Economics invokes extremes. For some, nothing more is beautiful than economics, for many others though; it revives those memories of those abstract graphs, curves, equations, diagrams scaring the wits out of them! Mathematical formalism and the associated complexities have made economics daunting. Yet like or hate it, economics cannot be ignored. Implicit in the ability to grasp the intricacies of policy measures lie in a good understanding of economics behind it. Needless to say, teaching economics presents a formidable challenge.
Yet, away from the horrors associated with learning economics, there is ample space and opportunity for economics to be fashioned in a narrative and transform it from being abstract and detached from reality to one of encompassing as tool of analysis of everyday life is possible. In their own indomitable style, stalwarts like Prof. Thomas Schelling, Prof. Gary Becker among others conquered hitherto unexplored and forbidden territories and built narratives that gave economics new life. While these narratives gained popularity in recent times thanks to host of popular economics books that have spawned up, yet many touch economics only superficially.
Examining the Indian economics eco-system, barring few honorable exceptions, the system appears to confine in abstracts and in near obsession with socialistic welfare economics. Yet to appreciate the deeper significance of economics, there has to be a change in the way economics is taught in the Indian system.
Current State of the System
Most students do not turn into economists yet would need sound grasp of economics in terms of its utility in their professional practice. This basic fact escapes the notice of most teachers. Theoretical debates may sound fine, if not discussed in the context of its applications, it may end up as just another banter but with a rider- memorize it to pass the examination!
Ironically while many teachers rant against the socialist system of the past, content remains a product of the same socialist mindset that rule the 1960s, 70s and 80s. Concepts and terms long redundant and irrelevant still continue in the curriculum. Many teachers still remain out of the touch with the changing dynamics of the contemporary economic discourse. This inertia is apparently an outcome of the lack of incentives and motivations for continuous process of faculty development. Further, as a leading capital market expert told this author recently, anything non-socialistic usage would deprive the economists’ funds of research as government decision makers understand only the language of socialism and its jholawallah variants.
Rote learning and comprehension is the norm and not analysis and application. For instance, a typical question in public finance paper repeated year on year was on describing the highlights of the recent Union Budget. Students would memorize the budget highlights and reproduce it in the answer sheet. Pre-internet days, while this made some sense, in the age of data abundance, these questions have little relevance. Yet, if something has changed, it is the addition of the question on highlights of the recent monetary policy in addition to the budget!
As economics turns quantitative increasing rigor, however, in terms of teaching, rather than emphasis on interpretations, they end up as mere rehash of statistics classes. Students end up neither knowing how to define variables nor know interpreting the results but only know the mechanical process of computation. Unfortunately, many PhD theses too focus excessively on justifying the statistical components than the economics component.
Further, despite the possibility of equations and graphs capturing real life phenomenon, their usage is abstract with little linkage to reality. Algebra and geometry are mere representational tools and not an end. The abstract tone often finds students wondering why the concept has to be learnt in the first place. The absence (or negligible) of the field research both at undergraduate and postgraduate levels reinforces this impression. All these factors make students develop at least disinterest if not a phobia, a subject to memorize for passing exams rather than imbibing the inner beauty of theories and concepts towards problem solving.
Contrary to popular impression, economics is about behavior. At the core lies a principle of tradeoffs, to be resolved through cost benefit analysis, the difference from the traditional analysis being the relevance of opportunity costs and marginal costs. Exploring further on inducing changes in the outcome leads us to the incentive mechanism, the fundamental principle that drives economics. Incentives can be offered either be through markets or through governments or even through social or economic norms. Yet students often remain ignorant about these fundamentals, without which, foundations remain weak.
In seeking solutions, it is essential to structure economics into a coherent narrative in deciphering wider phenomenon than confining to narrow artificially constructed boundaries. In pursuit of extending the horizons, the following measures might be a starting point.
Understand the audience. Communicate with clarity the utility of economics for the audience. Bombardment of graphs and equations on an audience with little clue on its relevance and applications is futile. It would be more appropriate using examples to facilitate intuitive understanding of the concepts.
Think beyond framing the questions in pure theoretical form. Many fine professors wax and wane of beauty of various theoretical concepts but lectures remain aloof from real life applications. This unfortunately results in wastage of opportunities which otherwise might be used in developing sectoral and market expertise.
Avoid compartmentalizing economics. Instead of treating each topic in isolation, discuss linkages across other topics and at times other disciplines. This facilitates a development of holistic thinking among the students. Numerous disciplines have consciously or otherwise have borrowed from economics and vice versa too. These linkages can be explored in depth.
Introduce field research particularly for graduate and post graduate students. Students could be encouraged to visit organizations, study the functioning and develop demand and supply functions for the particular organization. Alternatively field visits can also facilitate students understanding price mechanism, market structures etc. In terms of macroeconomic thinking, one can study how interest rate changes, price level changes, exchange rate changes, tax rate changes etc. influence organizational performance. Thus it enables developing an aptitude for applied economics and utilization of the same in practice. Moreover, it will put in place documentation of applied economics in the Indian context.
In some quarters, a case is made out of irrelevance of the text book theory in practice. This happens, in part, thanks to over obsession with theoretical dimensions of teaching. Yet every piece of theory can capture numerous real life practices across board. What is missing is the adaptation of those theories incorporating dynamic variables. Theory, after all, is the simplified capture of real life phenomenon. Adaptations result in students appreciating the vagaries of the market and limitations of government interventions.
Shed the infatuation with developmental and welfare economics. Yes, probably it might still bring in some funds and publicity, yet these results in imbalances with less prioritization to other dimensions of economics. Moreover, discussion on developmental and welfare economics often borders on rhetoric than dissection of the possible impact of the policies on the economy. For instance, very little discussion happens in the class on unintended consequences of social measures like Right to Education, Food Security, and National Rural Employment Guarantee Act (NREGA) etc.
Little teaching happens in linking macroeconomic performance of a country/state to its impact on firms. As factors beyond the control of the firm, macroeconomic indicators and policy measures are of great importance. From pure practitioner point of view, content development is still in infancy. There is ample opportunity and scope for simplifying macroeconomics teaching. A beginning could be in increasing emphasis on development of case studies /situation analysis to link micro/macro economics concepts to its applications.
Economics is fun and with little effort can be made appealing to students and practitioners. Operating in narrow pre-defined contours, what emerges is the opposite. Hence attacking the problem at its roots with an appropriate incentive system for faculty development can lay the foundations for a new ecosystem. The roots lie in how economics is taught and imbibed thus calling for a new beginning there. As the products of the new schools of economics teaching emerge, the resultant narratives potentially might diversify the applications in hitherto rarely ventured domains.
(The views expressed are the author’s own views and do not reflect the views of the organization the author works for or is associated with. Some of the examples and caselets /situation analysis which the author uses as part of his teaching are documented in his blog stalkingtheory.blogspot.in)
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