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Thomas Sargent, Nobel Prize winner in Economics: turning the world into an opportunity with new ideas and technologies

Time : 27/10/2021 Author : pm6qoh Click : + -
        Li Dawei: in 2011, you won the Nobel Prize in economics for your achievements in the field of "empirical research on causality in macroeconomics". As a famous macroeconomist, what do you think of the challenges brought by the COVID-19 epidemic?. From the perspective of the United States, we are in the great depression in 2020 caused by the COVID-19 epidemic. From the perspective of economic and epidemiological models, even if the most sensible public policy is adopted, accompanied by the high unemployment rate and the decline of GDP, the United States cannot avoid entering the most serious depression since 1930. Now, there is great uncertainty in all the details. These uncertainties have brought challenges and opportunities to government workers, ordinary people and entrepreneurs.
        In comparison, China has done a very good job in responding to the epidemic. First of all, we must admit that China is now leading the world in many aspects. This outbreak highlights that China is a leader in virus detection, disease source tracking, social response policies (including blockade and social isolation), and online education. My friends in China have taught me about online education. This dialogue is very wonderful. As an American, I am paying close attention to medical and biological research, and China is also a leader in this field. The Chinese government, enterprises and individuals have also been in the leading position in international assistance to other countries.
        In addition, what is particularly meaningful is the Chinese government's fiscal and monetary intervention measures, which have been very active and effective so far. Li Dawei: with the development of the epidemic, many experts have compared this public health incident with the war. Many countries, including the United States, called the epidemic a war. What do you think? Do you think this analogy is reasonable?. There are accurate parts and inaccurate parts. The exact part is that the government of each country plays an important role in it. The large amount of public transfer and expenditure, as well as the huge fiscal deficit, are unprecedented in peacetime in the United States. The last time there was a large fiscal deficit was during the Second World War.
        The deficits of the central bank and the Federal Reserve led to intervention measures. The inaccurate part is that this "war" is not a war between countries. In the face of COVID-19 virus, the common enemy of mankind, countries have more common interests, and the impetus for mutual assistance and learning is stronger than ever. When people make war analogies, they often think of the reaction of the central bank to taxes, subsidies and expenditures. The United States adopted a similar approach to the epidemic during World War I and World War II. In addition, it is to associate the problems that may arise after the war with a series of consequences caused by the government's public policies to deal with the epidemic. Second, the government deficit is not covered by expenditure, but by money printing and borrowing.
        Another thing that happened during the war and is happening now is that the US government is strengthening its direct control over resources. Li Dawei: people have all kinds of reactions to the monetary and financial problems after the war, and there are also opportunities to reduce government expenditure and transfer, and rearrange public debt. We will be burdened with heavy debts, but not all of them will be paid off. In some cases, the private debt of the United States will be in trouble. Will the government nationalize them?. After the war, we must experience the pressure of inflation, even though today's inflation rate is very low. Inflation is also a cover for default and redistribution. Some of the measures taken after the first World War were inappropriate, but those after the Second World War were better.
        China is considering innovative ways to service domestic and foreign sovereign debt, and China will play an important role in it. The RMB is playing an increasingly important role, and new financial derivatives will appear. If we work together, we will surely create more surprises. Li Dawei: the long-term coexistence of viruses and people will become a new normal of human society, which makes people think about the uncertainty in the post epidemic era. I know that you are using some academic models to think about the impact of the epidemic. You think that there is great uncertainty and uncertainty in the duration of the epidemic and the costs related to it. What is the source of uncertainty?. The main reason is the limited data.
        Taking the current situation in the United States as an example, how many people are susceptible? How many people are infected? How many asymptomatic infections are there? How many people have recovered? All these data have uncertainty, which leads to great uncertainty in the actual parameters of the statistical model. We all know that the virus will mutate. In many epidemics, the virus will become weaker and weaker with the passage of time. Is novel coronavirus the same? Scientists have not fully understood novel coronavirus, let alone we. Maybe five years later, we will get a good model, and we will learn a lot of useful things, because we will have more data. But now we do not know that uncertainty is a major problem at present.
        This depends on effective drugs and vaccines. Outstanding scientists in China and other countries are working hard to develop effective response drugs and vaccines. Even after scientists have designed good treatment methods and invented vaccines, enterprises must produce and circulate them. From the perspective of production and circulation, it takes time to establish production facilities and circulation links, as well as personnel training and circulation management. It takes a long time for the vaccine to be developed and applied on a large scale, and we don't know how long it will take. The time varies from country to country. This is because governments of different countries have different degrees of preparation. First, different governments are using different strategies.
        At present, China and the United States adopt different response measures, and Sweden and France or Germany adopt different response policies. For example, there are significant differences among countries in terms of home and isolation policies (mandatory and voluntary self isolation), how to effectively implement policies, and virus detection. As more data emerge, we will see that some of these policies are better than others. Secondly, novel coronavirus has different effects on people of different ages. Thirdly, countries have different patience. The Chinese are patient, they are willing to wait for a long time, while the Americans are often impatient. yes. We now have sufficient motivation to invent and deploy new technologies.
        One way we understand the future is to look back. During World War I and World War II, a large number of inventions emerged. Under the pressure of the war, people invented many things, such as radar, all the theories of coding and decoding, including making codes and cracking codes. This information theory is the basis of the smart phone and computer technology we use today. Statistical prediction theory is a complete theory developed by European and American statisticians. It is widely used in science, atomic energy, jet aircraft and computers. These discoveries and inventions accelerated during World War II. In the face of the current epidemic, there will also be many inventions and innovations in the world. Inventions will make our society better in ways we don't even understand, because new inventions will bring unexpected results.
        Ongoing inventions will help combat the epidemic and will change the world and the way we do things. Some of these technologies have been applied, such as wechat or Dingding for online work in China, and zoom for social networking or business in the United States and other countries. Entertainment, movies, opera and sports are taking on new forms. Online physical examination, online business meetings, online cooperation with colleagues and so on will accelerate the development of these models. Such a pandemic as COVID-19 is not the first time. It has happened before. The London plague in 1665 was also very serious, with a high mortality rate, once as high as 40%. At that time, British universities were closed, and Cambridge University was closed. All students were sent home.
        One of the undergraduates left the University and went to the farm for two years. During that time, he proposed classical optics, discovered the law of universal gravitation and invented calculus. He is Isaac; Newton. Li Dawei: innovation can bring us more surprises. As an economist, you have paid special attention to technology in recent years, especially artificial intelligence and blockchain. What is the reason?. As an economist, I should be interested in price, quantity, trade, inflation, unemployment rate, tariff and other issues. Of course, I am also interested. So why am I interested in artificial intelligence and blockchain in recent years? The answer can be traced back to Adam, one of the founders of modern economics; Smith, he influenced many economists, such as Karl & middot; Marx, David & middot; Ricardo.
        He put forward the advantages of competition and large market. He believed that the market size limited the division of labor. If the market is larger, the more transactions can be made. Adam & middot; Smith's book is about trade barriers and big market barriers. He doesn't like trade barriers. What are these barriers?. The first is the transportation cost, which requires resources and money to transport goods from one place to another; The second is the cost of communication. It takes resources to send information from one place to another. Adam & middot; Smith wrote in 1776 that these costs were very high no matter what time trade was conducted.
        At that time, one of the obstacles to trade was bandits and thieves. This was a trade barrier that you must guard against. Another trade obstacle is distrust. When people trade with each other, the buyer and the seller must establish trust. Goods and services will be delivered within the specified time with quality and quantity guaranteed. Therefore, trust is really important in trade. Finally, the way to maintain or gain trust is to bear the cost of default. Through these methods and bearing these costs, we have built trust, but the higher these costs, the greater the trade barriers. Yes. In digital currency, what we want is anti-theft and anti-counterfeiting. We also need fast and low-cost delivery of financial documents. This delivery is long-distance and may not be recognized by both parties. This is the role of blockchain.
        Blockchain is a data structure that relies on computers to establish trust. It establishes trust by distributing credentials and expanding the structure among the nodes of the computer network. These data are distributed and synchronized among everyone participating in this network, so this is a distributed network. So what was distributed? It's a very old thing. Some are like the ledger invented in China. What is the ledger used for? It records the transactions between each participant in the network. It is actually a historical record of all transactions. If you and I are on the network, this ledger will record all the things I receive from others and all the things I pay to others. It will make such records for everyone. This is the ledger.
        A blockchain is a chain composed of blocks. The key component of a block is hash. Hash is the only digital signature, which is taught by cryptography. Therefore, it is also a code. It is the only digital signature. Every transaction has a digital signature, which is a unique block. The information on the blockchain and the blockchain cannot be tampered with, because it is deterministic and not random, just like you cannot change the historical results in the game. It runs encrypted code, which records the facts, forms an account book, and ensures the safety and reliability of recorded information. Information is immutable and unique. Finally, it has accuracy.
        The reason why I use the words "unique", "accurate" and "non random" is that artificial intelligence is another thing in comparison. First of all, artificial intelligence is like human beings. For people with intelligence, there is no absolute certainty. Human beings will constantly revise their views on others, the world and its operation. We often use the description "may be true". What is artificial intelligence? Like our senses, it is random or based on probability, and rarely makes a 100% conclusion. It is not fixed, because through continuous observation, its views will change. Artificial intelligence is composed of a group of algorithms that guess unknown facts.
        All these are inseparable from modeling. Artificial intelligence uses data to constantly update its views. Artificial intelligence will establish a model of the simulated world and improve it with more data input. The blockchain uses different angles and different tools. Artificial intelligence is the work of computer guessing after training. What is the key tool to do this? Modify the model or viewpoint as the data is input. We use statistical methods and statistical data. These methods are proposed by outstanding mathematicians and statisticians, some of whom are Chinese mathematicians. What they seek is to use statistical methods to make the closest estimate of the unknown reality.
        The blockchain is not related to approximation, but to accuracy. Its purpose is to become a trading technology. To put it simply, it allows one person to send money or other things to others in another place. What is the dominant trading technology now? Not the blockchain, but the bank. Today's trading technology first connects a group of people through a network. There is only one trusted intermediary in the center of the network. We call it a bank. This bank sells trust and you can trust it. If you want to transfer money from yourself to others, you need to rely on the bank. As an intermediary, the bank has its own way to verify the current balance of everyone in its system.
        This can also be regarded as an account book, which belongs to the bank. Suppose I want to remit money from the United States to a person in Britain or China, and I tell my bank to operate the remittance. The bank will first check whether I have the money, and then transfer the money to my Chinese friends, but all these are charged. Therefore, if I want to remit $99 to my friend, I need to pay $100 to the bank, because the bank will charge a handling fee of $1, and then transfer it for me. Moreover, this kind of operation is not fast and usually takes two or three days to complete, so it is expensive and slow. If we use Adam & middot; From Smith's point of view, is there a faster, cheaper and safer way? Banks are easily attacked or interfered by some malicious actors. Now we need to conduct transactions through the intermediary of banks, which is why banks are called intermediaries.
        The vision of blockchain is that it may replace banks by connecting everyone. The middleman is between you and me, so why not connect us directly? Let's all look at the ledger and make it work in some way. This is the idea of blockchain. Yes, but it just shows that we have a chance to do better. Adam & middot; Smith once said that if you can reduce costs, you can increase trade. Therefore, many people are trying to find a mechanism to reduce the transaction cost of verification, and many important emerging companies are committed to this direction. The key economic assumption is that we will use some tools and combine them.
        Scientists have provided us with such tools and ideas. Some outstanding entrepreneurs have also found out how to combine these tools and make some new attempts, and also integrate the existing things in an innovative way. As more computers are connected to the same network, we can use competition to eliminate monopolists. We will gradually decentralize and share information. Everyone will have an account book. We will use economic incentives to build trust. This is one of the ideas.
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