THERE'S AN ECONOMIST IN ALL OF US

I have always been vocal about my fondness for Economics. But if any one were to ask me, “What Economics does? Or What are Economists for?”, chances are he/she will have to leave without getting a satisfactory answer from me. I remember somebody asking me this very question a long time back. I didn't have a convincing reply then and even today I don’t think I have progressed enough on that count.

Are economists experts on economic matters?, No, an expert by definition is someone who has a comprehensive and authoritative knowledge of or skill in a particular area. An Economist hardly possesses any of these qualities. Economists work on a wide variety of issues in varied sectors like business, finance, governance, crime, education, family, health, law, politics, religion, social institutions, war, science etc but their knowledge about the chosen field or sector per se is fairly limited. An economist is also most likely not to have any well rounded skill in any particular area. Think about it, Engineers, Doctors, Surgeons, Artists, Teachers, Soldiers, Mechanics, Designers constitute a set of people who we consider to be skilled. Do economists share anything in common with them?. Economists are therefore no experts.

There are many people however, who do like to look at themselves as economic experts. Many such men appear frequently on the television to put forward their ‘expert views’ and opinions. Some also go to the extent of making predictions as to how various economic elements will play out in the near and distant future. Anyone who watches News on television must have surely noticed at least one such ‘Expert Economist’ predicting economic growth, inflation, population growth, interest rates, demand, supply and what not, during the run up to Union Budget or just before a Quarterly/Annual Monetary Policy Release by RBI . Well, while such people may undoubtedly be economists, I have my serious reservations in taking their “Expert Opinions and Predictions” seriously, especially so, when their assumptions are not so readily apparent. I work for a Bank and from time to time we too get queries from the media asking us about the future course of interest rates. We generally revert back with a statement such as “Likely to increase/decrease/remain stable” based solely on whether the interest rates had moved up, down or remained stable in the last 2-5 months. Now, everyone  knows that past developments are hardly a basis for predicting uncertain future events. Our relatively honest reply to the media guys would have been “Dude, I don’t have any more clue on the issue than you do”. But ‘hey!’ we are thought of as experts, so our answers are framed accordingly. 

Is it then the Economist’s task to manage the economy? A socialistic economy is managed by Politicians. A free market (capitalist) economy gets managed by itself (Many of my PGDM friends upon reading this statement, will recall the “Invisible Hand” of Adam Smith, which troubled most of them throughout their first four trimesters). Since most economists abide by the “invisible hand” model instead of “visible hand” model, the question of economy getting “managed” by economists simply doesn’t arise. In fact chances are you will never come across a self respecting economist who claims to have influenced market mechanism in some manner, for claiming this will mar his own credibility as an economist. What economists usually claim as their contribution to the field is how well they were able to explain a particular market phenomenon. A far cry from managing the economy, I must say.

Who are economists then? And is it really important to have this breed of professionals at all?  In very simple terms, economists are truth seekers who employ their energies in separating raw facts out of various social events, phenomenon, processes, systems and beliefs. Their task is to put together the most complex jigsaw puzzle ever designed -  ‘Human Behaviour’. By doing this they create raw materials for other social institutions to construct, modify or restructure a number of social processes and systems, most important amongst them being “Market”.

Looking back, one will find that the work of each note worthy economist, has dealt with the unraveling of some social truth. Thus throwing profound insights about the issues plaguing the markets or related systems of the time. For e.g. Adam Smith, Samuelson, Marshall on the need for free markets; Malthus on population; Keynes and a long list of Keynesian economists on wide range of social issues like unemployment, wages, role of state etc; Friedman on the need to put emphasis on monetary policy; Von Newman, Morgenstern, Nash etc. on decision making under asymmetric information and uncertainty; David Ricardo, Paul Krugman on trade; Akerlof, Trevsky, Kahneman and other Behaviorists on Rationality, Judgment, Heuristics, framework for understanding cognitive bias and their effect on markets etc. The list is a very long one and describes the achievements of economists in throwing some light on an otherwise mysterious process.

Economics is nothing but a compilation of the truths gathered by these economists which is given the shape of a thought school to enable young adventurous minds in understanding its full context and thereby prepare them in becoming able truth seekers of the future.

Dear Reader. If the mysteries of social living interest you, chances are that there’s already an economist somewhere deep inside your consciousness. Open the gates of your mind and start thinking about the world afresh and someday we might just meet him/her.

YF - IThink