Viewing Contemporary Economics through a historic lens can imprint a good understanding of Economics gratifying to inquisitiveness of MBA students.
Such a learning process or methodology is based on a historically investigated approach. The fact that Economic Science and its theories are esoteric in nature is just a myth. A retrospective and scrupulous study based on vivid recurrence of certain economic upshots in the past can give a well-contrived understanding of different economic theories.
Mr. Shankar Jaganathan, a professional Chartered Accountant, Guest Lecture at Indian Institute of Science (IISc) and a well acclaimed author, addressed the students and imparted a good learning on this methodology and its practical entailment in understanding the present economics issues. It was a series of Guest Lecture sessions organized at MARC School of Business and Mr. Jaganathan
addressed the students at one of the sessions on 8th January, 2013. Having a vast work experience of 18 years in Wipro, Mr. Jaganathan also authored one book “The Wisdom of Ants”.
Referring to the wisdom of Ants, he explained how the tiny ants can carry out difficult tasks on the basis of three aspects of accomplishments namely: Taking initiative (Pro-activeness), Disciplined/Altruistic approach and perseverance. In context to several of Economic concepts which are widely discussed now a day, the ex-cogitations of development of such concepts can be understood by taking the historical development of civilization and subsequent social psyche as a benchmark. Historically, Economics can be unfolded in 3 steps. If we look at the timeline,
1 Million BC when per capita income found to be around $90
10000 BC when Per capita income raised to $92 to $93
1350-1500 BC, per capita income was $140 and
800 BC, per capita income was around $1000.
The rise of income generation can be attributed to overall increase in total production. But what exactly explains the uneven increment of income generation can be attributed to three significant social developments. Firstly, concept of sharing based on equity and ethics was changed and private property ownership concept came up. In fact, in ancient times trading and doing business was considered to be unethical as it goes against the social norms based on equity and ethics. The second factor was the social sanction of self-centered behavior that is, an individual has the right to protect self-interest. Third reason was development of utilitarian concept which allows a person to believe that material consumption can be a measurement of happiness. In this ongoing process, the science of economics was gradually developed. In fact, Adam Smith’s famous book “The Wealth of Nations” which is considered as an elementary elaborative work on basics of Economics is based on the assertion “Self-Interest is goal”.
Mr. Jaganathan also shed some light on two important instruments of Economics: Monetary Policy and Fiscal Policy. The basic difference between these two instruments can be explained from two contrasting theories of Economics. Fiscal policy focuses on demand side of economics which is more like an accelerator running the economy by looking at the demand side. However, monetary policy is like a brake which looks on the supply side of Economy by controlling the money supply. Both the concepts were developed on the basis of various economic crisis that happened in the past (Example: The Great Economic Depression, Dot-Com bubble and sub-prime crisis etc.)
He also illustrated how the Economy of a nation can be compared to different parts of an automobile vehicle. Dashboard of a vehicle can be referred to the economy, GDP growth is like a Speedometer, Inflation can be compared with the temperature gauge of an automobile vehicle, and different business cycles are like gears used time-to-time. Unemployment is the potential for acceleration or gap to maximum speed limit.
Referring to major debates in economy, Mr. Jaganathan also pointed three important points that are underlying to such debates,
1) Personal Property: A Right or Theft?
2) Self-centeredness : A boon or a bane?
3) Supply creates demand or demand creates supply?
Contextually, he also illuminated the ongoing economic theoretical development that had a profound impact in the recent US election, namely, Saltwater Economics (by Economist Paul Krugman) and Sweetwater Economics (by Economist Ben Bernanke). Talking about Indian Economy, he asserted that the presence of a huge youth population in India is a good sign for Indian Economy and its future.
It was a very interactive session and the students were overwhelmed by the well-articulated, apprehensible and distinctly interconnected theories of Economics.
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