Thursday, March 08, 2007

Another Undergraduate Economist Shows The Older Generation the Way Ahead

Alex M Thomas posts on a Blog called Undergraduate Economist (‘perspectives of an economics student) and gives us a sight for sore eyes: a proper appreciation of what us required if economists are to make real contributions to understanding how wealth (the annual output of society – the ‘necessaries, conveniences and amusements of life’) is created. Poverty is the absence of wealth and the discipline should be about how to the create wealth (it will not be abolished any other way).

I have taken the absolute liberty of reproducing Alex Thomas’s post in full (apologies to his Blog) because I consider it an excellent survey of what social science has to offer those who look for it. It will also help put Adam Smith’s Works into perspective.

“The Fellowship of Economics (8 March):

The essence of Economics or Political Economy as it was called earlier (According to Adam Smith) was to provide a good livelihood for the people and also to bring in money for the state. Nowadays, economics has got lot many divisions and specialities, that I feel the essence is getting compromised.

These are some of the subjects which are closely related with economics.
Anthropology is the science that deals with the origins, physical and cultural development, biological characteristics, and social customs and beliefs of humankind.
Economic anthropology analyses decisions and behaviour of economic agents who are embedded in the networks of social relationships and cultural influences. Economic Anthropology is directly concerned with the most central anthropological issues of human nature, choice, values, and morality. [Thomas 2006]

Geography is defined as the science dealing with the areal differentiation of the earth’s surface, as shown in the character, arrangement, and interrelations over the world of such elements as climate, elevation, soil, vegetation, population, land use, industries, or states, and of the unit areas formed by the complex of these individual elements. []

Geography forms an integral part of Environmental Economics, which studies the externalities, both positive and negative, arising out of human activities.
Moreover, natural endowments have a significant correlation to the natural progress of an economy. Studies have shown that nations with abundant natural resources have grown faster.

Geographical factors can lead to poverty also. Jeffrey Sachs, in his book “The End of Poverty” has given an account of this.

Demography, the study of Population draws extensively from the science of geography.
History is the branch of knowledge dealing with past occurrences. Tirthankar Roy, an Economic historian says that Economists engage with history from a desire to make the theory of economic growth more complete and intelligible. Without comprehending the history of Britain during the 1700’s one could never understand what Adam Smith tried to say. Students find Classical theories to be otiose, due to their lack of understanding of history.

Political science or politics seem to have attracted a lot of ire, but with out a proper political institution, there will be no freedom. It is a branch of social science dealing with political institutions and with the principles and conduct of government. It is therefore essential that economic policies can be framed keeping the objectives of the political institution prevailing. “The disjuncture between economics and politics in India’s democratic system has also been growing” says Bimal Jalan in his book ‘The Future of India’.

Psychology is the science that deals with mental processes and behaviour. Theories like consumer preferences, irrational exuberance and specializations like behavioural economics and game theory draws heavily from psychology. Behavioural Economics is the combination of psychology and economics that investigates what happens in markets in which some of the agents display human limitations and complications. [Mullainathan and Thaler]

Sociology is the study of human social behaviour, especially the study of the origins, organization, institutions, and development of human society. Economic sociology has emerged as a separate branch in Economics; Robert Gibbons of MIT defines it as the sociology of economic actors and institutions.

Philosophy is the rational investigation of the truths and principles of being, knowledge, or conduct. J D Sethi, who specializes in Gandhian Economics, said that “Science of Economics is in crisis. Indeed, the main reason for the crisis is that modern economics has no philosophy whatsoever”. To understand an Economist’s theories, we ought to know the prevailing philosophy at that time. Moreover, debates were carried out to decide whether Economics was a normative science (based on values) or a positive science (based on empiric).

Thus, it becomes pertinent that the teaching of economics also touches subjects like history, psychology etc so that the student gets a more realistic picture of the event. These days, economics has become a strict discipline with various specializations and one who ventures into one specialization is unaware of the effects of variables which is outside his or her area of interest. I do not know if ‘division of labour’ is applicable in such cases as it tends to distort the real picture. Thus the need arises for a more comprehensive learning of the social sciences.”

What’s with these undergraduate students that they are so switched on? I am in awe that they understand something the usual university teacher of economics from the neoclassical paradigm apparently does not. If they represent the future of the discipline it is in better hands than I thought.

What Alex M Thomas is saying is that economists ought to start from where Adam Smith left off and progress from there in an inter-disciplinary collaboration to address the problems of today. A good place to start is with Smith’s outline of the creation of real wealth (growth in modern parlance).

[Read the post and follow the comments from his fellow students – the tone of some of them suggest there is much work still to do!) at:]


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