Superior Research Award Committee (Junior Category)
College of Social and Behavioral Science
Monday, January 18, 2010
Dear Colleagues:
When I was an undergraduate, the Vietnam War was raging and I became an economics major in order to try to understand this conflict. My instinct was that economics must have something to do with the war. So studying economics would help me understand a war in which my older brother was a marine in Khe San, my father was a Corp of Engineers officer digging wells across the country and my younger brother was a navy officer on duty off the coast. However, the more courses I took, the less I was able to connect economic theory or economic research with either the Vietnam conflict or wars in general. I would constantly pepper my economics professors at Pomona College with questions about how does any of this connect with the real world, the war or the various assassinations that were taking place or the domestic turmoil that was rife in society and even on the pastoral campuses of the Claremont Colleges? I remember well one of my favorite professors admonishing me in class after one of my puzzled questions saying: "Mr. Philips, economists don't ask the big questions!"
This frustrated me greatly. My solution was to go to graduate school at Stanford thinking the problem was that I had not gone deeply enough into the economics discipline and that further study would begin to reveal how arcane economic theory shed insight into crises such as the Vietnam War. To some extent, my instincts were correct. Graduate training at Stanford did provide me with many tools needed to dissect social problems into their component causes and ramifications.
But I also found a very disturbing tendency for many economists to be attracted to tight little mathematically tractable, logical problems of doubtful relevance to issues that I thought economists should be tackling. Also many economists and would-be economists had very little involvement with social movements, policy disputes or even people. I was amazed at the introverted mathematical sorts that seemed to be rising to the top of the profession and were guiding research into increasingly complex, opaque and seemingly irrelevant minutia.
Some critics of this move towards ever increasing mathematical formalism focusing on minor or remote economic issues labeled the tendency "autistic economics".[1] Others sought a revival of Keynesian economics which dominated the profession into the 1960s but was eclipsed by formalistic neoclassical economics thereafter.[2] Still others sought perspective by returning to Marx and a political economy approach to economic analysis.[3] But none of these alternatives nor the Austrian School norexperimental economics gained much traction against mainstream rigorous yet seemingly irrelevant neoclassical economics.[4]
The durability of neoclassical economics which I have viewed over my professional life has amazed me. In order to incorporate conflict into economic models, neoclassical economics embraced game theory developed by John Nash of popular fame from the movie "A Beautiful Mind."[5] I cannot imagine an individual less qualified to provide insight on how human societies fight than John Nash. The most telling weakness being that game theory has zero historical content in it reflecting not only Nash's zero understanding of the historical nature of society but also the inability of mathematicized economics to incorporate real sequential historical time into its models. Nevertheless, Nash won the Nobel Prize in economics.
Myron Scholes and Robert Merton also won the Nobel Prize in economics for their work on the Black Scholes model that purports to establish the present value of financial derivatives. This model and its offspring are famously opaque, but they were sold to the outside world as a practical benefit of the new mathematicized ahistorical economics. This eventually led to a greatly expanded hedge fund industry of which Long Term Capital Management was a leading entity. Scholes and Merton were principles in this company. And the absolute inability of these models to anticipate historically unusual but hardly unprecedented swings in asset prices that led to the financial crisis of 1998 which but for a (then) massive bailout by its creditors organized by the Federal Reserve, would have led to a meltdown of the financial system.[6] George Santayana famously said that "Those who cannot remember the past are condemned to repeat it." This has been variously paraphrased as:
Those who cannot learn from history are doomed to repeat it.
Those who do not remember their past are condemned to repeat their mistakes.
Those who do not read history are doomed to repeat it.
Those who fail to learn from the mistakes of their predecessors are destined to repeat them.[7]
All of these cautions apply in full force to most American economic research done over the last 40 years. This is no more apparent than in the case of Scholes, Merton, Long Term Capital Management, formalism in economics and financial crises.
Of course, we now know that the 1998 bailout of a mere $3.75 billion was child's play compared to the bailout we have just undergone. Also, as is now well known, the financial crisis of the spring and fall of 2007 with its fallout spreading onto today and into the near future caught mainstream economics completely by surprise. Government responded by reverting to the supposedly discredited Keynesian economic policies with many of the economists involved in the implementation of these discredited policies undergoing battlefield conversions.[8]
But established mainstream neoclassical economists are many of them resistant to any such abandonment of orthodoxy.[9] Nonetheless, historical, political and economic crises eventually have a way of transforming economic thinking. But because most economic thinking is done by established economists entrenched in academic institution with corresponding influence over professional organizations, change will come slowly and to a significant extent change will come only from younger economists willing to buck the old guard and think anew.
This is why in the twilight of my own professional career it is my delight to propose and support the recognition of the work of a young economist on our own faculty whose work on China and the globalized economy from a Marxian political economy perspective is just the sort of big thinking and innovative analysis that economics needs to get out of the cul-de-sac it has wondered into over the last forty years. I am not saying I agree with all or even most of what Professor Li has to say: rather I am saying he should be listened to; his arguments should be critically considered and his efforts should be recognized.
Professor Li experienced his own battlefield conversion. In the late 1980s, he was a young and promising student at what is now called the Guanghua Economic Management School associated with Peking/Beijing University. This isperhaps the leading neoliberal economics think tank in China staffed by Chinese economists trained at the major Ivy League economics departments in the West.[10] However, he got caught up in the liberal student unrest associated with Tiananmen Square and eventually spent two years as a political prisoner. Li states in the preface to his most recent book:
There were two advantages about the prison life. First, for the first time in my life I had the opportunity to live with people from various unprivileged social layers. This experience was of immeasurable value. Secondly, in prison one had ample time to do reading, a privilege I have not been able to enjoy again since then. I read Marx’s three volumes of Capital three times, many other classical writings of Marx, Engels, Lenin, and Mao, Baran and Sweezy’s Monopoly Capital, Arghiri Immanuel’s Unequal Exchange, G.A. Cohen’s Karl Marx’s Theory of History, and Bertrand Russell’s A History of Western Philosophy.
Political prisoners throughout history have had time to read but book selection is typically limited. Historical irony helps account for Professor Li's early education combining the neoliberal economics of the Guanghua Economic Management School with the books available in prison in a country emerging from a socialist past. This background gives Li an advantage compared to most young economists in the United States: his training has truly been broad and his personal experiences have truly forced him to think about society when he thinks about economics. Most young economists in the United States today have neither advantage and our discipline suffers correspondingly.
In my opinion, Li's advantages show fruit in his new book, The Rise of China and the Demise of the Capitalist World-Economy. London: Pluto Press (November 2008).[11] The heart of Professor Li's current book and much of his recent opus is the juxtaposition of two central facts about the world economy: the entrance of China into the world capitalist system and the increasingly apparent fact that there arereal and approaching limits to economic growth, resource exploitation, labor availability and environmental degradation.[12] In the preface to his current book, The Rise of China and the Demise of the Capitalist World-Economy (2009), Li states:
This book is unlike many of the books on China today. It is not one that will discuss how China’s dramatic economic growth and growing geopolitical influence will constitute economic, military, and cultural threat to the west. Nor is it one that will discuss how China will rise to become the world’s next hegemon, what strategy China should adopt for this purpose, or what economic and political model China should follow to be a “responsible” player in the world politics. However, the book will discuss the underlying world-historical processes, which have led to the current world-historical context upon which both perceptions (the perception of China as a threat to the west and the perception of China as a benign rising world power) [have emerged]….
Capitalism (or the capitalist world-economy) is a social system based on the production for profit and the endless accumulation of capital. The operation and the expansion of the existing world-system thus depend on a set of historical conditions that help to secure low environmental cost, low wage cost, and low taxation cost….
China was one of the last large areas that was incorporated into the capitalist world-economy and did not actively participate in the system-wide division of labor until very recently. China therefore has functioned as a strategic reserve for the capitalist world-economy and the mobilization of this large strategic reserve in fact signals the impending terminal crisis of the existing world-system.
But Li argues that bringing the last major outlier intothe world capitalist system is merely prelude to an ecological crisis associated with taxing to the limit the planet's ability to absorb pollutants and find resources along with an economic crisis associated with increasing pressure on profits as the last major world reserve of labor is exhausted.
The devil is in the details of any such broad-based thesis such as this. And looking down the road as far as Professor Li does, it takes something of an act of faith to believe that capitalism cannot wiggle out of this dilemma one way or another.[13] But neither details nor faith are the point here. The point is: economics as a social science desperately needs new, big ideas.[14] It needs ideas rooted in history, and it needs ideas rooted in politics, policy, relevance and action. It is bracing and exciting to have a young economist on our faculty who is willing and able to take up these challenges.
A quick perusal of Professor Li's curriculum vita easily shows that Professor Li's current book is a culmination of much previous work:
"The End of the End of History: the Structural Crisis of Capitalism and the Fate of Humanity,” Science and Society (contribution to the special issue on “Marxism and Crisis in 21st Century Capitalism”, forthcoming).
"One Hundred Million Jobs for the Chinese Workers!: Why China’s Current Model of Development Is Unsustainable and How A Progressive Economic Program Can Help the Chinese Workers, the Chinese Economy, and China’s Environment,"Review of Radical Political Economics (forthcoming) (with Chiara Piovani[15]).
"Capitalism, Climate Change, and the Transition to Sustainability: Alternative Scenarios for the US, China, and the World,” Development and Change, special Forum issue, 40:6 (December 2009).
"Climate Change, Limits to Growth, and the Imperative for Socialism,"Monthly Review, 60:3 (July-August 2008), pp. 51-67.
"An Age of Transition: The United States, China, Peak Oil, and the Demise of Neoliberalism,"Monthly Review, 59:11 (April 2008), pp. 20-34.
"Peak Oil, the Rise of China and India, and the Global Energy Crisis,"Journal of Contemporary Asia, 37:4 (November 2007), pp. 449-471.
"The Rise of China and the Demise of the Capitalist World-Economy: Exploring the Historical Possibilities in the 21st Century,"Science & Society, 69:3 (2005), pp. 420-448.
The foregoing peer reviewed articles extracted from his vita clearly show that Professor Li does things the right way: exposing his research piece by piece to criticism prior to bringing it together holistically in book form to tease out its overarching implications. Because I subscribe to Monthly Review, I read these two piece when they came out (I was on sabbatical at UCLA at the time). Here is my email to Professor Li at the time:
Hi Minqi,
I was surprised and delighted to get my issue of Monthly Review in the mail only to find your name on the cover and "China Peak Oil and Neoliberalism's Demise" inside! And to share honors with Samir Amin![16] What an honor! Congratulations!
Peter
Obviously, this is not a detailed critique of the article. But it does reflect in an unvarnished fashion my contemporaneous admiration for this piece of his work that was partially the basis of his new book.
I append to his letter a listing of the citations for Professor Li's previous work taken from Google Scholar. There are no citations for his new book but then it is a new book. There are 10 citations for "The Rise of China and the Demise of the Capitalist World-Economy: Exploring the Historical Possibilities in the 21st Century," Science & Society, (2005) which is suggestive of the reception the book will receive. More generally, Google Scholar finds 68 non-self-citations for Professor Li' s work.
The College and the Superior Research Award Committee will have to do its own investigation of the worth of Professor Li's scholarship. Big ideas are necessarily controversial and needing of critical assessment. However, in my view, it is a no brainer that Professor Li should be considered for such an award. He is just precisely the sort of young intellectual who will help economics get out of the doldrums in which it is mired and back on to the track of challenging ideas and provocative relevance which since the Wealth of Nations has been its traditional place in academic and public discourse. A discipline that can claim Adam Smith, John Stuart Mill, Karl Marx, Thorsten Veblen, and John Maynard Keynes should open its arms, embrace and encourage young scholars such as Minqi Li who take on the task of asking the big questions I thirsted for as an undergraduate. For that reason, I am more than pleased to nominate Professor Li for the College's junior research award.
Sincerely,
Peter Philips, Professor and Chair, Economics Department
Appendix:
Minqi Li-Citations
(up to January 2010, including Chinese citations for 李民骐)
The following are from scholar.google.com (66 Total Citations, self citations are excluded):
Article: The rise of China and the demise of the capitalist world-economy: exploring the historical possibilities of the 21st Century
M Li - Science & Society, 2005 - Guilford Publications
Cited by 10 - Related articles - All 4 versions
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