Steven N. S. Cheung : biography
Steven Ng-Sheong Cheung ( born December 1, 1935), a Hong Kong born American economist who specializes in the fields of transaction costs and property rights, following the approach of new institutional economics. He achieved his public fame with an economic analysis on China open-door policy after 1980s. In his studies of economics, he focuses on economic explanation that is based on real world observation (an observation first approach). He is also the first to introduce concepts from the Chicago School of Economics, especially price theory, into China.
He obtained his PhD in economics from UCLA, where his teachers were the American economists Armen Alchian and Jack Hirshleifer. He taught in the Department of Economics at the University of Washington from 1969 to 1982, and then at the University of Hong Kong from 1982 to 2000. During this period, Cheung reformed the syllabus of Hong Kong’s A-level Economics examination, adding the concepts of the postulate of constrained maximization, methodology, transaction cost and property right, most of which originate from the theories of the Chicago school (economics)|Chicago school.
Contribution to economics and China’s economic development
Chueng’s contribution to economics and China’s economic development can be roughly grouped in the following areas,
- New Institutional Economics
- how different kinds of contractual arrangement affect transaction costs, which are often ignored by neoclassical economists
- realizing the importance of transaction costs (as Cheung often mentions in his writings, if there is no transaction costs (the original starting point assumption by Coase), there is no difference in using different institutional arrangements (e.g. market or government)).
- the nature of the firm (a government, to a certain extent, is a firm and can be more efficient than the market in some areas),
- emphasis on economic explanation (according to Cheung, economic explanation is the ONLY objective of the study of economics);
- the analysis of relevant and observable real world constraints: Adam Smith’s tradition,
- downward sloping demand curve: Neoclassical tradition,
- theories must be potentially refutable but not yet refuted (Cheung considers many mainstream concepts not observable, leading to the non-refutable nature of many theories (such as utilities, welfare))
- focus on capturing the underlying and relevant constraints to explain economic phenomena that might seem odd and strange on the surface.
- China’s economic development
- Considerable influence among the Chinese speaking population (most of his work after 1982 are written in Chinese);
- Prediction of China’s institutional reform (which, in general, has been quite accurate)
- Analysis of the deficiencies in the Chinese state owned enterprises
Comments on China’s modernization
He had written many books (in Chinese) commenting on China’s modernization programs from an economic point of view. In the 1980s, Cheung predicted and strongly supported an economic transformation of China as a market economy. However, in that decade, China went through serious inflation, leading to strong economic, political and social tensions.
However, after 1992, China continued to reform economically. Steven Cheung claimed that most of his predictions have come true. One of his major ideas, the replacing of state owned enterprises by private enterprises, turns out to be very consistent with the direction taken by Chinese political leaders and policy makers.
Later on, after the leaders of Shanghai began economic reforms, he predicted that it would immediately become one of the financial centers of the world, surpassing Hong Kong. The prediction was met with heavy skepticism, but turned out to be accurate.
Nobel Prize winners like Ronald Coase from nobelprize.org and Joseph E. Stiglitz from nobelprize.org have acknowledged the contribution by Cheung in their respective Nobel lectures. While referring to Cheung’s "brilliant, valiant attempt" to prove that sharecropping does not matter to the incentives of the workers, Stiglitz credited Cheung’s "" for motivating him to develop the alternative theory.