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Poorly Taught Economics

Curriculum Development, Higher Education



Luis Miranda

A few weeks back I attended a talk by Prof Arvind Panagariya of Columbia  University, hosted by Gaja Capital. And I loved it. After a really long time I  heard someone in India talk about the role of markets in reducing poverty. Our  colleges are filled with socialist teachings on the subject and we seem to trap  our students in a time warp. So it was so refreshing to hear Prof Panagariya. He  talked about the need to grow the pie in order to redistribute wealth … if we  only have poverty then there is not much wealth to redistribute. He added that  the reduction of poverty is more important than the reduction of inequality.

A few days before that I had met a consultant who had recently majored in  Economics from one of the leading colleges in India. When she was still in  college she had attended a course taught by a think-tank that I am associated  with, Centre for Civil Society (CCS). CCS, was set up by Parth Shah 16 years  back to open the minds of young Indians … to teach them about public policy … to  give them an opportunity to connect classroom theory with practical work … to  highlight the importance of making decisions based on data. And this young lady  said that she enjoyed the iPolicy sessions of CCS because they discussed a very  different type of economics from what she was taught in college and the theory  was validated by experiential testing. I recalled my college days in  Mumbai.  I was taught that the father of economics was Adam Smith and that  John Maynard Keynes was God. That was it – no mention at all about economic  theory after Paul Samuelson.  I then went to the University of Chicago and  was exposed to a branch of economics that I had never heard about in Mumbai. I  was introduced to names like Milton Friedman and was taught by Nobel Prize  winners like George Stigler and Gene Fama. Thirty years later the situation is  the same in our colleges, with a small tweaking … maybe one part of one paper  over 4 years would talk about ‘fresh water’ economics. The developments in  Economics over the past 30 years seem to be irrelevant in India.

I recently participated in a discussion on philanthropy with Rohini Nilekani  and she talked about how we should use markets as a force of good in  philanthropy, especially since a lot of recent wealth was created by  entrepreneurs like Azim Premji and the team at Infosys, thanks to the role of  markets.

Unfortunately after 60 years of independence we are still brainwashing our  students that socialist policies will get our country out of poverty. So I asked  Prof Panagariya how can we get more Indians aware about the role of markets in  economic development and the reduction of poverty. He said that the problem lay  with the faculty in our colleges. Those who are market-inclined either don’t get  teaching positions because their ideology clashes with that of the rest of the  faculty or they decide to take up corporate jobs. As a result, we have the same  antiquated knowledge being taught over generations in our classrooms by  so-called development economists who fail to realise that the world has changed  around us. I have still to see the curriculum of a top college in India devote  sufficient attention to new concepts like the Chicago School of Economics, the  Public Choice School of Thought and Behavioural Economics. And this gets  compounded when the faculty invariably comes from former students of the same  college. This inbreeding has to stop so that students get exposed to new  concepts.

I am not arguing that one theory is better than the other – all I am saying  is that students need to be exposed to different schools of thought. And  students should be encouraged to debate these theories and get hands-on training  in economic policy. At Chicago Booth the faculty consists of people like Gene  Fama and Richard Thaler who are on opposite sides of the efficient markets  hypothesis. We need to see such intellectual tolerance in our campuses in India.  About a year back I spoke about the role of markets to a bunch of post-graduate  students at Manipal University. I felt like a slave in Roman times being fed to  the lions. We argued a lot and most of the students felt that I was a total  idiot to talk about crazy concepts like the importance of incentives and  competition. I ended by saying that I wasn’t there to brainwash them that  markets represented the Holy Grail, but to expose them to other ideas and let  them debate these ideas amongst themselves. Their professor, Sundar Sarukkai,  subsequently told me that there was fierce debate on my talk after I left.  Mission accomplished.

I remember attending a 2-day seminar in Delhi a couple of years back where  faculty of Delhi University, JNU and the University of Chicago got together to  discuss the future of the study of humanities. One particular session stood out  – a presentation by a professor from Delhi on research being currently done in  Indian universities. Nothing in her presentation was backed by data and we  instead discussed frivolous issues. It was a fascinating couple of days which  highlighted the lack of academic rigour amongst some of the leading faculty in  Delhi and the total disdain to look at what the data says. Which is why Bhagwati  and Panagariya’s recent book, ‘India’s Tryst With Destiny’, is great – they use  data to debunk common myths about India’s journey over the past two decades. For  example, after markets took over from the state in 1991 poverty has declined  even for scheduled castes and tribes, growth has gone up, jobs have been created  and health and education has improved … this is, of course, only if you want to  look at the data. Panagariya is also a supporter of education vouchers and cash  transfers.

I asked my former Chairman, Dr. Vijay Kelkar, why data is largely ignored in  public decision making and he paraphrased the sorry state of affairs with this  lovely quote of leaders in public policy – “Don’t confuse me with the facts.” Dr  Kelkar also reminded me of the famous quote of Prof Raj Krishna, of the Delhi  School of Economics – “India’s policy makers are knowledge proof.” So is the  media.

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