Abstract
The paper looks into the issue of the relationship between economics and management studies in a management school. Instead of attempting any grand view, the paper seeks to look into three distinct questions viz.,: (a) usefulness of learning economics in a management school; (b) utility of case studies as a pedagogical devise in the study of economics; and (c) relationship between finance and economics as distinct disciplines. The broad inferences of the paper are the following. First, while learning economics would be of use to a student of management as a background, its usage and application need not be exaggerated in the sense that knowledge and running of a corporation are quite different from knowledge/running of the whole economy. Second, while traditionally economics is taught in a deductive manner, usage of case studies to teach economics could be worthwhile in a management school. Third, despite the close links/parentage, finance as discipline has been able to establish its adulthood from economics; however, the recent disjoint between finance and economics have turned costly for both to the disciplines.
I am indebted to Anup Kumar Sinha, Runa Sarkar and an anonymous referee for their detailed comments on an earlier draft of the paper. I am also grateful to K.R.S. Murthy and Sudip Chaudhuri for clarifying a few points. The usual disclaimer applies.
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Notes
- 1.
A distinction is made in this context between a “management school” and a “business school.” Intuitively, the curriculum for study of “business” is far narrower (or “focused” to a believer) as against study of management as a discipline. However, conceptually, business administration is a determinative function, while business management is an executive function.
- 2.
I have heard many a talk from a management expert on a contemporary economic issue that starts with a caveat, “I am not a macroeconomist.” A macroeconomist speaking on a contemporary business issue is also seen to have started with a caveat, “I am not a management expert.” Such caveats often smack of false modesty and a presumed sense of superiority of one discipline over the other.
- 3.
See Grünbaum (1976) for a critique on Popper’s theory on falsification.
- 4.
In this context, one is reminded of Fayol’s 14 principles comprising, division of work; authority and responsibility; discipline: unity of command; unity of direction; subordination of individual interest to general interest; remuneration; centralization; scalar chain; order; equity; stability of tenure; initiative; and team spirit.
- 5.
I am indebted to Professor K.R.S. Murthy for pointing this out to me.
- 6.
However, a random survey of a few textbooks on macroeconomics for management/business managers was not helpful in understanding the relationship between the disciplines of macroeconomics and management studies. For example, one of the best-selling textbooks titled, “Macroeconomics for managers” by Michael K. Evans (Oxford: Blackwell; 2004) in discussing the importance of macroeconomics for business managers finally emphasized finance and noted, “Even if the sales of your company are not directly affected by the twists and turns in the economy—and many dot.com companies belatedly realized that they were not isolated from the business cycle—the ability to construct an optimal capital structure is vital for every corporation. Managers must understand how much to borrow, when to borrow, and the appropriate debt/equity mix. A clear understanding of the macroeconomic factors that determine financial market prices is also essential for successful business management” (p. 3).
- 7.
An illustration of the various forms of wage—rigidity as embodied in the recent models in New Keynesian economics may illustrate this point; see Blinder (1994) for details.
- 8.
The same may not be true between a giant multinational corporation and a small economy in Asia, Latin America or Africa.
- 9.
The case method, The Handbook for Economics Lecturers, http://www.economicsnetwork.ac.uk/handbook/casestudies/11.
- 10.
Other methods of Inductive learning could include teaching methods such as inquiry learning, problem-based learning or project-based learning.
- 11.
‘About the Association’ http://www.afajof.org/details/page/3710241/About-the-Association.html.
- 12.
In connection with Markowitz’s PhD thesis, Keenan (1990) noted, “people were not quite sure what to make of him or his work since it bridged uncrossed disciplines. The mathematics professor said it certainly was not new math (though it was in terms of some quadratic programming algorithms), the economics professor said it was not economics and the sociologist said it certainly was not something that affected people’s behaviour. What it turned out to be, of course, was a powerful new view of the world that had significant impact on professional behaviour in all three disciplines.”
- 13.
The Nobel Laureates in economics related to finance were as follows: Franco Modigliani (for his “pioneering analyses of … financial markets” in 1985), Harry Markowitz–Merton Miller–William Sharpe (for their “pioneering work in the theory of financial economics” in 1990), Robert Merton–Myron Scholes (for “a new method to determine the value of derivatives” in 1997—Fischer Black would have joined them in the honour, if not for his death in 1995); and Eugene Fama–Lars Hansen and Robert Shiller (for their “empirical analysis of asset prices” in 2013).
- 14.
- 15.
Daniel Kahneman received the 2002 Nobel Prize for economics for “having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.”
- 16.
“Cognitive dissonance” refers to the state of mental tension that occurs whenever a person holds two cognitions that are psychologically inconsistent. Traders in most of the financial asset classes tended to exhibit this behaviour.
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Ray, P. (2017). Teaching Economics in a Management School: Some Personal Quandaries. In: Thakur, M., Babu, R. (eds) Management Education in India. Springer, Singapore. https://doi.org/10.1007/978-981-10-1696-7_7
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