I had hardly given any conscious attention to economics until I began to engage with issues regarding environment, poverty and education. Its been few years at our consulting practice that has given us to contribute in different capacities with organisations (mostly non-profit) working in these areas. Through these engagement one thing that came out quite clearly was, it is necessary to understand the economics behind any of these issues to be able to solve them. This is because of the scarcity of the resources that is required to solve a problems or the resource itself is the reason of a problem. Another reason why I am interested in getting to know this science better is , I observe in our times people understand the language of money far easier than any other language and economics ( to this beginner) will help learn that language. It has become difficult to use morals or ethics to reason out why a particular decision is better than another. Money has become the primary yardstick in decision making for majority of individuals, organisations and even the state. When monitory evaluation and economic value of goods or products is what matters then it becomes important to learn the language of money. That is when I started to pick up basic books on economics, looking at the subject like an exotic object from another planet.
What is economics in simple words?
One of the popular definitions is: The science of how people make choices for the allocation of scarce resources to satisfy their unlimited desires.
If this is the definition of economics all of us are practicing economics in our day to day transactions. Isn’t it? All of us are economist in our lives.
Economics can be a lens used by all experts in their own field. Why do we need an expert who is an economist? This may sound like a ridiculous question. I ask this question because, many decisions made for a country ( regarding everything- education, environment, food, water, trade etc) especially depend on the opinions of influential economists of the country. The buck always stops here.
For instance, how can we expect an economist to know the value of services provided by a forest especially when we have very little knowledge of the services provided by the forest. If you do not know what are the resources and the services provided by them in totality, how do we expect to quantify them completely?
It is quite unsettling to know that a very few people ( influential economist ) who know little of the subjects/problems/ issues they evaluate but a lot about economics are making decisions for nations. As Friedrich Hayek during his nobel speech in 18974 said ( excerpts from here)
The Nobel Prize confers on an individual an authority which in economics no man ought to possess… This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.
Another economist who comes to my mind is Bjorn Lomborg, who is known for putting together the Copenhagen Consensus. Where for the first time a list of most important crises of the world were listed and prioritised. Who did it all? Again world’s leading economist. Why economist, because they can really compare how much of work can a billion dollar do in malaria alleviation in what period of time vs what that same money can do in addressing climate change in what period of time. In his TED talk Bjorn Lomborg makes a very convincing case for the same. He also acknowledges this is not the best way, and therefore they brought in 80 young people from across the world and got them to come up with their list. And that the list made by the youth was quite similar to the one put together by the world’s best economist.
Economic theories and methods are usually based on observation of state economies and their course of journey that has taken place in the past. It is done in retrospect. It is theoratization of the past. And these theories are projected for the future with many assumptions which could change dynamically. ( paraphrasing a thought from A talk by Prof J Mohan Rao at Azim Premji University)
I am a person who always wants to quantify, measure and see tangible effects of any of the work I do. And economics is a tool that serves my purpose best. But using it as legitimiser of decisions, in my opinion is taking it a little too far from what the field is capable of.
* This is my opinion based on my engagement with the subject in my early days. My opinions may change with gathering of wider and deeper knowledge of this science. But one thing I am sure of is that I will not want to lose perspective of real problems and their contexts in my attempt to make them quantifiable.