Chapter 27 Do you know how economists study the economy?

The laws of economics originated, were generalized and generalized by academic economists, and are widely used in politics and business.Traditional economics encompasses everything from economic ideas (eg, markets are made up of rational practitioners) to economic laws (eg, national accounts must remain in balance).These general economic laws have been fully practiced in the world political economy and are regarded as laws of nature. In the 20th century, traditional economic laws and laws gradually developed and evolved, but they were always respected by the government and enterprises.During this period, some economists questioned the theories and rules of traditional economics, and modified the basic assumptions of traditional economics.Through practice in the economic field, some economists have found that there are problems with the assumptions of rational practitioners and national equilibrium systems.However, many economists who help the US government and Wall Street formulate policy firmly believe that the country as an independent economic unit has not changed, and the theory of national equilibrium is still an important law of economics.

Economists working in business and government do not get paid to work on abstract economic theory in specific areas of the economy.Even if they create new economic models through deliberation, no one will pay them for their labor.The job of these economists is to analyze existing data and predict future economic trends.Economists' income is also derived from forecasting future demand.Though deep thinking is needed by society, it has gone beyond the academic field, so few economists will engage in unpaid labor.In times of economic prosperity, some big companies will have a strong think tank, and sometimes the think tank will brew some great ideas.Yet when the economy falters, these think tanks are often the first to be dismissed.

Generally speaking, economists employed by financial institutions must have a clear understanding of complex data.These messy data may come from government agencies and companies, or from industry federations or statistical associations.Economists are often seen as key sources of important information.I used to be chief economist for a Wall Street firm, and during that time I spent a lot of time talking to brokers and financial advisors.They want to understand the current economic situation and future economic development trend through me, so as to rationally arrange customers' funds, so as to make correct investment choices in the stock and bond markets.The position of business economist requires practitioners to have reverse thinking and creative thinking, so that they can accurately judge which data are reliable and which are not, and which theories can produce ideal results in practice and which ones cannot.The duty of business economists is to explain various economic data and make relevant analysis for clients, rather than to test and revise the original economic theories and principles.

Economists working in the U.S. government work in many departments, such as the Federal Reserve, the Treasury Department, the Office of Management and Budget, the Bureau of Statistics, and the Bureau of Economic Analysis.Economists who work at the Federal Reserve work in each of its 12 branches.These economists conduct research on some key economic issues, including how to improve labor productivity and how to calculate the "wealth effect" in the case of high housing prices and high commodity prices.Economists who work in Congress help Congress calculate spending budgets for the next few years, taking into account taxes and industry output.The work of economists in other sectors may also involve balancing imports and exports, forecasting domestic sales, studying interest rates and cash flows, and other key factors affecting national budgets and macroeconomic developments.The role of economists and statistics is primarily to find the rationale for given spending, and their analysis will determine where Social Security goes and the Centers for Medicare and Assistance budgets.

Much of the economic data we have access to is provided by government agencies, businesses and business associations.The purpose of government statistical economic data is to formulate a more reasonable fiscal expenditure plan, evaluate the operating efficiency of government projects and the stability of the national economic system.The data on inflation are not calculated for ordinary people to measure their own wealth. Whether it is data about inflation, or data about unemployment rate and trade volume, these statistical results are for the government's expenditure budget and future income. Based on reference.Other data collected by the Federation of Enterprises, such as retail sales, the number of layoffs, inventory, and housing starts, are intended to help companies in related industries have a clearer understanding of future industry development and make reasonable financial budgets.For example, large retailers may have to think twice about opening new stores as planned when the data shows that retail or chain store sales are low.

To encourage statistics, those who need data must pay to use it.Surveys and statistical work by economists and statisticians require cost, and even when the economic situation is good, statistical work must be included in the financial budget.The main goal of enterprises is to maximize the return on investment for shareholders, so they need important industry data to help them make correct business judgments.The need for statistical data in academia is because scholars need to use these data to conduct scientific research in related fields, and at the same time, in order to obtain new research data, their research work also needs financial support.Although the world is full of all kinds of data information, for people, there is still a lack of data that can really help them understand the world.In other words, tons of data don't really teach us about things we don't know.Beneath the wave of reliance on numbers and formulas to describe economic and business activity is the illusion that we have enough data to draw reliable conclusions when we don't.

Compared with relatively sufficient domestic data information, global data information is even scarcer.This is because no country or government is willing to spend a lot of time and money to complete such work.However, some multinational companies are doing this work, but their statistics are mostly limited to their own industries. For example, oil companies calculate the global supply and demand of oil, and General Electric Co., Ltd. calculates the global demand for power turbines. demand.Despite the industry statistics of these large multinational companies, there are still huge information gaps about the global economy.After the Second World War, a large number of global institutions and organizations were established one after another, including the United Nations, the International Monetary Fund, the World Bank, and the North Atlantic Treaty Organization.Every international organization and agency has staff dedicated to data collection and statistics.Unlike national governments that only focus on their own economic data and multinational companies that focus on the data of a certain industry in the world, the data statistics conducted by these international organizations are multi-industry and cross-border.However, they also have certain limitations when collecting and counting global information. For example, the World Health Organization focuses on health and disease issues, and the United Nations focuses on the number of refugees, unemployment and poverty in the world.Now, more and more non-profit organizations are also engaged in information collection and data statistics, the most famous is the Bill & Melinda Gates Foundation, which has more individual endowment funds than many countries in the world. gross domestic product.

We know that there are thousands of well-educated and skilled economists and statisticians in the world who collect data information on behalf of hundreds of governments and tens of thousands of companies and non-governmental organizations.Of these, however, few have analyzed and explained the global economy as a system.Even the International Monetary Fund, which forecasts global economic growth, relies on the statistical results of the gross domestic product of 190 countries in the world as its data source, and then obtains global economic data through weighted average.Simply put, statistics about the global economic system are actually the statistics of individual countries.

After years of discussions about topics like globalization and "the world is flat," not everyone agrees that the world today exists within one global economic system.The world is composed of sovereign countries, and countries have the right to raise or lower their own barriers to international trade and overseas capital.Although in the past few decades, the role of national borders has been weakened in the face of the trend of global economic integration, national sovereignty and borders have never been changed.Except for some rich people and multinational companies, personal assets and corporate profits will be deposited in a country's bank.When people talk about economic problems, they usually mean the economic problems in their own country.Although different regions within a country have different levels of development, in general, these regions are in the same direction as the country's economic development.

In the face of drastic changes, historical turning points, emergencies and unknown futures, no institution or individual can handle affairs properly, even those scholars who specialize in research to promote the resolution of border issues and intellectual property issues cannot do so. arrive.History develops in changes, and scientific changes, technological changes, political changes and social changes constitute every link of historical development.And these changes sometimes come so suddenly that people have no time to react at that time, such as a sudden collision of a plane or a robbery by a mob, and they can only rely on afterthoughts and conclusions.People often turn a blind eye to what's going on until it's too late, and they don't realize if there's a manuscript in some treasury in Silicon Valley or on a desk in a research lab that's not being read until after the author's death. Find.Society and institutions are inherently resistant to change. When the change is unstoppable, they will try to weaken the negative impact of the change.The financial sector likes to predict the future, the government likes to maintain the status quo, and ordinary people like to stick to the rules.Maybe it's just human nature.

In many cases, people are willing to announce the arrival of a new era or the birth of a new paradigm, although the timing is often premature, and sometimes they are wrong or hysterical.The end of the business cycle, risk-free investing, and the diminished role of religion could all herald turning times.People sometimes stick to the old rules and ideas until it has shown great inadaptability to the new era.Some rules of traditional economics have been practiced for many years. For example, the nation-state is the most basic economic unit in the world economic system, and trade should maintain a balance between imports and exports.The new economic system is also conceived on the basis of these traditional economic rules. Many factors have conspired to lead to the integration of China and the United States over the past 20 years, a trend that is often overlooked.Because the integration of China and the United States cannot be explained by traditional economic theory, people did not expect it.Most people believe that China and the United States should be in a competitive relationship between these two sovereign countries, and it is impossible to truly integrate. The integration of China and the United States only achieved rapid development after December 2001.Due to the lack of early relevant data and theories, we cannot trace the early development path of the integration of China and the United States.The strength of the United States has been weakened by terrorist attacks and the two wars in Afghanistan and Iraq. At the same time, its development speed has also been greatly affected in the process of restricting North Korea and Iran.The international situation faced by the European Union and the United States is similar. In addition, it has to deal with many complicated internal problems, such as Turkey's accession to the European Union and the attitude towards Eastern European countries.China is a very important country, and many private companies regard China as the most important growth market.If you were a manager at Caterpillar or General Motors, you saw China as the next big market for your company. In 2002, the Internet bubble burst in the United States, and related companies cut expenditures and reduced commodity inventories; the telecommunications sector began to slump after investing huge sums in the optical fiber field; economists worried about deflation, a sharp drop in consumer demand and long-term growth. Unfavorable factors such as influence appear.At this time, China became the "savior" of the global economy, and China's accelerated development surprised many people. Soon, China's development attracted the attention of the world, but some people questioned China's ability to develop in the long run.China's economic activity relies too much on government spending and the export of low-cost goods.This is an unsustainable state of development that does not provide a solid foundation for future development.While China accelerated its development, the U.S. economy began to recover, but this round of economic growth has not been accompanied by inflation and wage increases as in the past.Federal Reserve Chairman Alan Greenspan was very confused about the phenomenon of high global economic growth, low interest rates, and low inflation at that time.Some people have explained this phenomenon, arguing that the reason for this anomaly is that the two economies of China and the United States are more closely integrated, and this integration is happening quietly.