Saturday, January 23, 2010

Debunking the myth called Economics


Recently I came across an interesting article in which the author takes heavily on all the proclaimed economists of the world. He laments their overdose of advise precisely after everything is over. Like one economist himself wrote "Everything in retrospect is obvious. But if everything were obvious, authors of financial debacles would have been millionaires." Such are the caprices of the field, that the best minds fail to realize whats coming. In the words of some of LSE economists "It was the failure of the collective Intelligence ...", to the question posed by the queen on why none of them(the best minds in the field) could predict the economic crisis which overtook the world.
Economics is a brilliant field. One which closely tracks our everyday living. But alas, it is made so complex with a myriad of numbers that the common man simply cannot seem to decipher the science. I have always been dumbstruck by the variety of figures that keeps coming every now and then. Whether Inflation or Interest rate, the CRR or reverse repo, Its all like a fancy theoretical figure. Sometimes, it is simply difficult to comprehend the underlying meaning. I am no economic major, but I like to know what all these figures talking about my day to day dealings are. I do try reading articles, but most of them make it seem so complicated.
Then I came across some very interesting literature - the types of freakonomics - where the authors Lewitt nd Dubner, who call themselves as rogue economist and who admit very honestly that they can tell you nothing about stock market movements or profit margins, but that they can tell you stories; they analyze numbers and give you some very interesting conclusions. And they make economics seem so relevant that you can relate to the field. The amusing anecdotes coupled with their witty style of writing gives you a rare pleasure. So when you read about crime rates and the relation it has with one lady who fought it out for abortion rights, or how the grading system makes the teachers corrupted, or how the whole system of Sumo wrestling makes it so vulnerable to bribing, you gain a whole new range of insights. In their more recent sequel, superfreakonomics they bring on the same style to even more interesting themes.
One which will surely bowl you out is how television and more importantly soap operas transformed the lives of Indian women,empowering them much better than any other goodwill initiatives ever taken in this direction. Yet another equally unbelievable story is about the greatest threat Industrialization brought about in New York city - horse shit. Oh yes, turns out the modern automobile was an innovative improvisation to address the grave concern caused by the enormous equine problem. :D
The killer of all the story is that of global warming. With all the gung-ho made out in the run to copenhagen, one can be forgiven to think of doomsday to dawn upon us very soon with our current carbon emissions. They give you some juicy figures and turn the whole argument upside down. Of course this is not to say that there is no cause for concern, but only that there's a whole lot to the story than the Inconvenient truth that Al gore wants us to know.
The authors go into some radical experimentation mode too and in the process, among other things, helps us understand the altruistic nature of human behavior. They show you a whole new world of behavioral economics and in the process bring out the fundamental trait of every homo sapien - they respond to incentives. Incentives govern human behavior. Now incentives could be very different. For some it could be money, for others social stigma. But in this rests the universal solution to every existing human problem. They get underneath every imaginable problems and explains it with a whole new dimension. Whether its with cold blooded murder, or raw prostitution, we are governed by the incentive system. Any policy decision of any body, government or otherwise is made keeping in mind the incentive system. Given the right incentives, human behavior can drastically change. They even extend their games to our closest resembling species - the monkeys, and find to their amazement, that much like us, even monkeys are governed by incentives and motivated primarily by food and sex. :D
Well, I thoroughly enjoy reading this sort of economics. One which is simple, lucid and understandable for a common man like me. Most importantly, one which we can relate to.
If only we had more economist to bring out such interesting stories rather than cry foul over some undecipherable data!!!

16 comments:

V Rakesh said...

Way too much has been said and misquoted and cooked up in the name of Economics! The spartan views of the likes of Adam Smith do not hold any consensus or for that matter value today!

Simply put, the government claims that inflationary pressure in India is at a low, but footsies on explain that the food inflation is quite another area! I'm wondering if that were not part of the inflationary index itself and why the need to treat it as another identity? But, for political purposes.........!

Good thoughts here Issam! Very relevant in today's context, especially!

Lakshmi said...

I always thought economics is difficult to understand ... I thought it deals with abstract concepts and makes it all the more complex. Also I never took the trouble to try and understand it :D

So the rogue economists have made it very easy and simple by relating it to real world situations huh. Nice. Good for people like me :)
I found the post informative man. Thanks!! Did some learning also.. Had to Google and find out whats LSE stands for, what is that Inconvinent truth etc etc :D Thanks for the post !

AJai said...

Have been wanting to lay my hands on the book ever since you told me abt it. So part 2 is good too is it?

And it's so true that Economics appears so difficult to comprehend because of the way it is presented. But, to be fair, there has always been so much happening around man-kind that to try and simplify things will always be one real problem. I love it when things are explained very simply. not just in economics, but also in maths, history, whatever. it helps ppl grasp things better.

jemin said...

@Rakesh
The WPI and FPI have been in direct conflict with each other. If they had lives of their own, one would have killed the other :p
And thanks to the economic crisis, we now have some sense brought in... Or at least lets think of it that way :)

@Lakshmi
Glad you found it interesting...
Economics ideally should explain our day to day living; not abstract concepts like how it typically happens. You must check out these books :)

@Aj
I have them both here. Will give it to you the next time we meet up...
Who doesn't like simplicity... I think its the need of the hour now, especially in our education system - to simplify things... :)

Lakshmi said...

Where is Issam ? I can see "Jemin" :P

Manju said...

i studied actuarial science, and we had a lot of economics in it, and it still bores me lolzzzz but waitttttttt!!... how has soap operas empowered women >_<
all i get from soap operas is that they are all so petty and vindicative and manipulative and love listening behind doors

Manju said...

p.s you HAVE to try banana bread if you can, it is amazing (but then i'm biased coz i love it ;) )

A New Beginning said...

Issam, I feel as if Iv just had a very interesting seminar! Hats off and happy Republic Day!

Praveen said...

when I started reading this article, 'freakonomics' came to my mind..and as I read on realised that this is exctly abt that. really an eye opener of a work.. I had the same feelings about economics before I read that. It revealed to us the immesnse possibilities of this wonderful field..If only, every economist had simple thoughts!!!

Issam said...

@Lakshmi
I didn't realize I was logged in with his ID. :)

Issam said...

@Manju
A survey conducted across 2700 household with women fifteen year and older proved this:
Turns out that women who watched more television(a.k.a the saas bahu varieties) were less likely to tolerate wife beating, less likely to have a male child preference, and more likely to exercise greater autonomy.
Perhaps the 'sthree' in them were awakened by jyothi(i guess thats the bahu's name) and her likes.
And hard data reveals even more emphatically with reduced birth rate and increased enrollment of the girl child.
And wait... there's more to the story... Spicier stuff, if I may call it that :)...I suggest you read it... Trust me you'll enjoy it...

Issam said...

@Manju
I would love to try your banana breads... Why don't you courier me some? :D

Issam said...

@Sana
I am honored... :)
Happy republic day :)

@Praveen
Thanks for dropping by.
And yes, lets pray for more economist of this breed... :)

Chandrika Shubham said...

Economics is not very interesting but our one of the teacher used to give the examples from day to day life to make it easier, simpler and enjoying.
Happy blogging! :)

Mohan Babu K said...

Issam,
You are spot on. There are two dimensions to the discussion of Economics: the analytics (number crunching) and the art and observations… the stuff that make books like Freakonomics blockbusters!

Issam said...

@chandrika
Teaching is indeed an art... We need more such teacher :)
And thanks for dropping by

@Mohan
The art and observation part is what makes Economics more realistic. Numbers will do no good to the common man... :)