Economic growth should focus on technological change

Since June, the government's policy measures to deal with downward pressure on the economy have continued to increase. In particular, some local governments frequently make moves, and the heart of emergency is extremely urgent. Sichuan, Guangdong, Fujian, Shanxi, Yunnan, Guizhou and other provinces have introduced steady growth measures, and the stimulus at the city level may be even greater. There are “16 articles” in Sichuan (“16 measures to promote the current steady economic growth”), and Chengdu has more “Chengdu 22” than Sichuan Province. Heilongjiang's "65 Articles" ("Several Measures for Promoting Stable Economic Growth in Heilongjiang Province") showed "reward-like" stimulus measures, etc., and even some of the larger doses. If there is no long-term concern, there must be near-worry, and the mood can be understood, but there must be rules in the urgency. The emergency does not have to be "made into a chapter", but it must not be punched out according to the "routine." "Regular" said that policy measures must respect economic laws.

The first thing to think about is why the economy grows and why not grow? According to economics, economic growth is driven by four wheels, and the engine of growth must be installed on four wheels: human resources, natural resources, capital, and technological change and innovation. Human resources include the quantity and quality of labor, and the quality of labor is generally considered to be the most important factor in economic growth. The development of modern economy shows that natural resources are not a necessary condition for economic development. Countries with few resources in Japan have developed very well, and some countries with superior resource conditions have fallen into the trap of “resource curse”. Capital includes the type of capital such as machinery and factory buildings, as well as intangible capital such as intellectual property rights, as well as social capital. Capital is gradually accumulated in the process of economic growth. Technological change is the most important factor in economic growth. Capital is a means of production that contains certain technologies. Natural resources are used more, better, and more efficiently with the improvement of technology. Therefore, in the long run, the economic growth policy is to consider how to promote technological progress.

If there is no technological change, economic growth only depends on capital accumulation and labor increase. It only relies on the original production technology to increase the number of factories. The final result is “overcapacity” and economic growth will eventually stagnate. Marx said that the renewal of fixed capital is the material and technical basis of the economic cycle, which is what it means. At the same time, it also shows that the economic cycle has its objectivity, and there is convergence when there is an increase. In the words of Las Tweed, it is "the economic cycle that cannot be escaped." The well-known economists Lucas and Prescott believe that economic cycle volatility “is not costly to society” and, more importantly, to increase the growth rate of overall productivity rather than smoothing economic fluctuations. Stabilizing the economy in the short term will have a negative impact on long-term growth prospects. These views are not "correct" and worth studying.

Increasing labor input is important, and investment is also important. They are all major factors in economic growth, but they are less important than technological progress. How does public policy promote economic growth? Only when the government designs a sound rule of law framework and effectively protects intellectual property rights, and has a wide range of economic freedoms (such as investment, entrepreneurship, factor flows, etc.) within this framework, it is possible to maximize technological change. The free market for labor, capital, products and ideas is the most fertile ground for innovation and technological change. Both theory and practice have proved that a highly concentrated planned economic system, whether it is a "carrot" or a "big stick", is difficult to solve the fundamental problem of encouraging technological innovation. Because the government can't use executive orders to simply force people to think or become smarter. “Need to be the mother of invention”, market competition is the most basic driving force for innovation. The entrepreneurial spirit and entrepreneurial spirit rooted in open society and free market are the inexhaustible source of technological innovation.

On this basis, the government should adopt a policy of promoting technology supply to promote economic growth. Specifically, it includes: supporting basic science, engineering and technology development activities, establishing a strong patent system, improving forecasting capabilities, improving cost-benefit mechanisms, implementing tax incentives and other fiscal policies; and encouraging foreign companies to invest in promoting technological advancement in their countries; Reduce the cost of capital for research and development, and clear financing mechanisms.

The above is mainly about the long-term growth policy from the supply side. Some people may say that "the fire eyebrows are in front of the eyes", what matters is how the current economic downturn responds. I don't know, the accumulation of short-term policy effects one after another is a "long-term policy," and it is hard to return. Growth economist Baumol said that macroeconomic analysis and policy will become "a building that sits on a quicksand if it is only from a short-term perspective."

Keynesian macroeconomic policy is a short-term demand policy. But what deserves our reflection is, have we misunderstood or misused Keynesian macroeconomic policies? The macro policy of Keynesianism is mainly fiscal policy. There are two types of fiscal policy, one is the compensation policy and the other is the drowning policy. The compensation policy is a “comprehensive” intervention that reverses the adjustment of the economy and can be used when the economy is overheated and depressed. When the economy is overheated, the government will increase revenues and reduce expenditures. When the economy is depressed, the government will increase its income and reduce revenues. The adjustment will cover all social needs including consumption and investment. Means include not only public investment, but also income tax, consumption tax, transfer payment, and financial subsidies.

The drowning policy is also a macro-intervention policy, but it is only used in times of economic depression. The tools are only government investment, and the scale of investment cannot be “excessive” and should be adequate. The purpose of the drowning policy is twofold: one is to “fill in the blanks”, use government investment to fill the “empty” when private investment is reduced; the other is “water introduction”, during which time it initiates and activates private investment to induce economic recovery. . After the private investment is revitalized and the economy achieves independent growth, the government will no longer invest or reduce the scale of investment.

So, are we using compensation policies or drowning policies now? I am afraid I should still figure it out. Theoretically unclear, it is difficult to say in policy. In accordance with the requirements of the Third Plenary Session of the 18th Central Committee to "make the market play a decisive role in resource allocation", what we need more is the drowning policy. Moreover, what is more important is the market-oriented reform of “going to the administration”, which is to control the government and release the market. Because both the compensation policy and the drowning policy are based on the spontaneous mechanism of the market economy, this is the most crucial.

The side effect of economic policy is to facilitate the development of market mechanisms, or to stimulate the return and strengthening of the planned economic system? This is very noteworthy. "Local government corporatization" is one of the basic characteristics of the Chinese economy since the reform and opening up. At present, the local government has taken the lead in the macro-control.

As the saying goes, "It is a three-point drug." Even if you understand the pulse, you can see the disease, the right medicine, the side effects must be highly vigilant, at least should be aware of it. If it is "disease of medical treatment", the disease is not seen, the medicine is not eaten, not only did not cure, but added disease. The direction is wrong, the faster you run, the farther you are from the goal, the harder it is to return.

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