Role and Relevance of Economics in MBA by Prof V.J Sebastian


 

mba in economics_imtghaziabad_admito

Introduction

This article aims to examine the role and relevance of economics as a subject of study in management education. It also examines the career choices in Economics vis-a-vis MBA. Hopefully, it would help both MBA aspirants as well as the current students to appreciate better, this important subject.

 

Economics or MBA?

There are no two opinions about which should be preferred for a corporate career – an MBA is a ticket for entry into the corporate world. An Economics post-graduation (MA/MSc.) has entirely different orientation from a PGDM/MBA. Consequently, the career goals are also different – graduates would go into research and analysis based jobs, policy making, etc. as economist / economic advisors with large corporations, banks and other financial institutions, governments and international organizations such as IMF/World bank, etc. In between pure economics and MBA are the hybrid programmes such as Master of Business Economics (MBE), offered by Delhi University and other, which is as good as any typical MBA, with an extra focus on quantitative economics/econometrics. Given the above understanding of the prospects of both the type of programs, it is hoped an informed choice may be made by the aspirants.

 

Economics in MBA – the Challenge

Most of the Indian business schools teach 2 -3 papers of economics as compulsory subjects at the post-graduate level (PGDM/MBA). Frequently, these are Managerial Economics (Microeconomics), Macroeconomics and Business Environment/Indian Economy. There are also other papers such as International Business/Trade, which are also taught as compulsory subjects. The first three papers mentioned above covers the basics of the subject that are required for an MBA; other specialized topics can always be picked up even through self-study if the above subjects are properly grasped. Book by Paul Samuelson Economics can be a good basic reading for anybody interested in the subject. It is also worth mentioning here that Economics also goes as an input into other subjects such as strategy. The starting point of strategy formulation would be a scanning of the business environment, which is dominated by the economic environment.

Based on my interaction with management students for more than a decade now, I can say that the potential of economics has not been fully been exploited nor explored. Two important reasons may be cited for this. First, it is true that the abstract reasoning and concepts, which are frequently employed in the discipline may be at variance with the methods of subjects such as, say sales/marketing etc., and pose a hurdle for many students in appreciating the subject. To continue the comparison, the tactics and strategies of achieving your targets in the field may be studied in sales/marketing etc. and frequently, these are directly applicable to their jobs. Whereas, it would be rare for many management graduates at the entry level to apply the concepts and theories of economics in his or her job. This perceived dichotomy between the classroom learning and the applicability in the field is the second reason.

 

Training Vs. Education

Essentially the difference between the role of economics and other subjects such as finance/Marketing/HR in an MBA programme is that of the difference between training and education. Though the difference is clear and distinct, it is doubtful whether this distinction is clearly understood by the students and even some of the educators themselves. A casual google search throws light on the distinctions. “Training is about practice, about skill, about learning how to do things. Education is about fostering the mind, by encouraging it to think independently and introducing it to the knowledge of the physical and cultural world”[1]1. Another source says that education “is aimed to deliver knowledge about facts, events, values, beliefs, general concepts, principles, etc. to the students. This helps in developing a sense of reasoning, understanding, judgment and intellect in an individual”2.

Often an interesting analogy is used to drive home the distinction between training and education – if my teenage daughter informed that she is going to take a course on sex education in school, I should be happy; but if she said she is participating is sex training programme at school, it is reason to be alarmed! To summarize, training imparts certain skills that help you perform a task and helps you do a job or maybe get employed. Whereas education helps in your overall development – strengthening personality, logic and reasoning, intellectual capability, widen awareness and perspective, leading to a holistic approach to issues. So both subjects that impart skills to make you employable, and subjects that are educative are equally important in an MBA curriculum. And economics clearly fall into the latter category in an MBA programme. Economics may not fetch you a placement, but it may help make you a CEO!

It would be interesting to note in the above context that in India IITs do teach the engineering graduates essentials of humanities and social sciences such as Philosophy, Sociology, Psychology, Economics, during the first/second year. These are well appreciated by the graduates, makes them well-rounded persons; some of whom even take up these or related subjects for their post-graduation.

 

Conclusion

Taking a wider view of things, economic literacy is highly desirable for every citizen, be he or she a commoner, business persons or corporate managers. Going by the present trend where more than 80% of the intake in a good B-School is engineering graduates, who do not understand the even the basic concepts or logic of economics, it’s all the more important accord seriousness of teaching and learning of the subject in our B-Schools. This would help produce management graduates who can on their own analyze and understand the implication and significance of policy actions by the government on their business and on their own personal lives. That way we would be redeeming our social commitment by creating a well-informed and intelligent citizen, who can take better and more informed decisions, whether in their chosen field of work or as a citizen of this country.

 

Prof VJ Sebastian

Prof V.J. Sebastian is an Associate Professor in the area Economic Environment and Policy, IMT Ghaziabad. He has done his Ph.D. in Economics from Indian Institute of Technology, Bombay and has co-authored a book on Managerial Economics.

  1. https://philosophynow.org/issues/47/Education_versus_Training
  2. http://keydifferences.com/difference-between-training-and-education.html
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