The limits of economic prediction: reassessing the Lin-Yang debate on China's dual-track reforms

Yiyang Sun

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Yang, drawing on his inframarginal economics framework, argued that China's dual-track reforms would fail without constitutional shock therapy, predicting that the absence of proper institutional transitions would lead to corruption and economic stagnation. Conversely, Lin's New Structural Economics advocated for gradual reform based on comparative advantages, arguing that late-comers could benefit by developing industries aligned with their factor endowments. This essay examines the 2002 to 2003 debate between economists Justin Yifu Lin and Xiaokai Yang regarding China's economic reforms and late-comer advantages. Through an analysis of recent empirical evidence (2020-2025), this essay demonstrates that Yang's predictions largely failed to materialize: China's dual-track system succeeded despite lacking constitutional transformation, with state-owned enterprises contributing positively to growth and anti-corruption campaigns improving productivity. However, Lin's framework also proves insufficient in explaining China's success. The paper concludes that economic forecasting necessarily sacrifices scientific rigor in favor of broad generalizations, suggesting that economics should focus on explaining existing phenomena rather than predicting uncertain futures.

Keywords: later-comer advantage/disadvantage; constitutional transition; Chinese economy; dual-track reforms; empirical revolution (search for similar items in EconPapers)
JEL-codes: B41 O53 P21 (search for similar items in EconPapers)
Pages: 6 pages
Date: 2025-10-14
New Economics Papers: this item is included in nep-cna, nep-his, nep-hpe, nep-inv and nep-sea
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Published in Advances in Economics, Management and Political Sciences, 14, October, 2025, 226(1), pp. 51 - 56. ISSN: 2754-1169

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