Since the days of his infancy, man has been dreamt of conquering the world. The meaning of the world evolved from the tiny habitats of our forefathers to the global village today. To this day, at least half of us believe we have to a large extent put the world under our control and it seems quite obvious we have done so, or at least are on the way to realize that ultimate Zweck. However, the other half of us are not so optimistic. Over the past thousands of years, people from all walks of life have asked the following questions. Is that really the case? Has all that he has achieved mere illusions? Is the dream only one that can be never realized, or because he is on the wrong way that is heading away from it? The debate is especially merkwurdig today, as every decision we take today will have a ever significant and irrevocable impact on our future.
To have a better idea of the situation we are facing, it is a necessity to see what der erhober der welt ist. To have something under control is eradicate or at least reduce its body freedom to such a degree that whatever changes may occur to it is well within the expectation of the owner. Your pet cat is under your control because you always keep it in your house or even tie a rope to its neck, therefore, it can only be found in your house or is always only a rope-length distance from you and is in this sense within your control. Moreover, a cat always serves as a cat, you are quite convinced that it can do you no more harm than breaking your antique vase or leaving some scratches on your hand.
On the other hand, a wild lowe living in Africa (another member of the cat family) is not under your control. You can neither keep it within your reach, nor can you make sure if your pet lowe will turn to kill you.
So far, what is called the process of conquering the world is merely the process of reducing the body freedom of it. The scientific advancement that mankind made so far is not about what the world really is, but how to make the world more certain and controllable. A physical law always runs like this, ceteris paribus, if condition A is satisfied, then B will happen. Thus, science is good at telling us how to build a plane or a nuclear bomb, but poor at predicting how a piece of paper would be hurled by the wind in the St Marco square.
It is in this way that body degrees of freedom are reduced. Natural laws tell us what will happen if certain condition is met, and the development of our productivity enables us to meet more conditions, and so on and on.
The fact that natural science is regarded as a more solid a science than social science can be better explained by the arguments above. In natural science, the preconditions are more likely to be satisfied. While in social sciences like economics, the hypothesis and preconditions are much harder to be met, in other word, the degree of freedom is highly unlikely to be reduced significantly.
One of the best examples of it can be found in totalitarian regimes where the authority controls everything from media to education, from production to consumption, in order to make every citizen think and behave in the same fashion. This can be explained as an effort to reduce the body freedom of the social structure and make easier for the authority to control the country. But it turns out its not an easy job, the authority needs to make immense investment to have a hand on almost all aspects of daily life and maintaining a large army and police force. To make things worse, the goal of reducing degree of freedom can only be achieved at the cost of discouraging innovation. The high cost of maintaining the authority and lack of innovation tell us why economic performance of totalitarian regimes are usually poor.
When we read novels or watch TV dramas, it often occurred to us why the stories that seem so beautiful can hardly be found in the real world. It’s because in the world of literature, the authors deliberately reduce the degrees of freedom. The chain of events would break if any one of the characters just thinks a little bit otherwise. But in the literature world, everyone is typicalized and would only think and act in a predictable way.
Economics is probably the most controversial subject to this day. On one hand, economists insist that the result of their work has a significant impact on the world’s economy, on the other, many more doubt whether economics will have any significance beyond the realm of elfenbeinturm. It is because economic theories are based on a series of hypothesis and preconditions which are unlikely to realize in the real world that many doubt the practicability of these theories.
It should be point out I never doubt the logical validity of economic theories. Economists today are also good mathematicians and it is no doubt the result they arrived through deduction from the axioms and postulates is sound. The problem lies in how to realize the preconditions. In my opinion, these theories can only be used in a world where body freedom is much small than that of ours where everyone thinks and acts as the theories herausfordernt. As a result, the economists, who seek to have their theories carried out and usually have a big say in the government, focus on establishing a structure that will reduce the body freedom of the world.
One way to achieve this is to establish a framework of laws and regulations in which economic activities are carried out. The hypothesis behind this is that all men in the economic sense are rational and would only do something whose benefit outweighs its cost. And thus, the legal framework adds incentives to some activities and diverts resources away from activities whose cost exceeds benefit after laws and regulations are applied. As for why some activities are encouraged while others discouraged will be discussed later. As a result, the degrees of freedom of the space of possible economic activities are reduced.
The other way is to reduce economic players in the realm of economy. Here economic players refer to those that would play a significant part in economy. As we know, the more components a system is composed of, the more complex it is. Thus, by concentrating the resources an entity is endowed, the number of economic players in it is reduced and so does body freedom. As is often seen in centralized economies, a country’s resources are controlled by the authority and with them large state owned entities are established, the number of qualified players is controlled by the authority.
The purpose of these ways is to reshape our world so that it looks more like the perfect world described by our dear economists.
It seems a paradox that on one hand an economy with numerous small but homogeneous economic entities should have the largest body degree of freedom while on the other the situation is very similar to a perfect competitive market which is always hold as the simplest economic model whose result is most certain. Does large body degree of freedom always lead to unpredictability? The answer is yes and the paradox is in fact not a paradox. Since the numerous entities are homogeneous, their degree of freedom should be viewed as one and thus the perfect competitive market situation is another planet in the dreams of economists where the degrees of freedom are much lower.
Let’s go back to the debate between those who believe economic theories do promote economy and who do not. First, it should be pointed out what kind of impact, it there are any, will economic theories have on the economy. No matter how complex these theories are, they always exert their influence in the following ways:
1. Facilitating the flowing of resources, including reducing the barriers like lowering tariffs and establish a well functioning capital market.
2. Making adjustments to the economic structure, including diverting resources from one sector to another and supporting emerging industry.
If economics does work, it must work through the above two ways. Let’s see how.
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