Principle of Ultimate Efficiency Equilibrium:
 fairness is overall efficiency,
and efficiency is local fairness

That is the purpose and meaning of China
common prosperity or shared prosperity.

The following is an article by Liu Haofeng

to illustrate his views on the principle of

 Ultimate Efficiency Equilibrium,

fairness is conducive to efficiency
and efficiency is conducive to common prosperity.

Principle of Ultimate Efficiency Equilibrium:

 fairness is overall efficiency, and efficiency is local fairness

Common prosperity is the inevitable course to the future for the world

By Liu Haofeng 

Keywords: 
Ultimate efficiency ,  Overall fairness,  Paradox of pursuing local maximum benefits causing overall minimum benefits,   Isoperimetric theorem, 
 Common prosperity, Sustainable development 

The
 Principle of Ultimate Efficiency Equilibrium

is the theoretical discovery and contribution of Liu Haofeng,
the founder of China.

Harmonious Theory,

 in his fifth volume of Principles of Economic Science, i.e. Ideological System of Harmonious Theory in 2010.

It is a necessary supplement and development and a great transition for the

principle of maximum benefit distribution,

which is the theoretical contribution made by Professor Mao Yushi,
 a famous Chinese economist, in the field of microeconomics.

The principle of ultimate efficiency equilibrium
indicates through rigorous demonstration that the
principle of maximum benefit distribution

pursues supreme local interests and achieves maximum benefits in the field of microeconomics, which leads to overall long-term minimum interests in the field of macroeconomics and finally gets into the paradox dilemma of polarization and periodic economic crisis.

 The Nash equilibrium principle mathematically demonstrates the

prisoners dilemma,

and fully proves Adam Smith’s Theory, that is, everyone proceeds from the purpose of self-interest in the market economy, and ultimately the whole society reaches the effect of altruism, which is an untenable paradox.

However, the fact is that everyone only proceeds from the purpose of self-interest, which may benefit oneself locally in the short term, must brings a vicious circle of mutual harm to the society in the long term, and eventually leads to a systemic crisis that neither benefits oneself nor benefits others in the whole society.

This also proves the argument of Professor Mao Yushi
in the Principle of Maximum Benefit Distribution:
everyone pursues maximum benefits and finally the whole society achieves
maximum benefits, which is not logically tenable.

The fact is that everyone pursues maximum benefits,
which leads to minimum benefits of the whole society, that is, which leads to polarization
 and cyclical economic crisis or social revolution.

The principle of ultimate efficiency equilibrium

states that when resource distribution pursues maximum benefits to the extreme, it is inevitably required to turn to the realization of social fairness and tend toward the equilibrium of the overall system.

It puts forward an insightful economic view that

 fairness is overall efficiency, and efficiency is local fairness,

so as to realize the logical unification between microeconomics and macroeconomics for the first time, and achieve the dynamic complementary relationship between efficiency
and fairness in economic phenomena.

This theory makes a significant contribution, although it is not widely known.

 However, on December 29, 2018, Liu Haofeng
was selected into the 16th annual conference of China Economic Personage
and received the only

China Economic and Cultural Innovation Person Award

of the year due to his economic theory called

principle of ultimate efficiency equilibrium
 in the 2018 China Economic Summit Forum
 and the 16th Annual Conference of China Economic Personage

jointly sponsored by
 China Economic Personage Network,
Global Times Newspaper Office,
China-Asian Economic Development Association,
World China Chamber of Commerce and Industry and other institutions.

Tenable conditions for the principle of maximum benefit distribution and the

 paradox of pursuing local maximum benefits causing overall minimum benefits

In order to completely understand the theoretical value of the

principle of ultimate efficiency equilibrium,

we must first understand the
 principle of maximum benefit distribution

put forward by Professor Mao Yushi,

 which is the basic scientific theory on resource distribution
and transactions in microeconomics.

Principle of maximum benefit distribution

 takes fertilization distribution as an example.
 In case of a given chemical fertilizer and two pieces of land, how to distribute it can maximize the grain yield. The two pieces of land are different in size and soil texture (fertile and poor soil). There are 50 kilograms of chemical fertilizer. How can it be distributed on these two pieces of land to maximum the grain yield? According to the

 principle of maximum benefit distribution,

one kilogram of chemical fertilizer is reduced on land B and added to land A, because this kilogram of chemical fertilizer can make land A yield more grain than make land B yield grain. In order to yield more grain, the chemical fertilizer is continuously reduced on land B and added to land A. It turns out that the total grain yield is increased.
This reasoning is tenable in terms of local systems.

As the transaction basis of Western microeconomics, the

principle of maximum benefit distribution

put forward by Professor Mao Yushi only settles the problem of local maximum benefits. If we only remain at the micro level, only focus on maximizing our own interests and ignore others interests, and can not expand logical domains and extend reasoning, it is inevitable for land A and B to fall into the state of polarization. Lets suppose A and B are individuals in the whole society. The state of polarization between A and B is the paradoxical pattern of class antagonism. Historical experience exposes that this will lead to a vicious circle of history for the revolution. This phenomenon can be called

the paradox of pursuing local maximum benefits
causing overall minimum benefits. 

Why do we focus on local short-term interests and ignore overall long-term interests?

 This is because we analyze and handle the problem in the way of formal logic thinking, suppose that land A and B are relatively independent, and do not dialectically regard those two pieces of land as a whole in terms of soil. It is this choice to pursue local maximum interests that makes land A become more fertile and land B poorer, so as to result in the imbalance of the overall pattern and the outbreak of polarization crisis.

It is a partial opinion for free market economy claiming to address efficiency rather than fairness. In fact, only when ultimate market efficiency turns to social fairness by coordinating and exchanging the cycle between market efficiency and social fairness can market economy avoid cyclical economic crisis and lead to overall efficiency. Only when ultimate social fairness turns to market efficiency by protecting and encouraging differentiated development can market economy avoid rigid economic crisis.

The whole and parts, fairness and efficiency, macroeconomic regulatory and market economy are the two legs of the healthy operation and development of social economy,
which can not be regarded biasedly.

Logical basis of

common prosperity:

 why does ultimate efficiency must turn to overall fairness

50 kilograms of chemical fertilizer is to be optimally distributed on land A and B to maximize the benefits. Let’s suppose that it is distributed to land A and B evenly. Generally, if one kilogram of chemical fertilizer is added to land A, land A can yield more grains compared with land B. Therefore, the chemical fertilizer that is supposed to supplying to land B is used on land A, which can maximize the benefits of chemical fertilizer. This is one aspect.

There is the other aspect. When the marginal benefit decreases, we will stop fertilize land A and shall fertilize land B. In a limited system, if there are only two pieces of land
named land A and B, we must fertilize land B.

In the same curve, if we take land A and B as a correlated whole to analyze them from the perspective of ecosystem or to explain macro problems, the decline of marginal benefit means that chemical fertilizer must be distributed to land B in order to increase the grain capacity of of 50kg chemical fertilizer and the grain yield of the whole land, thus narrowing the grain capacity and gap between land A and land B. Land A and B represent the rich and the poor, and the elite and the civilians. Chemical fertilizer represents the means and methods of
national macro-control such as national finance.

This transition is that ultimate efficiency turns to overall fairness to achieve common prosperity. This transition process corresponds to socio-economic ecology, which is a process to constantly change and narrow differentiation. Its policy introduction is required
to grasp a quite superb skill.

The state can not strangle efficiency in the name of fairness in development,
while it should protect efficient development.

 Meanwhile, the state should promote social fairness, narrow differentiation and achieve common prosperity through national policy regulation, social welfare and transfer payment.

Governing a country is like cooking a meal.

In specific social practice, the state and society shall be prevented
 from swinging between the left and right extremes,
resulting in huge losses of social costs

 There is Yin in Yang, and there is Yang in Yin,

 as Chinese cultural philosophy goes. According to the economic situation at different stages, efficiency is gradually developed in the realization of social fairness, and fairness is constantly promoted in the realization of social efficiency.

This is the

isoperimetric theorem

of two-dimensional plane.

For the closed geometric shapes with equal perimeter in the isoperimetric theorem,
the area of circle is the largest.

On a two-dimensional plane, if the perimeter of the closed geometric shapes is given, the area of circle is the largest; if the area of the closed geometric shapes is given, the perimeter of circle is the smallest. In a three-dimensional space, if the surface area of the closed solid geometric shapes is given, the volume of sphere is the largest; if the volume of the closed solid geometric shapes is given, the surface area of sphere is smaller than that of other shapes
(such as square, cylinder, etc.),
the force of sphere is uniform, and sphere will be more firm.

In physics, if the forces acting on a closed curve in all directions are balanced, the closed curve must generate a circle. If the force acting on a closed curve in one direction is large and the force acting on a closed curve in another direction is small,
the closed curve must generate a slender and flat figure.

In the field of national economy, if the country provides balanced financial support, that is, if the forces acting on a closed curved in all dimensions are balanced, the closed curve must generate a circle, which proves that realizing common prosperity is to maximize the overall interests of the whole society! 

If the country provides unbalanced financial policies and support, that is, if the forces acting on a closed curve in some directions are large and he forces acting on a closed curve in some directions are small, the closed curve must generate a slender and flat figure. For example, the country tends to provide great financial support for large enterprises and state-owned enterprises with good benefits, while it provides little financial support for micro, small and medium-sized enterprises; For another example, the banks tend to provide great support for the rich with bank deposits, while they completely ignore providing financial support for the poor for skills and entrepreneurship.

As the national economy develops, it is inevitable for the country to lead to a polarized society and the outbreak of economic crisis and even social revolution, fall into a vicious circle of history, and finally minimize the overall interests!

The European and American capitalist countries operate their finance in such a way. After developing for a certain period, those countries are bound to experience an economic crisis, causing huge losses to the society. They will expand and invade outward to fill the internal gaps of their system by enlarging their domains and geographical maps in the logical sense, which brings instability and conflict to the world
and plunges the world into unsustainable development.

The road to common prosperity shown by the principle of ultimate efficiency equilibrium is not only the inevitable expansion of the current socialist cause, but also the transition and improvement of capitalist civilization. It transcends the two social types and points out the goal commonly achieved by the world in the future. Only when the whole society achieves common prosperity can the world realize sustainable peace
and long-term common development.

Therefore, the

Principle of Ultimate Efficiency Equilibrium

 clears the way for promoting the global village to realize the sustainable development of common prosperity, harmony and peace in the world, and
 for better building a community of common destiny for all mankind.

Its discovery scientifically demonstrates that the road to common prosperity for the country
 or the world is the inevitable course for history and the times.

Back to Home