Introduction

This is the first article in the foundational-theory series of Synthesis Political Economy (hesan weiyi—literally, “synthesizing three into one”). It seeks to clarify the subject matter, core definitions, and theoretical sources of this framework, thereby laying the foundation for the four articles that follow.

I. Subject Matter: Relations among Three Organized Forces

The subject matter of Synthesis Political Economy is the political-economic ecosystem constituted by the three most fundamental organized forces in contemporary human society—the family, the enterprise, and the government—and by the relations among them.

Contemporary human society contains the three kinds of production:

  • the production of population and human resources, with the family as the unit (Life-Reproduction Capacity);
  • the production of goods and services, with the enterprise as the unit (Productive Forces); and
  • the government-led production of public goods (Government Power).

In a market economy, families, enterprises, and governments each act as both suppliers and demanders in relation to one another, forming three major supply-and-demand relationships mediated by money: the supply of and demand for labour-power as embodied human capital, the supply of and demand for enterprise products, and the supply of and demand for public goods. Resources relating to the supply of and demand for labour-power as embodied human capital and enterprise products are allocated primarily through market mechanisms. Resources relating to the supply of and demand for public goods, by contrast, are allocated through non-market means under government leadership.

The configuration of Family-Household Rights, Enterprise Rights, and Government Power determines the equilibrium and disequilibrium movement of the three major supply-and-demand relationships. It thereby establishes the political-economic institutions and operating mechanisms that drive economic and social development.

II. Three Core Definitions

1. Life-Reproduction Capacity

Life-Reproduction Capacity (shengmingli) refers to the capacity possessed by the family, as the basic unit of society and with population procreation as its core function, in the reproductive processes of childbearing, child-rearing, education, and physical development. The level of Life-Reproduction Capacity depends on the quantity, quality, structure, and distribution of population reproduction as determined by the level of household consumption—particularly expenditure on education.

Core proposition: Life-Reproduction Capacity takes primacy over Productive Forces.

Population procreation and human-resource development are the fundamental ends of the continued existence and development of human society; the development of enterprises’ Productive Forces is a means to those ends. The proposition that “Life-Reproduction Capacity takes primacy over Productive Forces” is, first and foremost, a normative value judgement within this framework: production is not an end in itself, but should serve human survival, development, and intergenerational continuity.

2. Productive Forces

Productive Forces refer to the productive capacity formed by enterprises through inputs of factors of production—labour, capital, land, technology, and information. The key driving force behind the development of Productive Forces is the optimal allocation of factors of production by entrepreneurs and their management teams.

Productive Forces and Life-Reproduction Capacity stand in a relationship of unity of opposites and mutual dependence: enterprises provide families with the factors of daily living and jobs, while families provide enterprises with human capital and consumer demand; enterprise profits depend on household consumption, while household wages depend on enterprise employment.

3. Government Power

Government Power refers to the government’s capacity, based on the coercive power of the state, to use such instruments as monetary policy, fiscal policy, tax policy, and market regulation to produce and provide public goods, maintain social order, and regulate the game between families and enterprises.

The rational behaviour of government may be hypothesized as the pursuit of the long-run maximization of Government Power within a framework governed by the rule of law. This is a behavioural hypothesis for analytical purposes, not a normative defence of the expansion of power. Because Government Power rests on the tax base provided by families and enterprises, any policy that systematically damages families’ Life-Reproduction Capacity or enterprises’ Productive Forces will ultimately erode the foundation of Government Power.

III. Six Theoretical Sources

This framework synthesizes insights from the following six theoretical traditions.

1. Marxian Political Economy

Engels, developing Marx’s historical materialism, proposed that the dialectical movement of “two kinds of production”—material production and population production—forms the basis of the historical development of human society. This framework inherits and develops that insight, giving it concrete form as the movement of unity of opposites between families’ Life-Reproduction Capacity and enterprises’ Productive Forces, and employing this movement as its core analytical instrument.

Unlike Marx, this framework holds that abolishing capital is not a feasible path to resolving the contradiction between capital and labour. The correct path is to advance the socialization of capital within a framework governed by the rule of law and to achieve a cooperative game through an institutional rebalancing of the Grand Tripartite—Family-Household Rights, Enterprise Rights, and Government Power.

2. Classical and Neoclassical Economics

The framework inherits Adam Smith’s central insight concerning the allocation of resources through the market mechanism (the invisible hand), as well as Ricardo’s theory of comparative advantage. At the same time, it argues critically that classical economics focuses excessively on “one kind of production” (the enterprise production of goods), while overlooking the independent logic of population reproduction by families and its fundamental effects on the market economy.

3. Institutional Economics and Property-Rights Theory

Coase’s theories of transaction costs and the nature of the firm provide analytical tools for understanding the evolution of enterprise institutions. Property-rights theory—the separation and recombination of ownership rights, rights of use, rights of control, and rights to income—provides a framework for understanding the micro-foundations of China’s transition from a planned economy to a market economy.

The family’s invariable property right, based on natural law, is Private Ownership of Labour-Power as Embodied Human Capital. Labour-power exists by nature within the life of the individual; no institution can deprive the individual of it. It can be extinguished only through enslavement or the destruction of life.

4. Keynesian Macroeconomics

Keynes’s theory of deficient effective demand and of the necessity of government intervention in the market provides a reference point for understanding the macroeconomic disequilibrium caused by Productive Forces Running Ahead, Life-Reproduction Capacity Lagging Behind. This framework further holds that the effective-demand crisis of the AI era is structural rather than cyclical and that the effectiveness of traditional Keynesian instruments faces a fundamental challenge.

5. Population Economics and Human-Capital Theory

Gary Becker’s theories of family economics and human capital provide a micro-foundation for analysing rational household behaviour (labour-income-based happiness maximization), the cost–benefit trade-off involved in raising children, and the two patterns of population reproduction—intensive child-rearing and extensive child-rearing. Malthus’s An Essay on the Principle of Population and the Club of Rome’s The Limits to Growth are also important points of reference for critical dialogue within this framework.

6. The Chinese Philosophical Tradition and Heheism

The core concept of hesan weiyi is rooted in the traditional Chinese philosophical idea of hehe (harmony-and-union): different things attain dynamic equilibrium and unity through a movement of mutual opposition and mutual dependence. This shares certain features with the equilibrium-analysis paradigm of Western economics, but places greater emphasis on the dynamism and asymmetry of contradictions and on the civilizational value of a cooperative game relative to a non-cooperative game.

IV. Why a New Framework Is Needed

This framework holds that modern mainstream economics has powerful capabilities for explaining enterprise production, price mechanisms, and the market allocation of resources, but pays insufficient attention to population reproduction by families, the non-market provision of public goods, and the configuration of Family-Household Rights, Enterprise Rights, and Government Power. In other words, the problem is not that mainstream economics is “entirely wrong”, but that its explanatory boundaries do not extend far enough to encompass the three kinds of production and their structure of rights and power.

As a consequence of this limitation, existing systems of economics cannot explain the following real-world problems:

Why does the market economy systematically suppress families’ willingness to have children even as it creates enormous wealth?

Why do developed countries commonly exhibit the coexistence of a “fertility-rate collapse” and “polarization between rich and poor”?

Why is the AI revolution, even as it raises Productive Forces, severing the underlying circuit that sustains the operation of the market economy?

Why has deficient domestic demand become the most prominent structural problem after four decades of rapid economic growth in China?

These questions are difficult to answer adequately within a framework of only “one kind of production”. Synthesis Political Economy is proposed precisely to establish a comprehensive analytical framework capable of encompassing the three kinds of production, the three forces, and the three forms of rights and power.

V. Theoretical Comparison and the Tracing of Intellectual Sources

In comparison with Marxian political economy, this framework inherits the historical perspective of “two kinds of production”, but does not regard the abolition of capital as the only way forward. Instead, it emphasizes advancing the socialization of capital under the rule of law and achieving a cooperative game through an institutional rebalancing of the Grand Tripartite—Family-Household Rights, Enterprise Rights, and Government Power.

In comparison with neoclassical economics, this framework accepts the importance of market mechanisms and price signals, but holds that the family is not merely a consumer or an owner of factors of production: it is the agent of the reproduction of population and human capital.

In comparison with Keynesianism, this framework attaches similar importance to deficient effective demand, but traces its source further back to the long-term disequilibrium between families’ Life-Reproduction Capacity and enterprises’ Productive Forces.

In comparison with institutional economics and public-choice theory, this framework emphasizes property rights, transaction costs, government incentives, and constraints on power, but expands the unit of analysis to the asymmetric game among the three organized forces of the family, the enterprise, and the government.

VI. Summary of the Core Propositions

  1. Life-Reproduction Capacity takes primacy over Productive Forces—population procreation and human-resource development are the ends; the development of enterprises’ Productive Forces is the means.
  2. The three kinds of production are mutually dependent—the game among families, enterprises, and governments is not a zero-sum game, but a potential cooperative game.
  3. A cooperative game increases the likelihood of a three-way win, whereas a non-cooperative game increases the likelihood of a three-way loss.
  4. The asymmetry of the Grand Tripartite is an objective reality—Family-Household Rights are inherently in a weaker position and require institutional rebalancing.

Open Questions

  1. How can the proposition that “Life-Reproduction Capacity takes primacy over Productive Forces”, as a value proposition, be translated into operational institutional indicators?
  2. How can Family-Household Rights find organized expression, rather than remaining merely at the level of moral appeals or welfare policy?
  3. Is the relationship between this framework and the circular-flow model of mainstream economics one of substitution, extension, or complementarity?

Notes

  1. Engels, F. (1884). Preface to the First Edition of The Origin of the Family, Private Property and the State.
  2. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations.
  3. Coase, R.H. (1937). The Nature of the Firm. Economica, 4(16), 386–405.
  4. Keynes, J.M. (1936). The General Theory of Employment, Interest and Money. Macmillan.
  5. Becker, G.S. (1981). A Treatise on the Family. Harvard University Press.
  6. Malthus, T.R. (1798). An Essay on the Principle of Population.
  7. Polanyi, K. (1944). The Great Transformation. Farrar & Rinehart.
  8. Buchanan, J.M. & Tullock, G. (1962). The Calculus of Consent. University of Michigan Press.
  9. Sen, A. (1999). Development as Freedom. Oxford University Press.
  10. Zhang Guangzhu. Economics of Labour-Power. Sichuan People’s Publishing House, 1989.

Translator’s note: The title and publisher in Note 10 have been rendered from the Chinese bibliographic entry. An official English title has not been verified.