Economics is something
very interesting yet at the same time sounds drab and abstract. Perhaps this
has to do with the way economics evolved. From the beginning, there seems to be
something disconnected between economics theory and its applications. While
Adam Smith built up his foundations of economics through the learnings he
inculcated in his decades long observation of human life and behaviour, yet
with passage of time, economics moved away from reality into a world of
geometry and algebra and what not. Mathematical formulations intensified
dragging economics away from reality. It might be a case of prisoner’s dilemma
wherein the world was away with collectively being worse off because the
objective seemed to be individually getting better off relative to others. The zero
sum games turned economics into something dull and drab with no connection to
reality. It naturally spilled over to economics teaching. Text books barring
some exceptions focused on theory rather than the evidence of application of
theory. Students were expected to be either mathematically strong or robust or
alternatively mug up to vomit in the exams. This made economics move away from
its original roots in many ways.
This is not to
suggest that economics must be divorced from mathematical formulations. In fact,
mathematics and statistics have added rigour to economics. Yet this cannot come
at the cost of making the subject move away from practical applications. Any subject
is not to be studied which has no relevance in real life. Any subject that
talks about the abstract without focusing on why one should study the same is
doing a disservice. Economics is no exception. The student of economics must be
expected to know the logic of study and how it is going help him or her in
navigating the real world. The objective cannot be to create another set of
economics teachers who carry on the tradition of abstract explanations without
linkages to practical world. Economics finds use in number of areas which must
be the focus of teaching. In settings like B-Schools, students are expected to
be corporate practitioners or entrepreneurs and economics must help them in
their pursuit. A mathematical formalism is no way to proceed on this. If the
students are mathematically inclined, there is no harm in expanding the
thoughts through mathematical constructs but there is a ever-present danger of
hitting the diminishing returns.
Therefore,
alternative methods must be thought off. Economists like Thomas Schelling
brought economics into the realm of real life. The book Micromotives and
Macrobehavior is highly technical without doubt, yet its application in real
life with less recourse to mathematical formalism is classic example of linking
real life and economics. For the uninitiated, Thomas Schelling was highly
mathematical is his theoretical formulations as did Gary Becker who carried on
the tradition of bringing economics even closer to reality. The tradition has
been carried on by economists like Robert Frank, Stephen Levitt among many
others. The concepts what they have illustrated became popular because they
were available in layman’s language. In other words, economists will have to
cater to two different segments. One is their professional segment, where they
need to outperform their peers through mathematical constructs. The second it
appeal to layman with the same concepts explained in the language of the
layman. This was the beauty of these economists. Incidentally, Nicholas Naseem
Taleb too has been writing on statistics and probability in highly technical
language. Yet what makes him different from the rest would be his ability to
decipher probability and the associated concepts in completely layman terms. His
books can be good examples where with instances driven from history he puts
across several concepts with ease. Yet, as he publishes his scholarly works,
his mathematical mastery comes to the fore with ease.
Therefore, in a
context of B-School settings, it makes sense or in fact rational to bring
economics into business. It is important for the students to understand the
practical relevance of concepts like demand and supply beyond those traditional
graphs. If they have to understand determinants of demand, they need to explore
with examples from each instance. If income if the key determinant of demand
for instance, what industries would benefit would be something of interest to
the students. Similarly an understanding of economies of scale or scope would
be possible if they were able to link with it being practiced in several
industries. In fact, market structures provide ample scope for the students to
link the common goods into different markets. Their own behaviour in purchases
would be an ideal point in building up the assumption of preference formation
like non-satiation or transitivity or completeness. There are many instances
that can be drawn from the student’s own life that illustrate the success or
lack of it of the transitivity property. Similarly, their own bargaining
experiences bring about the illustrations of consumer surplus, reservation
price, first degree price discrimination, second degree price discrimination among
many other things. There are number of examples which illustrate price
discrimination but they would have never thought of these in the economics
context. It is not about teaching economics. It is about inculcating the
thinking of economics. Economics thinking is an art in itself. It is not merely
that arises from some abstract examples but living through it. In fact, the
onus is on the faculty to live and breathe economics.
In teaching,
passion is what brings faculty closer to the students. If the faculty expresses
a disinterest no matter how indirect it might be, it does reflected in the
knowledge spill over into the students. The students basically take off their
interest through the faculty’s interest in the subject. If the faculty is
passionate in conveying the thought processes, these would naturally reflect
strongly on the students. As the teacher starts giving numerous examples to
highlight different contexts, the students would begin to think differently. Every
observation they make illustrate different facets of the subject, not just
economics by the way. These facets as they explore through the eyes of the
concepts they have learnt, their own thinking improves and thus over a period of
time, the learning curve will ensure better structured decision making. Therefore,
economics must be taught to the needs of the students through live examples
making it a living organism and not something abstract that has little use
outside of the professional laboratories.
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