Chapter 3 Life experience and opinion self-report
◎Reporter: Professor Chen, you have studied computer science for 7 years, but you have given up your major in computer science to study financial economics.How did you change from a computer science student to a finance student?You seem to have no training in economics before this. What changed your academic orientation?
Chen Zhiwu: After graduating from university, I went to the National University of Defense Technology as a graduate student, majoring in computer science.Around 1984, after a year and a half of my studies, I realized that I didn't have much interest in computer engineering.Perhaps because I am from Hunan, I have a relatively high sense of responsibility for the country. I wanted to use the methods in the book to study political and economic issues.At that time, my friend Cui Zhiyuan was studying in the Department of Mathematics of National University of Defense Technology, and my contact with him made me more interested in using mathematical methods to study democratic mechanisms.At that time, he wrote some papers and published them in the "Political Science Research" sponsored by the Political Science Teaching and Research Institute of the Chinese Academy of Social Sciences at that time. The papers mainly introduced the Western mathematical political science at that time.Later, Cui Zhiyuan and I translated a book by Arrow, "Social Choice and Personal Value", which was included in the "Towards the Future" series.At that time, I felt that I should give up engineering and slowly turn to another new research field—using mathematical economics methods to study issues of democracy and politics.
In the autumn of 1985, I decided not to do research in system engineering, but to apply to some universities in the United States.At that time, I wrote to an old professor at Yale University, asking if he could apply to Yale University to study for a doctorate in this field, and he said yes.I didn't take the TOEFL and GRE exams, because at that time China had very strict foreign exchange controls, and it cost 32 dollars to take these exams, and I couldn't find a dollar.So I wrote to the professors responsible for admissions at Yale University to explain the reasons. After I explained to them, they agreed to let me waive the TOEFL and GRE exams, and gave me a scholarship to admit me.When I was about to choose a major, I asked Cui Zhiyuan what major I should choose. Cui Zhiyuan told me that I could choose finance, but at that time I didn't even know what the word finance (finance) meant.Cui Zhiyuan gave me an explanation at the time, but I still haven't figured out what this explanation means.It was in such a situation that I went to the United States.
After I went to the United States, I found that because I was born in engineering in China, this way of thinking about studying engineering and engineering was very helpful for me to study financial economics at Yale.Before I went to Yale, I did not study Chinese economics in China, which was more beneficial than harmful to me.If I had studied economics in China at that time, my thinking would have been fixed. This situation would only make it more difficult for me to study economics in the United States.I came into contact with economics from scratch in the United States.
◎Reporter: What kind of difficulties did you have when you entered the world of beauty in the United States from the Chinese society at that time?
Chen Zhiwu: China in the early 1980s was very different from China today.When I went to the United States, I didn't have any money. According to the exchange rate between RMB and US dollars at that time, I exchanged dozens of dollars and started on the road.After going there, by accident, I got help from a Chinese classmate who was studying at Yale.The biggest difficulty at that time was English. When I was in China, I listened to the English broadcast of "Voice of America" and listened to others, and gradually became familiar with my listening skills. But when I really spoke by myself, there were still great obstacles at that time.For those who have just started to go to the United States, the most important way to learn English is to watch TV, attend more parties, chat with friends, and read more newspapers.
The "New York Times" at that time was a great inspiration to me, and there were also many news channels on American TV stations. Those TV programs were very helpful to my English.Because American TV programs often interview some different people. There is an interview program called Nightline on ABCNEWS, which discusses the hottest political, economic and social issues. These programs let me understand from different angles American society and the American way of thinking.
◎Reporter: After studying and living in the United States for many years, what do you think you have learned from there?
Chen Zhiwu: What I feel most deeply is the way Americans deal with people. Before I went to the United States in 1986, China still knew very little about the United States, and there were many things I didn't understand when I went there.For example, we may think that the sex life of Americans is messy and casual, but it is not.Many of us Chinese feel that Americans don't pay much attention to family life and only care about themselves.In fact, after arriving in the United States, I found that Americans value family at least as much as Chinese people do.The vast majority of American families are very concerned about going on vacation, eating together, etc. on weekends or holidays. These are important family activities that make everyone feel like a group.This is very different from my original impression. My thoughts before I went to the United States are completely different from what I actually saw.
Charitable giving in the United States is also a different place from what I have seen.Compared to other countries and regions such as China, Japan, and even Europe, Americans are very proactive in giving to welfare and charities, which is why there are so many private universities, private hospitals, and relief organizations in the United States that rely on people's voluntary donations. Donations continue to operate.As people's economic income and living standards are getting higher and higher, more people in China should also find that if the weak in society - the less fortunate and unsuccessful people - don't get relief from others, it's okay. As far as the whole society is concerned, it will eventually be fed back and become a burden for everyone.Because rich people live a very prosperous life, but at the same time, when you go out and see so many poor people homeless on the street, the contrast will be very big, even if it is rich people. It will be hard too.
◎Netizen: You originally focused on the academic research of finance, and then you started to do research and express your views on China's financial issues.Where do you think the previous purely academic research helped your current research on practical issues?For those who have the idea of "making the world economical and benefiting the people", which one is more suitable to engage in academic research in economics and finance or in public management research?
Chen Zhiwu: Today I do not regret at all that from 1986 to 2001 I was engaged in purely academic research, including deriving many mathematical models and writing many empirical research papers. These research experiences not only gave me the opportunity to practice a set of rigorous I have developed a research habit, and I have fundamentally cultivated a set of analytical frameworks for economic issues in my head. This analytical framework is decisive for my current analysis and research on practical financial and economic issues.For example, although I also talk about issues such as constitutional government, culture, and news media, these issues revolve around the core mathematical model of consumption and investment optimization in modern economic theory, because this model always It is assumed that there are already many securities investment products for people to choose from, but the question is how did these financial securities products come from and what are they supported by?What would people do without these types of securities?With these financial and securities varieties, what is the significance of maximizing people's lifetime utility function?In particular, in what aspects does this meaning to an individual's life manifest itself?In order to develop externalized financial securities, what institutional mechanisms do we need?etc.
Therefore, I personally think that if you want to engage in research on actual economic policies in the future, you should start with solid and pure academic research.The training and cultivation of that basic analysis framework cannot be replaced, otherwise your understanding of the economy will easily lead to the tendency to treat the head with the head and the foot with the foot.
◎Reporter: Since the reform and opening up, China's economy has continued to grow at a high rate. If China wants to maintain this prosperity for a long time, will it rely on its vast land and abundant resources, or its inexhaustible cheap labor force, or will it rely on other resources to maintain its development?
Chen Zhiwu: We can look at a country's comparative advantages from three aspects: institutional capital, human capital, and natural resource capital (including mining, agriculture, and forestry).China has a large labor force and limited natural resource capital, but lacks institutional capital that is conducive to free market transactions and financial innovation. This includes insufficient protection of property rights, unenforceable contracts, unindependent and inefficient judiciary, and ineffective news media. independent etc.In today's world, natural resource capital is worthless, mining, agriculture and forestry are worthless.With only a lot of labor force but no good institutional capital support, the orientation of China's economic development must be in physical production and manufacturing.
After studying the data of more than 90 countries in the world, I found that countries with more natural resources such as gold, silver, oil and natural gas reserves are countries with lower per capita national income.The amount of natural resources and land is no longer the most important factor in determining the per capita income of a country or a place.My research is to answer such a question: If it is not land or natural resources that determine a country's wealth, what is it that really determines a country's wealth?The answer is: institutional capital is the most important.
After the reform and opening up of the Chinese economy in these years, especially through the export model in which the manufacturing industry is the main export-oriented, until today, this development model has brought more and more pressure on the Chinese society.We know that the manufacturing industry consumes a lot of energy and resources, and produces a lot of pollution to the environment. If this model continues, China's society and the environment will simply not be able to bear it.In addition, from the perspective of employment, it will become more and more difficult to increase employment opportunities through manufacturing. In fact, in the past few years, the number of employment opportunities increased by manufacturing in China has become less and less.Therefore, China must change its past growth model, from a development model dominated by heavy and chemical industries to a development model centered on the service industry and the tertiary industry.
For example, the development of the financial securities industry can improve the capital and resource allocation efficiency of the entire country, can activate a higher-level economic value growth machine, and can make China sublimate from an industrial economy dominated by manufacturing to a financial economy. Industrial society.However, unless institutional and institutional changes to facilitate market transactions can be carried out, such as further opening up the freedom of the press, otherwise it can only be expected. Since 2002, I have been researching, can a country have an unfree press and at the same time develop its capital market and the broader tertiary industry?The conclusion drawn is negative.No country in the world can develop a decent financial economy without a free press.
The reason is very simple.We often say in economics that the degree of information asymmetry in a market trading environment must be as low as possible, otherwise the transaction will be extremely difficult.If the media is not allowed to report, or the media dare not follow up and report on listed companies and unlisted companies under the threat of losing the lawsuit, the information environment faced by the trading environment of the financial market and the trading environment of the commodity market will be very muddy.As far as the financial and securities markets are concerned, both parties to the transaction, especially the buyer, are increasingly unable to trust all the information in the market.If things go on like this, in the end, not only the securities market, but also other markets are not easy to develop.
Therefore, although everyone hopes that China's economy will develop towards a high-tech and knowledge-based economy, I personally think that for a period of time, our intellectual property and intellectual economy will have less potential for development.It is because of the problem of institutional capital.
◎Netizen: What do you think of the current situation of the Chinese stock market? Has the United States also gone through such a chaotic period?
Chen Zhiwu: The development of the Chinese stock market is fundamentally different from that of the US stock market.Because China's stock market was originally intended to help solve the problems of state-owned enterprises, and wanted to raise funds from the society through the issuance of stocks to help state-owned enterprises solve their financial problems. From the very beginning, there was a conflict of interest.In the U.S. stock market, which just started at the end of the 18th century, companies went public because of their own financing needs. Listed companies themselves are private companies and there are no state-owned companies. Therefore, transactions between market participants are more Voluntary transactions, without any guarantees from the government.The government will not encourage people to participate in buying stocks through speeches.In short, the US government and the development of the stock market are very independent, which is very different from the situation in China.
People often say that the function of the securities market is mainly to help companies raise funds. In fact, besides this function, there are many other functions. For example, through the development of the securities market, more ordinary people can participate in the growth of enterprises.Considering China's current environment of news, public opinion and legal system, the situation of China's stock market is already very good.We all know that in today's Chinese society, people are reluctant to borrow money or raise funds from relatives and friends. Invest in these listed companies.It is not easy to do this step.
In modern society, on the one hand, as a result of large-scale production and sales, many entrepreneurial opportunities are increasingly concentrated in the hands of a few companies; Is there any way for these ordinary people to regain the opportunity to start a small business?From this point of view, we will find that if companies such as New Hope Group, Hualian Supermarket, and Gome are listed on the market, their stocks are divided into small pieces, so that more ordinary people can participate in the stock market by buying their stocks. The entrepreneurial development of these companies can share a share of the benefits. In this way, ordinary people can more or less have the opportunity to make up for their lost opportunities.From this perspective, the development of the stock market and the securities market can not only help enterprises to raise funds, but also play a very important role in cultivating the middle class.
For example, the stock market in the United States, especially the fund management industry that has developed in recent decades, has indeed provided a very good opportunity for ordinary American families to participate in the prosperity brought about by the economic growth of the United States through holding stocks and stock funds. Chance.About 2/3 of the families in the United States hold stocks or funds, so when the fund and stock markets in the United States are getting more and more prosperous, at least 2/3 of the families can share part of the benefits at the same time.In this way, it is possible that the income distribution in society will not become more and more polarized due to large-scale production and large-scale sales.
◎Reporter: Professor Chen, the current urban-rural gap and income inequality in China have caused a series of negative social effects, and may affect the stability of Chinese society. What do you think are the factors that affect the inequality of income distribution in China?What kind of income distribution system is fair and reasonable?
Chen Zhiwu: The first important factor is the institutional factor.The urban and rural household registration system, employment system, etc., all of these prevent rural people from obtaining higher-paying job opportunities like urban residents, nor can they obtain better educational opportunities like urban residents.For example, the test scores of Beijingers entering universities are much lower than those of students from other provinces and rural areas.Inequality in educational opportunities fundamentally makes the human capital of rural people inferior to that of urban people from the very beginning.Coupled with employment discrimination, the income gap between rural people and urban people has further widened.
The second important factor is the monopoly of national finance.Especially compared with China 100 years ago, there was no national bank at that time, and there were no various commercial banks headquartered in Beijing to collect the savings and deposits of people from all over the country from all over the country to Beijing, and the banks headquartered in Beijing centralized deployment , so 100 years ago, the deposits of ordinary people in various places can basically be returned to the local area to help the local economic construction.Today, through the People's Bank of China and the four major state-owned commercial banks, the country's financial resources are aggregated in Beijing, and the headquarters of the major banks and the National Development and Reform Commission make unified arrangements for the use of these concentrated financial resources.This, of course, brings a lot of unprecedented high moral hazard.For example, as we have seen, so many financial resources are used to focus on the development of big image projects like Beijing and Shanghai. These measures were indeed impossible 100 years ago, but they can be done today.The consequence of this is that a small number of cities have unprecedented opportunities for development, but for more rural areas, the financial savings they have saved through hard work can no longer be used for local economic development, but to a considerable extent. Land was transferred to develop those big cities.
A third important factor is the inequality of entrepreneurial opportunities.This is not only because rural people cannot enter the city, so they cannot have the entrepreneurial opportunities to make a fortune like urban people, but also urban people can raise funds for starting a business through their relationship with the government and state-owned banks, and these entrepreneurial funds It is elusive for rural people.Even a very small number of entrepreneurs like Sun Dawu had no choice but to seek the support of their relatives, friends and colleagues because they could not get formal financial support. However, although Sun Dawu worked hard to develop his own business, he still ended up with one way or another. The name arrested him.
Finally, the state-owned economy is also the fundamental cause of the income gap between urban and rural areas.In fact, the reason is very simple. When all resources, including natural resources, are allocated uniformly by the State Planning Commission and other departments, the cities must be taken care of first, and the interests of the countryside will not be taken seriously, but are often only thought of incidentally.The reason for this is that the government planning department will pursue more visible and tangible urban performance projects.Not many people go to the countryside, even if the development is good, not many people will see it, so for officials at all levels, if they really focus on the countryside, they will feel that their credit is not easy to be recognized .On the contrary, the engineering of the city is visible to more people.This asymmetry in performance evaluation necessarily led more planners and administrators to focus on urban rather than rural areas.So land privatization is the best way to return the best development opportunities to farmers.
◎Netizen: How do you view the relationship between state-owned banks and private banks?
Chen Zhiwu: China does not allow the development of informal credit institutions. This situation needs to be changed, and the development space of private financing should be greatly increased.The Wenzhou model that has been talked about a lot is a very good practice.During the Song and Ming dynasties, private lending in Shanxi was relatively developed, and the Wenzhou model can continue to be developed.Private voluntary financing transactions are the basic rights that people should have at birth, and should not be a topic that needs to be discussed.
Many people will say: "Isn't it messed up to allow people to conduct financial and investment transactions casually?" We must be aware that voluntary contracts and the freedom of transactions are the basic natural rights of human beings since ancient times.Regardless of whether it is China or other countries, they all started from private finance and grassroots finance at first, which is the most natural procedure.Only when the scope of financing goes beyond the “relatives and acquaintances” of the parties concerned, “friends of friends” and small local communities, will there be a more prominent problem of information asymmetry, and then there will be reasons for government supervision to intervene.But even when it comes to large-scale and large-scale financing, the government should only play the role of formulating and supervising the rules, and it is not necessary for the state to directly operate the financial securities business.In other words, private finance and grassroots finance are the original and most natural business forms of human beings, and state-run finance is the later, unnatural business form.
We often talk about insufficient domestic demand.What is the reason for the lack of domestic demand?The government has increased the income of our common people and entrepreneurs a lot through exports, but after the increase in income, everyone does not spend it and deposits it in the bank.This is because the financial planning tools available to consumers are very limited.Everyone has no way to better plan their future life through different investment portfolios and financial products, so they have to deposit the money they earn in the bank, for fear that there will be no income in the future.Therefore, the most urgent task is to release private finance, so that state-owned banks will face some competitive pressure through the competition of private finance, so that they can better improve their own operations.
◎Netizen: How did Professor Chen come up with the idea of introducing culture into the analysis of economics?In your opinion, in terms of the current situation in China, which field of research is more likely to produce results?
Chen Zhiwu: First of all, the introduction of culture into the analysis of economics, or in other words, the use of finance to explain the connotation of culture, mainly comes from my recent research on the significance of finance to society and families.
I found that in traditional society, there is no developed stock market, bond market and formal banking system, nor formal insurance market and loan market, but people can avoid future income risks, health risks and natural disaster risks from the beginning of human beings. Yes, so how does traditional society meet these risk aversion needs?We have seen concepts such as "adopting children to guard against old age" are actually financial concepts, that is to say, the offspring are the stocks, funds, insurance, and credit loans of the parents, but these financial securities that are all concentrated on the offspring must rely on culture. 1. Relying on morality to protect the interests of parents as investors, that is to say, the connotation of culture must include some things that are conducive to the implementation of invisible financial contracts.Otherwise, future generations cannot play the role of stocks, funds, insurance, and credit.Then, it will be difficult for human beings to continue.Therefore, understanding the formation of culture from the perspective of ensuring the execution of invisible financial contracts can finally let us know that once formal finance is fully developed, many traditional cultural contents lose their necessity for existence.This is also the reason why many Confucian scholars advocate the restoration of traditional Chinese culture but fail.Because with the further development of China's financial securities and insurance markets, the original role of guaranteeing future generations as an investment and risk avoidance tool no longer exists.Therefore, there will be new cultural connotations to replace it.These are independent of our personal will.
As for which research field is easier to produce results, from my personal experience, I find that research based on China's own past and present experience or data is the best comparative advantage of the Chinese economics community.For example, one of my recent research issues is the role of financial development in economic development.I found that the Central Rural Economic Laboratory of the Republic of China government collected a large amount of very detailed data on rural household finance, private loan interest rates, and sources of loan funds from 1933 to 1934, including thousands of households in 22 provinces.For example, I found that the distribution of private lending interest rates and the average interest rate in each province are very different, which of course reflects the differences in the degree of financial development in each province at that time. How decisive is growth? That is to say, can we explain the differences in economic growth in the next few decades or in different periods based on the different levels of financial development in different provinces at that time?These are very general economic issues, but by using data from different periods in China in the past, we can study those general economic issues.The resulting research papers are not only easy to publish in world-class journals, but also can help us answer many questions about financial policy and economic development, which really kills two birds with one stone.
Simply put, our main advantage of studying economics in China is to use Chinese data to study general economic issues, which is the easiest way to produce results.
◎Netizen: I would like to ask Professor Chen, what do you think of the position and role of finance in economics?Can you recommend some economics books that you think are good for us students studying economics?
Chen Zhiwu: Finance began to be separated from economics in the 1960s. Its main concern is the role of the capital market, or more generally, the financial market in the economy and people's lives. As a branch of economics, Of course, it only cares about issues related to finance and securities, and it only cares about a part of economics. Of course, financial transactions are the most abstract and law-dependent trading markets among all market transactions, so it has different characteristics from commodity markets. Some problems, so the research methods of finance and general economics also have their own uniqueness. For example, the mathematical tools used in the research of financial and securities markets in the 1970s and 1980s were the deepest and widest in economics. It is the first time in the history of economics that many of the models introduced have been directly applied by the practical and industrial circles. This is unprecedented in the history of economics. In terms of research methods, especially mathematical econometric research methods, it has played a very important role in other fields of economics. Strong demonstration effect.
As for recommended books, today's textbooks on economics and various branches of economics are very mechanical in a sense, and the taste of engineering is too strong.Especially in the field of finance, disciplines such as investment theory and corporate finance are more and more similar to the content and feeling of the computer engineering I studied at the time.Especially after I returned to China in 2001 and got involved in the discussion of different issues, I felt that the reason why I gave up the major of computer engineering was because I didn't like a characteristic of engineering: the input and output can be predicted, and there is no need to talk to others. Deal with society.I didn't expect to feel like engineering after doing research in financial economics, and my interest is to do research on people and society, so I found that financial economics is somewhat different from my interests.So from 2001, I began to return to related research that is more natural and closer to society.
In addition to reading basic economics textbooks, such as Mankiw's and other formal textbooks, I think you should also read more books on economic history.I feel that the economics and finance departments of universities in the United States and China do not pay enough attention to the subject of economic history.I also regret that I did not do a good job of training and learning in this area when I was at Yale, because there are no compulsory courses in economic history and financial history at Yale, and no one at Yale has taught financial history courses until now.My favorite books right now are books on economic history and financial history.Among English books, I recommend Empire: The Rise and Fall of the British World Order and Lessons for Global Powers by Niall Ferguson, a British historian who teaches at the New York University Business School. Order and the Lessons for Global Power), which reviews the development history of the entire British Empire, and is linked to finance and economics.
In addition to this book, Ferguson's other books, such as "The House of Rothschild: Moneys Prophets 1798-1848", "The House of Rothschild: Moneys Prophets 1798-1848", "The Morgan Family: American Banking Dynasty and Modern Finance". "The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance" (The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance), I recommend it to everyone.There is another book, Robert?"The Company" written by Robert Littell mainly talks about the development history of limited liability companies.
A great feature of the books written by these Americans and British is that they use a lot of data and charts. Frequent reading of such books can help us develop a good habit of using data or charts to illustrate problems when researching or writing.For example, I got an issue of a domestic magazine yesterday, which mainly discussed the issues of agriculture, rural areas and farmers, and included an article of mine.I found that none of the articles except mine used any of the charts.So many people discussing China's agricultural issues are jumping from one concept to another, just going around in circles between concepts, but no one uses data to prove which concepts or problems are tenable in the face of facts and are true to reality. feasible.This makes me feel very sorry that so many people are thinking about solving China's agricultural problems, but they can't get out of these methods that are only limited to concepts.Therefore, I think that while you read more books on economic history and financial history, you should add some econometric and quantitative methods to your research. I often say this to my students.