Game Theory in Economics

来源: CHINAFOREX 2018 Issue 2 作者:Mu Zhiqian
We now appear to have some crucial moments ahead of us.

The outcome of the trade dispute between China and the US is hard to predict. However,apart from national sovereignty issues,there is likely to be common ground on the nature and value of a market economy.

Economics is the philosophical logic of the balance between supply and demand. Oversupply or undersupply in the international market result in surplus or deficit in money flows and stocks. Essentially,this reflects the comparative advantages of economies around the world.

The economies of China and the United States are at different stages in their development. So are the structures of their supply and demand. The US has already undergone a process of industrialization and now it has comparative advantages in finance and high technology. China is in the mid- to late stage of industrialization,with abundant labor and manufacturing capacity. The ideal balance between supply and demand is to export goods and services where there is an advantage that makes up for   the disadvantages of others. China has been working towards this ideal balance. The goods it exports meet the general needs of US consumers. The real reason for the continued expansion of the US trade deficit with China is that China can't buy the high-tech American products that it needs from the US. It is not a result of China exporting too much. China can only buy US Treasury bonds to balance the deficit.

The punitive ban by the US on the sale of high-tech products to China causes lost profits in the short-term. Over the long term,however,it will prompt China to accelerate research and development to replace American products. A monopoly can never last long. The Chinese people will work together to engage in technological innovation,believing strongly that where there is a will there is a way.

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