Nobel Economics Prize Should Go To China, Not America

Of late 2 Americans – Thomas J Sargent and Christopher A Sims - are awarded Nobel Prize in economic sciences. This adds the number of Americans clinching the prize. Based on Wikipedia data, 46 out of 69 of prize economics winners are Americans. They might deserve it in the past, but today it is questionable.

It seems Nobel committee to be out of touch with today’s reality, given the fact America (and western countries) whose economies are operated based on the works of their scholars studded with Nobel Prize are grappling with economic/financial crisis.

You may say that they are scholars and nothing to do with the policy made by politicians. But to make Nobel economics prize valuable, the theory should wed the practice, unless it will be meaningless and world’s laughingstock.

My two cents, at present day in awarding the winner, Nobel committee should take into account the today’s reality: (i) grim western economy, and (ii) rise of ‘Communist’ China’s economy.

First, West’s capitalism must have been in trouble. To give the market total freedom and restrict the government’s role on economy in 1980s proves wrong in 2000s. Apparently without adequate regulation, financial sector dominates the economy.

In America, the economy shifted from production-based capitalism to financially-driven capitalism. Production-based capitalism is to create money from goods and services, while financially driven capitalism is to create money from ‘money’. The culprit of this change might be the cut-throat competition with eastern developing countries. Spreading of technology due to globalization makes eastern developing countries apt, nimble and productive in manufacturing. They became main producers of goods and services which once the west dominantly delivered.

In financially driven capitalism, they create money out of the thin air. They created the complex and hard-to-understand financial instruments and traded money itself. It works for some time until the moment of truth comes. The data shows the income inequality widens in America, when financially driven capitalism taking over production-based capitalism. The few becomes richer and the many poorer.

Now the pent-up dissatisfaction among Americans likely materializes in Occupy Wall Street cause.

Second, we see the spectacular show of Chinese economy which combining capitalism and socialism, free market and central plan economy, people’s initiatives and state’s directives. Without democracy, human rights, or other western directives, it manages to grow economy and in the process eradicating poverty. It really works, but it doesn’t appear in mainstream textbooks. And UN, World Bank, ADB or others don’t encourage nations to follow suit.

The good economic research should go down to earth, see and explain the new phenomena that change the direction of global economy. The one who should be awarded Nobel economics prize is Chinese economist or Chinese economic planner or whoever, but Chinese. I am afraid, on Chinese success, the Nobel committee holds the old saw that goes “it works in practice, but does it work in theory?”

* * * * *