Reviewing the two highlights of the “Industrial Policy Controversy” in 2016

2016 is over and there are many things to miss. As a scholar, I really miss the "industrial policy dispute" that I have been enthusiastic about. In this ideological debate, the protagonist is of course Lin Yifu and Zhang Weiying, but many scholars are not satisfied with eating melons, full of hard work, and devoted themselves to it, leaving behind a lot of stimulating words, whose significance is called "problem andism in the new century." The battle." The "problem of problem and doctrine" in the last century has had a profound impact on the direction of liberalism and Marxism in China, and the "industrial policy dispute" in the new century will certainly determine neoliberalism and new developmentism in China. In the future, some media called it "a debate about China's future."
The reason why "the dispute of industrial policy" is far-reaching lies in the quotation marks here. On the surface, this debate is controversial about the gains and losses of industrial policies, but in fact the technical, professional and empirical content of industrial policies is basically ignored. The focus and focus of the debate began with the role of the state and the market in economic development (especially industrial restructuring and upgrading). Later, with the involvement of political scholars and sociologists, the focus was on the binary opposition between the state and the market. Quietly transformed into a triangular relationship of state-market-society.
Many scholars have underestimated the technical content of this controversy, and even reduced the academic level of the dispute between the plan and the market in the 1980s. Although there are indeed a lot of "slots", from the perspective of promoting positive energy, there are still some bright spots and innovations in this debate. The space is limited, let us bring sunglasses, just look back at two highlights.

The market failure is due to the failure of market theory? How do teachers in colleges and universities teach?
The most dazzling light of "the dispute of industrial policy" was lighted by Zhang Weiying. He even denied the existence of market failure in the real world, and determined that the market itself did not fail. The failure was the mainstream theory of the market, including the market theory of the neoclassical synthesis. This bright spot is probably not related to the actual problems of industrial policy gains and losses, but it is related to the most basic theoretical issues in economics. Whether this issue is related to the national economy and the people's livelihood is not easy to say, but it will definitely affect the rice bowls of all the university's economic colleges, management colleges (or business schools) and public management colleges, that is, the teachers and students. Once the market failure negation theory is established, the relevant teachers teach and the relevant students learn, all must be reinstated. It is in this sense that Tian Guoqiang pointed out that Zhang Weiying, who is performing better in the debate, is more harmful to economics education.
Of course, the relevant teachers can achieve re-employment by learning the new market never fails theory. The market never fails to be the first creation of Zhang Weiying, which is very popular among the Austrian school's Chinese clusters. Ao Pai's market process theory, which has its own unique theoretical charm and academic value, deserves to be taught in college classrooms. If the Austrian school defeats the Chicago School academically and dominates the economics textbook, then economics teaching will inevitably undergo a radical change. But objectively speaking, such a situation will not happen in the foreseeable future.
Specifically, the Austrian market theory does not constitute an impact on the neoclassical market failure theory, especially the externality theory. The neoclassical market failure theory deals with other parties outside the market trading entity. Whether the operation of the market mechanism is characterized by the Austrian procedural theory or the Chicago school's equilibrium theory, and regardless of the outcome of the market operation itself to the trading participants, the market may have an impact on the external party. It may be positive or negative. Market operations have the potential to allow the parties to achieve Pareto optimality, but this is not necessarily the case with external parties. This is the case of market failure. When these external parties form a "public" in a certain sense in a time-spaced space, the things that the market trades may change from the original personal items to the public goods in a certain sense.
On the one hand, Zhang Weiying acknowledged that the existence of public goods did cause market failure, and on the other hand denied that externality became one of the root causes of market failure. He accused Lin Yifu of generalizing industrial policies, such as the integration of infrastructure and intellectual property systems into the scope of industrial policy. At this time he cited the theory of public goods and recognized limited government intervention. At the same time, however, he believes that externalities are omnipresent and therefore do not form the basis of market failure.
As everyone knows, public goods are precisely the original personal items after the externalities and the people reach a certain range. Public goods are global, national, regional, and industrial. The existence of industrial public goods has the same meaning as the externality of market behavior in the industry. As long as there is externality, the market operation between the internal parties alone, no matter how perfect the market operation is from the perspective of the Austrian school or the Chicago school, it is difficult to achieve the Pareto optimality of resource allocation in the whole society. State, the “whole society” here includes both internal and external parties. Basic education and smog remediation are examples of positive and negative externalities and will not be repeated.
Of course, recognizing the existence of externalities, or acknowledging the existence of public goods, does not necessarily mean that government intervention is the only option that contributes to the Pareto optimality of society. The theory of market failure based on externalities and public goods only discovers the prevalence of market failures. As for the government's correction of market failures, it is necessary to analyze other phenomena. It is at this point that Stiglitz often makes the so-called "functionalism" mistakes, from the ubiquity of identifying market failures to the universal necessity of identifying government intervention. In his speech at the Nobel Prize in Economics, he declared that the "invisible hand" could not be seen because it did not exist at all and was endorsed by active government interventionism. The jump of his thinking is indeed the point of running the train full of mouths.
These functionalist fallacies have reached extreme levels in many Chinese public policy researchers. For example, in the field of medical reform that the author has been involved for for many years, many officials and experts hold such a way of thinking that because of the market failure caused by information asymmetry in the medical service industry, it is only government-led to promote medical public welfare. Let the health administrative department implement all-round, all-link, all-weather management on the medical supply side dominated by public medical institutions. The literature they quoted turned out to be the classic paper that Arrow made the foundation for health economics.
Logically, no matter what the externality is, the market failure caused by the existence of externality can at least be achieved through the improvement of market system, the improvement of market organization and the innovation of market model. New institutional economics, contract economics, organizational economics, and information economics all provide an analytical framework for the refinement and diversification of market mechanism operations from their respective perspectives. In addition, market failures can be corrected through the operation of the community mechanism, and the multi-center community self-governance theory of Nobel Prize winner Ostrom shows the wisdom of this dimension.
It is worth mentioning that disregarding externalities and negating the views of market failure theory often quotes Coase's theorem, that is, the existence of externality is only the result of unclear definition of rights, and once the rights are clearly defined, market failures simply do not exist. . There are many commentators who equate Cosmism with market liberalism and even market fundamentalism. Zhang Weiying is also among them, but there are English literatures devoted to it. The path of Kosism research also contains recognition of the positive role of the government. Coase himself also clarified in his speech at the Nobel Prize in Economics: Coase Theorem "does not mean that government actions (such as government operations, regulation or taxation, including subsidies) and individuals in the case of positive transaction costs) Compared with negotiations in the market, it can't produce better results. What is the situation needs to be answered by studying the real world government rather than the imaginary government. My conclusion is: let us study the world of transaction costs" . Therefore, the existence of the market failure based on the Coase Theorem and the significance of the market failure theory are based on the misunderstanding of Coase's knowledge.

What is the scope of the government for? In what way is it promising?
If Zhang Weiying's dazzling point in the debate is to render the role of market forces or entrepreneurs to the point of market manifestation, then Lin Yifu's innovation is to portray the scope and manner of the government's positive and promising to the point of erratic. Tian Guoqiang’s criticism of Lin Yifu is concentrated in the scope of the government’s promising, while the author focuses on the way the government works.
Surprisingly, the "promising government" that Lin Yifu and his colleagues vigorously promoted did not have a suitable English translation until today. In fact, the "active interventionist government" advocated by Stiglitz and others is similar to Lin Yifu's "promising government" in terms of the content, strength and orientation of the government. The reason why there is no suitable English translation at present, according to Lin Yifu and others, is because "the government is the government" and "not for the government" and "disorder for the government". If the government acts as a cause of chaos, it is not the meaning of the "promising government". This definition is clearly suspected of being a set of logic.
With neutral expressions, as long as the government takes action, the results may be both good and bad. The key is not to exclude the possibility of bad behavior from the definition, but to attribute the good as own. The key is to define the scope and manner of government action, so that the government's proficiency is conditional, and thus the probability of becoming chaotic is reduced. Therefore, limited government is a topic worthy of detailed exploration.
In the "industrial policy dispute", some scholars define the "limited government theory" from the perspective of the legal system and constitutional government, and strive to limit the application of industrial policy within the scope of the rule of law. This is certainly good, but the level of this argument is too high, and Lin Yifu does not match the level of government theory. Moreover, it is hard to imagine that Lin Yifu, Zhang Weiying and the participants in this debate will oppose this high argument.
Lin Yifu has one of the drift points of government theory, which lies in the scope of government action. It is in this sense that Zhang Weiying and Tian Guoqiang have uncovered the theoretical and practical significance of "limited government." In their writings, the scope of limited government is generally limited to the following areas: (1) defining rights (especially property rights); (2) maintaining contracts; (3) providing public goods; and (4) promoting stability (including Macroeconomic stability); (5) Guarantee social equity. Among them, Zhang Weiying clearly recognizes the first three items, namely the smallest state theory, and the latter two are somewhat ambiguous. In fact, the new liberal state theory revealed in the World Bank report is defined in these five areas. Of course, different neoliberals may have different definitions about the connotation and extension of each of them.
In the real world, the government must not only be correct in the above five areas, but also be active in creating a good environment for social and economic development. In addition, the areas that the government applies to expand in different dimensions will form different types of government forms such as regulatory states, development countries, entrepreneurial countries, and welfare states. Among them, the “developmental state” is a concept commonly used in the political science community to summarize the government that actively intervenes in economic development by adopting industrial policies.
Due to the limited size and limited government, the government must do something to make a difference. It is necessary for the government to play the role of the smallest country, and the role of the new free country is also minimal. As for whether the government should play other types of state roles, it needs to be weighed according to its own capabilities. As far as the Chinese government today is concerned, whether it should play a positive role in the construction of a regulatory or welfare state, or to make a big fuss in a developmental country or an entrepreneurial country, this is a public choice worthy of in-depth discussion. topic. To be honest, the author believes that government governance should be given priority in managing environmental pollution and providing social security (such as universal health insurance) rather than fully implementing industrial policies. It is a pity that this basic problem has not been discussed in detail in the "industrial policy dispute", and the scholars who Tian Jiaqiang and others disagreed with Zhang Weiying's "industrial policy abolition theory" have only repeatedly proposed "industrial policy cautiousness."
In addition to the scope of government administration, another important issue is the way the government applies. In this regard, Lin Yifu swayed between "choosing winners" and "taking advantage of the situation." In fact, behind these two methods lies a major theoretical issue concerning industrial policy, and Lin Yifu and his colleagues did not delve into it.
Rodriguez, the master of American research globalization, has proposed two cognitive and practical models for industrial policy. The first is the strategic choice model: the goal is to choose strategic industries, occupy the commanding heights of the economy, and select some winners; the focus is on the analysis of the socio-economic consequences of strategic choices; the means are measures such as tax incentives, and even protectionism. The second is the policy process model: the goal is to carry out strategic cooperation between the government and the enterprise, to discover the opportunities for industrial development and the common cost of the industry; the policy focus is to design the correct policy process and governance model; the means is to negotiate communication and consultation, in short, the market Mechanisms and community mechanisms play a leading role, and administrative mechanisms assist them.
According to the research results of Roderick and the forefront of international industrial policy, the basic consensus is that the government should lead the allocation of resources through administrative means to “select winners”. In most cases, it should not become the focus of industrial policy, nor should it be Be the focus of research on relevant academic efforts. The real question is, through what kind of system construction and what kind of incentive mechanism is established, the government can provide relatively effective services for industrial development with a high probability. In short, the role of the government needs to be transformed from a pilot to a waiter.
This means that the question of whether industrial policy is necessary is not a problem. The real question is how the government implements industrial policies, or whether the implementation of industrial policies can adapt to market mechanisms or even strengthen market-community mechanisms rather than destroy, distort or even Replacing the market-community mechanism. It is certainly necessary for government to do so, but there are ways in which the government must act in a limited way, that is, to strengthen the market and activate society.
Although the academic gold content is not high, the two dazzling points of the “industrial policy dispute” help us to focus on some real academic issues related to new developmentism. The booming 2016 has passed and we need to meet a year of academic stability in industrial policy.

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