Steven Cheung | |
|---|---|
| Born | (1935-12-01)December 1, 1935 (age 89) |
| Citizenship | United States[when?] |
| Academic background | |
| Alma mater | Wa Ying College Queen's College, Hong Kong University of California, Los Angeles |
| Influences | Adam Smith,Armen Alchian,Ronald Coase,Jack Hirshleifer,Milton Friedman,Aaron Director |
| Academic work | |
| Discipline | Transaction cost,property rights, China's economic development |
| School or tradition | New institutional economics |
| Institutions | University of Chicago University of Washington University of Hong Kong |
| Notable ideas | 1969The Theory of Share Tenancy 1982Will China Go Capitalist? |
| Steven N. S. Cheung | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Traditional Chinese | 張五常 | ||||||||||||
| Simplified Chinese | 张五常 | ||||||||||||
| |||||||||||||
Steven Ng-Sheong Cheung (/tʃʌŋ/CHUNG;[citation needed] born December 1, 1935) is a Hong Kong-born American economist who specializes in the fields oftransaction costs andproperty rights, following the approach ofnew institutional economics. He achieved his public fame with an economic analysis on China open-door policy after the 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 theChicago School of Economics, especiallyprice theory, into China. In 2016, Cheung claimed to have written "1,500 articles and 20 books in Chinese" during his academic career.[1]
He obtained his PhD in economics fromUCLA, where his teachers were the American economistsArmen Alchian andJack Hirshleifer. He taught in the Department of Economics at theUniversity of Washington from 1969 to 1982, and then at theUniversity of Hong Kong from 1982 to 2000. During this period, Cheung reformed the syllabus of Hong Kong'sA-level Economics examination, adding the concepts of the postulate of constrainedmaximization,methodology, transaction cost and property right, most of which originate from the theories of theChicago school.
AHakka ofHuiyang,Guangdong ancestry[2] born inHong Kong in 1935, Cheung fled tomainland China in 1941 due to theJapanese occupation of Hong Kong. From 1959 to 1967, he studied economics atUCLA and prepared a PhD dissertation. From 1967 to 1969, he did postdoctoral research at theUniversity of Chicago, analysing share tenancy and variable rural land resource allocation, and was hired as an assistant professor after impressingMilton Friedman in a debate. In 1969, he moved to theUniversity of Washington where he taught until 1982. Under the advice of several friends, includingRonald Coase, he returned to Hong Kong as a professor inUniversity of Hong Kong to support the economic reforms of China.
Unlike modern mainstream economists, Cheung's analysis does not rely on advanced mathematical techniques but solely on the two basic building blocks of price theory: one is the axiom of constrained maximisation and the other, the law of demand (one that already incorporates the law of diminishing marginal returns). One of the constraints which he emphasizes most is transaction cost (or better termed institutional cost).
His theory of share tenancy has enhanced the understanding of contractual arrangement, which was largely ignored by neo-classical economists. According to Cheung,sharecropping is not necessarily exploitative. It will achieve the same efficient allocation as labor markets under competition and zero transaction costs (Cheung, 1968).[3] In the presence of transaction costs, sharecropping can be efficient by lowering the monitoring costs of wage contracts and increasing risk-sharing benefits relative to rent contracts (Cheung, 1969).
This implication is revolutionary; sharecropping was perceived as an inferior arrangement for years. After the publication of"The Fable of the Bees: An Economic Investigation" (Cheung 1973), our perception ofexternalities is no longer the same: as long as corresponding property rights are clearly delineated, OR transaction cost is zero, externalities can be internalized through private negotiation/contract arrangement without government intervention.
In 1983, Cheung published probably his most important journal article, "The Contractual Nature of the Firm". While a firm cannot be defined easily, Cheung interprets it as a kind of contractual arrangement being used to replace the market (i.e. price mechanism) to reduce transaction costs (e.g. the cost of price searching). Cheung once stated that when he finished writing the article, he knew that it would become a work that will last generations, and still be read a hundred years later. Thus, "[he] beheld the sky and laughed."[4]
Outside of the academic world, Steven Cheung is most well known for his numerous writings directed at a popular audience, especially the Chinese public. He is also known for his famous wit; in 1969 he wrote an article "Irving Fisher and the Red Guards", published in the renownedJournal of Political Economy, arguingironically that the activities of theRed Guards in China stemmed from their use of a "refined concept of capital". Unbeknownst to the readers, the article was written under considerable emotional pain; his close friend, thetable tennis championRong Guotuan, had just committed suicide after being tortured by the Red Guards.
Cheung maintained a lifelong friendship with former mentorsRonald Coase andMilton Friedman, the latter of whom officiated his wedding.[1] He accompanied Friedman in his numerous tours of China, and was present when Friedman met with Chinese leaderZhao Ziyang to discuss economic reforms.
Cheung was also an avid photographer. He took the most iconic photo of Milton Friedman, which was featured on the cover of Friedman's treatiseCapitalism and Freedom.[1]
While referring to Cheung's "brilliant, valiant attempt" to prove that sharecropping does not affect incentives of the workers,Joseph E. Stiglitz credited Cheung's "unreasonable assumptions, especially concerning information" for motivating him to develop the theories of the role of information in economics.[5]
In order to understand real life phenomena, he personally engaged in numerous economic activities, such as fish farming, selling citrus fruit, inspecting the petroleum industry, and haggling over the price of antiques. He has criticized the isolation of most economists from real life problems.[citation needed]
Cheung's contribution to economics and China's economic development can be roughly grouped in the following areas,
He wrote 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 amarket 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. Cheung claimed that most of his predictions have come true. One of his major ideas, the replacing ofstate-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 correct in some respect. As of 31 January 2015,Shanghai Stock Exchange overtook theHong Kong Stock Exchange in terms of market capitalization. However, Shanghai has yet to catch up with Hong Kong in terms of financial infrastructure, and Shanghai's dream of overtaking Hong Kong has yet to be fully fulfilled.
On January 28, 2003, Cheung wasindicted on thirteen counts by a US federalgrand jury. The charges consisted of six counts of filing a false income tax return, six counts of filing false foreign bank account reports, and one count of Conspiracy to Defraud the United States. Cheung was accused of failing to report incomes from Hong Kong parking lots and other business. As a U.S. citizen, Cheung is obliged to report incomes from anywhere in the world, even if he does not reside in the United States. The law is uncommon in other countries. Cheung insists that he relied on the advice of his tax consultant, and did not know he was supposed to report the income in question.[6]
Experts have said that ignorance of the U.S. tax policy is common among U.S. expatriates; the U.S. government generally does not pursue investigations of failures to report overseas income for non-residents. When discovered, offenders are often simply requested to turn in the unpaid tax. It is unknown why the U.S. government chose to investigate Cheung, and further to pursue a federal grand jury indictment; journalists have suspected ulterior motives.[7][better source needed]
Originally a professor atUniversity of Hong Kong, because of the pastextradition agreements between the US and Hong Kong, Cheung has since stayed inmainland China, a jurisdiction that has no such agreements with America. He now writes books and works as a columnist for the Chinese websiteifeng.com. Occasionally, he pays visits to various universities in mainland China.
From 1998 to 2003, Cheung's company, Steven N. S. Cheung Inc. had a subsidiary in Seattle called Thesaurus Fine Arts, which specialized in Asian antique pieces. The store closed whena series of investigative reports in theSeattle Times alleged that many of the antiques were fake.[citation needed] In 2004, the Washington State Attorney General filed consumer fraud charges against Thesaurus Fine Arts. In 2005, Thesaurus Fine Arts settled for up to $550,000 in fines, attorney fees, and restitution. Cheung was dropped from the case as a result. Cheung has denied ownership of Thesaurus. Thesaurus is a subsidiary of Steven N. S. Cheung Inc., but it is claimed that Cheung is "not an officer, director or shareholder" of Thesaurus.
