Cognitive and methodological challenges for Western scientists in contact with China

Otto Kölbl

Generally, Westerners tend to think that the Chinese can learn a lot from our "superior" scientific culture, but not the other way round. However, it seems that when developing the policy which allowed the Communist party to develop the country at a speed never achieved before, the Chinese use concepts which Western scientists have got problems to understand. A closer analysis of Western scientific methodology can tell us where the problem comes from and point out a possible solution.

A rough diagram of scientific methodology as it is used in exact sciences might look as follows:

At the level of reality, we have got a research object which produces some (generally quantifiable) phenomena. This might be an apple falling form a tree or two molecules which interact producing a precise amount of energy. The researcher uses a methodology to produce a theory from which he will derive a quantitative model of reality. This model is supposed to predict the phenomena mentioned above.

In human sciences (i.e. psychology, sociology, economic science or political science), the diagram is a little more complex:

Instead of studying an inanimate "research object", these sciences try to build a model of a "research subject", i.e. one or more human beings or whole societies. These "subjects" will not only react to external stimuli, they are also able to think on their own. They will even create some kind of "structuring system", or they are naturally structured by such a system.

This last aspect is not mentioned in standard methodology treaties, but these "structuring systems" are present in most recent theories in human science. In the case of theories about natural language acquisition, well-known examples are the "monitoring" system by Krashen, which allows native and foreign language speakers to analyse and self-correct their production, or Chomsky's "grammar competence", a supposedly innate formal system which, with the help of a few adjustable parameters, is able to adapt to the grammar of every human language. In the case of economic or political science, the "structuring systems" determining the various "research subjects" are the legal and political systems of the different countries.

All these systems are more or less explicitly considered to be logical and stable. In the case of economic science, this structuring system is supposed to be invariant in time; it determines the way in which various quantitative parameters will evolve in time and produce growth, stagnation or breakdown of the economy. The question to which these theories try to answer is: which structuring system produces the best result under some given conditions?

Let us now take the example of the Chinese economy. Until 1976, the country was structured by a well-known, relatively stable politico-economical system, i.e. an orthodox communist planned economy. The growth which it has been able to achieve was relatively slow (even though we should keep in mind that the Chinese average growth rate 1950-1976 is the same as the average world growth during the same period).

Since 1978, this system has never stopped evolving and changing. Let us suppose the in 2040, it will again reach a more or less stable state, which we could describe as a "marked economy with Chinese characteristics". The following diagram sums it up:

The "development" of the Chinese economy before 1976 and after 2040 can easily be described with Western theories. The evolution between these two dates is more problematic: how can we describe an economy whose "structuring system" keeps changing?

We run into trouble because of a fundamental characteristic of all logical systems: they can not change gradually. In such a system, we have got a lot of logical prepositions, which can be deduced one from another. If you change only one of the prepositions from "true" to "false" (corresponding to a small change in the legislation), since the previous state of the proposition can still be deduced from the other remaining propositions, you get one proposition which is as well true as false. As a consequence, the whole system breaks down: from one single such proposition, you can deduce that all the other propositions are also as well true as false.

Let us see what one of the leading Swiss economists has to say about the Chinese economy. Wolfgang Schürer is a permanent visiting professor at the University of Sankt Gallen, which is specialized precisely in the field of economy, and the founder of the International Management Symposia at this same university. On Jan. 14^th 2006, he wrote in an article in the Neue Zürcher Zeitung (NZZ), the most prestigious Swiss newspaper:

Wenn Asiens Bäume in den Himmel wachsen (When Asia's trees grow skyhigh)

In our perception, paradoxes are contradictions, in China and India, they are reality. Handling them often becomes the key to success or failure. […]

Every investment in China will be facing a paradox: even if the political dogma is still anti-capitalist, reality follows capitalist principles. But there is neither the logic nor the transparency of capital markets, but only the logic of capital itself. [my translation]

What exactly does Schürer mean when he talks about "paradoxes"? We can try to formulate the logical system of the capital marked as follows:

• For the economy to develop, only successful companies must get new capital.
• The capital market regulates the capital flow to successful companies.
• The capital market works by the fact that the shareholders decide the price of the shares by their buying and selling behaviour.
• For the capital marked to fulfil its role, the shareholders must be well informed.
• The transparency of the results of each company allows them to be well informed.
• Adequate legislation must ensure a consistent transparency for each company.

We can also walk through the system in the other way: no transparency ? shareholders are not well informed ? … ? the economy will not develop. So, what is the problem with the Chinese economy, as Schürer presents it? We can sum it up as follows:

• The Chinese economy is booming like no other
• The Chinese companies are anything but transparent
• The whole theoretical model breaks down…
• Since the model does not work, this is not a great loss!

Schürer solves this problem by proposing that we "accept paradoxes", and he is not the only one. Pointing out "paradoxes" and "contradictions" has become almost a "must" when talking about the Chinese economy. The problem is that if we do this, we loose all our theoretical tools which allow us to make predictions according to our theories. That is probably the reason why most people refuse taking this step. We can of course send all our managers and economists to Zen Buddhism crash courses so that they can handle paradoxes without getting a nervous breakdown. However, before we throw all our theoretical tools away, we should first ask the Chinese how they handle these problems.

In all my discussions with Chinese people, I have never heard them say that we should learn to handle paradoxes in order to understand China or its economic development. On the contrary, all of them tried to explain it in a coherent way.

The concept of "development" itself is maybe one of the keys to the question. When Westerners use it, they always mean some kind of quantitative improvement; generally it is "economic development", sometime "social development". When Chinese use it, it might mean the same thing, but quite often they talk about a progressive qualitative change, i.e. in the institutional framework. This is what we called the "structuring system" in the methodology outlined above.

Therefore, the question is: how can we conceptualize the gradual change of a "structuring system"? The answer is: by differentiating and quantifying as soon as a logical description gets us nowhere. For example, since the logical description of the Chinese capital market ends up in a big mess (a "paradox"), we should stop asking whether the Chinese companies are transparent or not, and rather try to evaluate to what extent there is some transparency (quantification), or whether there are alternate ways through which shareholders can get some information (differentiation).

Does this lead to a "Sinization" of our science? It is quite striking to note that among the Western scientists, only human scientists seem to postulate "logical" systems in the reality they investigate. In exact sciences, if a logical model does not work, they will try out quantitative models, statistical models, empirical models or whatever they call them. It is equally striking that researchers in exact sciences have got no problems communicating with Chinese researchers, whereas human scientists tend to arrive at the conclusion that they have to throw all their tools over board if they want to get back from a China trip in good mental health.

Of course, modelizing an economy which develops at breakneck speed within a legal and political framework which changes all the time is a real challenge, even with the most modern tools. However, we should consider what is at stake: the Western development models have not shown convincing results, in some cases they have even led to sheer disaster.

The Chinese model, on the contrary, has surprised everybody by its results. Maybe it is not only a question of using a different economic theory, but a question of methodology. If this is the case, an adequate model of the Chinese development of the last 30 years could lead to a quantum leap in development theories, with billions of people benefiting from it.