's grave, Engels said, "This is what he is as a scientist. But this is far from the main thing in him. For Marx, science is a driving, revolutionary force in history. Any Every new discovery in a theoretical science - the practical application of which may not yet be foreseeable - delighted Marx wholeheartedly, and when he saw a development which had an immediate revolutionary effect on industry and on the development of history in general When he discovered it, his joy was extraordinary." Surprisingly, Engels regarded Marx as a scientist. Schumpeter introduced entrepreneurs into economics, and Marx introduced scientists into economics.The innovative spirit of entrepreneurs is important, as is the innovative spirit of scientists.Einstein is the greatest scientist of mankind in the 20th century. In 1999, the American "Time" magazine selected Einstein as the man of the 20th century, which is well deserved.He gave the mass and energy mutual conversion equation E=mc2, E is energy, m is the mass of matter, and c is the constant speed of light.It was this deceptively simple formula that laid the foundations of the nuclear energy industry.Bernard pointed out in "The Social Function of Science" that "the relationship between Marxism and science lies in the fact that Marxism frees science from the completely detached position it imagined, and proves that science is an integral part of economic and social development, and is also a In doing so, it removes the metaphysical element that has infiltrated scientific thought throughout the history of science. It is through Marxism that we recognize the dynamics of scientific development that no one has analyzed before, and Only by relying on the actual achievements of Marxism can this kind of understanding be reflected in the form of scientific organization for the benefit of mankind."Chris Freeman, founder and leader of the Sussex Science Policy Research Institute (SPRU) in the UK, collaborated with the famous long-wave theorist Francisco Lusan in the book "Time Like an Arrow: From the Industrial Revolution to the Information Revolution". Recognizing the fundamental role of science and acknowledging the extreme importance Marx himself attached to science, they write: "Many historians have underestimated the influence of science, and today's economists often underestimate the contribution of science to modern innovation." Some Marxist histories Scholars tend to exaggerate the contribution of technology (compared to science) to economic growth, although scholars such as Needham and Marx himself do not.” Although Marx attached great importance to science, he did not clearly point out whether science was the source of changes in productivity, nor did he give a specific model for the changes in productivity. Since science had just started in the era in which Marx lived, it was even more impossible to summarize its development laws.We all know that Marxist economics was born in the middle of the 19th century, in the "age of steam engines". When Marx died in 1883, the "age of electricity" had not yet begun. was born.Therefore, we cannot demand too much of Marx. As a great economist, Marx's insight has far exceeded his time. Marx said, "But at the entrance of science, as at the entrance of hell, the demand must be made: 'Here all hesitation must be rooted out; here all cowardice is of no avail.'" The nature of science and the law of scientific development must be explored.The development of science is a process of repeated revolutions.Since the industrial revolution, science has gradually been recognized as a force, and people adopt scientific knowledge optimistically.In "The Social Function of Science," Bernard realized the profound nature of the scientific revolution.He said, "The events of the past 20 years have not only caused ordinary people to change their attitudes towards science; The most significant changes in theory and general opinion in the field are comparable to the disturbing developments of the World War, the Russian Revolution, the economic crisis, the rise of Fascism, and the preparations for a newer and more terrible war. This may seem like a strange coincidence. The polemics over axioms and logic shook the foundations of mathematics itself. The physics of Newton and Maxwell were completely overthrown by the theory of relativity and quantum mechanics, which are still poorly understood paradoxical theories. Developments in biochemistry and genetics have reshaped biology. These are changes that have occurred rapidly in the course of an individual scientist's lifetime, forcing them to think more deeply than scientists in previous centuries the fundamental basis of their own beliefs. They are also not immune to outside forces". Thomas Kuhn proposed the law of scientific development, but ignored the increasing practicality of science.Bernard asked, "Any discussion of the application of science must involve economic issues. We have to ask: How much opportunity does the various economic institutions, existing or proposed, provide for the maximum use of science for the benefit of mankind?" ?” Simply put, the Marx-Kuhn law of aggregate supply is: the corresponding relationship between science-technology-productivity.Science develops alternately through three basic stages of "scientific progress, scientific crisis and scientific revolution".The progress of science is marginally diminishing, and will eventually stop and enter the stage of scientific crisis, which leads to scientific revolution.The progress of science promotes technological progress, the crisis of science leads to technological stagnation, and the scientific revolution leads to technological revolution; the progress and stagnation of technology bring about the progress and stagnation of productive forces;Growth, stagnation, and revolution in productivity are inevitable. The Marx-Kuhn economic law states that increasing, constant, and diminishing returns all exist within the same general-purpose technology paradigm.To achieve long-term economic growth, there must be a revolution in productivity and entry into new general-purpose technology paradigms, which will lead to fluctuations in investment rates and possible technology bubbles.There will be four stages of economic development: prosperity, stagnation, recession, and recovery. The cycle of the economy cannot be guaranteed. However, if an economic system is unable to adapt to the productivity revolution, it will experience long-term stagnation. Deng Xiaoping attached great importance to the revolutionary nature of productivity at the beginning of the reform and opening up, emphasizing that the productivity revolution is the most fundamental revolution. In 1988, he further pointed out that "science and technology are primary productive forces".The Marx-Kuhn economic law interprets Deng Xiaoping's conclusion theoretically. Classical economics and neoclassical economics believe that the long-run aggregate supply curve is vertical, and the government should not try to intervene in the economy, because that will cause inflation and have no benefit to economic output; Keynesian economics believes that the long-run aggregate supply curve It is inclined, and price adjustment is sticky. When the economy is in recession, the government should intervene in the economy to make the economy reach full employment; as shown in Figure 1-12, neo-Marxist economics believes that according to the Marx-Kuhn economic law , the aggregate supply curve is not eternal for a long time, and is vertical within a productivity revolution. When a new productivity revolution occurs, the potential aggregate supply curve will shift to the right by a large margin, and a "supply revolution" will occur.Say's Law is still in effect, and the supply revolution creates entirely new demands. If an economic system has sufficient adaptation efficiency, it can seize the opportunity for the aggregate supply curve to "jump" to the right, and aggregate demand will gradually reach equilibrium with the new aggregate supply curve; if an economic system lacks adaptation efficiency, the aggregate supply curve will be If it cannot move to the right, the aggregate demand can only be balanced with the vertical aggregate supply curve in the existing productivity revolution, and the economy falls into a "high-level equilibrium".The government's demand management through fiscal policy and monetary policy may not help to break this equilibrium, and economic system reform is necessary. The most fundamental mistake of classical economics, neoclassical economics and Keynesian economics is to "assume" the supply environment, emphasize demand while ignoring the supply side, and fail to realize the fundamental changes in aggregate supply brought about by the productivity revolution. Carve a boat and ask for a sword.In "The Poverty of Philosophy", Marx believed that "people establish corresponding social relations according to their own material productivity, and it is these people who create corresponding principles, concepts and categories according to their own social relations. Therefore, these concepts and categories also Like the relationships they represent, they are not eternal, they are historical and temporary products. The growth of productive forces, the destruction of social relations, and the formation of ideas are all in constant motion, and only the abstraction of motion, that is, "immortal death" can is stagnant." Drucker pointedly pointed out the crux of contemporary economics, "Contemporary economic theory does not take technology, innovation and change into account. Like the previous neoclassical school, contemporary economists assume that the economy is constant, Equilibrium, while technology, innovation, and change are external. . . . But entrepreneurship, invention, and innovation can change the economic system in a very short period of time, and they are the masters, while the macroeconomy is not." Neoclassical economics came onto the stage of history in the 1970s. It was just catching up with the decline of the industrial economy. The information technology revolution had just begun. Its policy propositions just happened to adapt to the emergence of the information economy dominated by small and medium-sized enterprises and inadvertently promoted the development of the information economy. development, but did not really understand the fundamental changes in the "supply side" of the economy. Who said "nature cannot jump"?Information technology has become the most basic constraint of the enterprise - general purpose technology. Marxist economics has a deep understanding of the historical and fundamental role of productivity in human economic life, but due to the limitations of the times, it has not pointed out the specific model of productivity development; neo-Marxist economics is based on the core viewpoints of Marxist economics. On the basis of integration of the latest achievements in the philosophy of science, it is pointed out that the productivity revolution makes the aggregate supply curve jump. Due to the uncertainty of the productivity revolution, the economic system is more flexible than stable.In order to move to the new supply curve, the production process and methods must be completely reorganized, and new production factors are required. Labor and capital are undoubtedly the most important. Therefore, the labor market and capital market have also become the most important among the various production factor markets that promote the innovation economy. important factor markets.Without a flexible labor market and an efficient capital market, the factor supply of the "new supply curve" cannot be achieved.However, the labor market and capital market are not enough. A national learning system is also needed to continuously update skills and promote the upgrading of human capital in a rapidly changing economic and social environment.The productivity revolution will inevitably appear, but its content and outbreak time are highly uncertain.Under such circumstances, any accumulation of specialized physical capital may become obsolete, and the only long-term solution is to invest in human capital with constant change.As the productivity revolution triggers a wave of investment, the inevitable sudden jump in world interest rates and a sharp reversal in international capital will have a major impact on balance sheets and will weigh on demand and output.Monetary policy can work very poorly in such circumstances.To guard against a capital account crisis, some control over the capital account needs to be maintained. In a nutshell, "Adam Smith's growth" depends on the division of labor; "Solow's growth" depends on capital accumulation; "Schumpeter's growth" depends on enterprise innovation; "Marx's growth" depends on "Marx-Kuhn innovation". "Marx-Kuhn innovation" is divided into two types, one is conventional innovation, which is an incremental improvement; the other is revolutionary innovation, which is equivalent to Schumpeter's "creative destruction". The subject of "Marx-Kuhn innovation" is scientists.The subject of Schumpeterian innovation is the entrepreneur.In the long run, the role of scientists is greater than that of entrepreneurs.In the short run, scientists are as important as entrepreneurs, and the close relationship between the two plays an important role in economic development.