The benefits of studying economics include two points: first, understanding economic phenomena and second, helping to formulate good economic policies for the benefit of the country and the world.
On November 18, 2017, the author was fortunate to receive the China Economics Award from the Beijing Contemporary Economics Foundation. A conversation was published when the award was awarded, and part of it is recorded below and shared with readers.
Use mathematical methods to study economic problems
My interest in economics can be traced back to my time at Cornell University. There I found a magazine called “econometric” (Econometrical). Although I did not fully understand the content of the journal articles, I began to realize that mathematics can be used to study economic problems. This discovery made me very excited. From then on, I decided to study economics with mathematical methods. In 1951, the University of Chicago was the only university that offered a course in econometrics, so I decided to go to the University of Chicago to study econometrics.
At that time, the Cowles Commission was established at the University of Chicago. The committee has several famous mathematical economists. Including J. Koopmans and J. Marschak, etc., but the professor who influenced me the most was Milton Friedman (Milton Friedman). Friedman tells us that a good economic model is a simple model. I learned applied economics in Chicago, that is, first set up a hypothesis, and then use statistical data to verify whether the meaning of the hypothesis is correct.
When writing a Ph.D. thesis, I need to find an appropriate topic. After about half a year of hard work, I found an appropriate topic, which is “The Needs of American Automobiles.” At that time, there were many papers on the research on the demand for food and other nondurable goods, but the research on the demand for durable goods was very lacking, so I focused my research on the demand for durable goods. After completing my doctoral thesis, I was awarded the position of assistant professor at the MIT Sloan School of Management. After becoming an assistant professor, I need to continue to do economic research.
I have researched econometric methods, including 1. “Zhou’s test” to test the changes in the structure of the regression equation; 2. time series analysis; and 3. optimal control of the economic system. Regarding optimal control, I propose to use the Varangian multiplier method to obtain the optimal control result instead of the general dynamic programming method.
Can economic assumptions be applied to different countries?
An interesting question in the field of economics is whether the economic hypothesis can be applied to different countries. Many economic hypotheses can be applied to different countries. For example, Friedman’s research found: the effect of increasing the money supply on the country’s gross output value and prices. According to Friedman, the effect of increasing the money supply on a country’s gross product is temporary and limited (otherwise the government can increase the currency to promote economic development), but the effect on prices is delayed and lasting. This explanation can be applied to many countries.
Other famous economic hypotheses e.g. (economics tuition Singapore) can also be applied to all countries. There are two examples below:
(1) Explain the function of total consumption with permanent income; (2) Investment function based on the principle of acceleration. Regarding the acceleration principle, please note that investment is determined by changes in income, not by the amount of income. The stock of capital is determined by income. Investment is a change in capital stock. Therefore, investment is determined by changes in income. If we use speed to represent income, the change in income will accelerate. The above investment principle is called the acceleration principle. I used a lot of data from different industries and different countries to study the above-mentioned theory of investment decision and found that this theory is correct.
The benefits of studying economics include two points:
First, understanding economic phenomena and second, helping to formulate good economic policies for the benefit of the country and the world. I hope that the annual award issued by the Beijing Contemporary Economics Foundation will encourage more young people in China to engage in economics research and make economics research contribute to economic development. I thank the Foundation for its decision to award this award. I believe this award will advance best economic research and thereby promote Besteconstuition future economic development.
