2014 “MAO Yushi’s Class” (Session 5) Held in Chengdu
Author:Unirule
Time：2014-06-10 14:14:08 Clicks:
From May 10th to 11th, the 2014 “MAO Yushi’s Class” (Session 5) was held in Chengdu. Joined in this session were Professor MAO Yushi, Honorary President of Unirule, Professor LEI Yi from CASS, and Dr. ZHAO Nong, Vice President of Unirule Academic Board. There were 41 registered students present and several participants.
On the morning of May 10, Professor MAO Yushi talked on “The Creation and Distribution of Wealth.” Wealth is measured by money as it can purchase commodities. The creation of wealth is the individual contribution to the society, which is measured by market mechanism. There is no exploitation as long as there the market is fair. And exploitation only happens when there is a breach of market rules. Professor MAO Yushi pointed out that fair and free exchange could create wealth and such exchange could bring about win-win scenarios. As all the exchanges are not done on a strictly equivalent basis, i.e. exchanges only happen when the utility of a good is overestimated by one side and underestimated by the other; therefore, the utility of both sides would be improved.
Professor MAO Yushi pointed out that the financial industry created wealth by helping allocate funds to its best use where the efficiency was high. The financial crisis is a result of trading with the future. Both savings and speculations are trading with the future. Speculation can also contribute to the accumulation of wealth since it allocates resources over time. This is similar to resource allocation over space.
Exchange changed human history. Since the 18th century, there has been a significant expansion of population and human longevity thanks to market and human rights as a side product. Social wealth began accumulating rapidly since there was freedom and equity, win-win market exchanges and cooperation. From a historic perspective of China’s reforms, it was because of the opening up of the market that freedom and equality were more and more emphasized. To put everything into best use is how China created such enormous wealth over the last three and half decades.
On the morning of 11th, Professor MAO Yushi talked on “The Correct Exchange Rate”. International trade improves the allocation and quality of resources all around the globe. Different comparative advantages lead to international division of labor; and international trade improves productivity and lowers cost. Exchange rate is employed in measuring comparative advantages. Professor MAO Yushi pointed out that the exchange rate is the ratio of marginal purchasing power, and the optimal exchange rate is the equilibrium exchange rate, i.e., the balance of foreign exchange receipts and expenditures. International trade comes into being because of the difference in purchasing power ratios of different goods. Professor MAO Yushi used the export-related foreign exchange supply curve and the import-related foreign exchange demand curve to illustrate on the equilibrium exchange rate and how the foreign exchange rate could influence the import or export of a commodity. Exchange rate is used to measure comparative advantage, and false calculation of the exchange rate leads to false calculation of comparative advantage. Besides, the price distortion of a state also leads to the distortion of comparative interests. Exchange rate not only balances the import-export trade, but also balances international investment. At last, Professor MAO Yushi pointed out that China’s excessive foreign reserves is a result of the exchange rate and concluded by illustrating the hidden causes of the exchange rate policy of China.
