Contributed by Samantha Peters
(A Professor of Economics in Sydney, Australia)
Economics as a subject, and economist as professionals, came into prominence in modern times after the Global Financial Crisis of 2008. This was almost a century after Economics came to notice during the First depression.
One of them, a Professor Nouriel Roubini, had predicted the Financial Crisis of 2008 as far back as 2005. However, from the time it was published till the time the crash actually happened, he was called “Dr. Doom”. The quote from Laurence J. Peter, author of the famous Peter Principle which states,” An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” was fished out of the bag.
Even after the crash did occur, people did not seem to give him due credit for having analyzed the situation properly.
So, why are we encouraging you to examine a subject like economics which not only doesn’t seem to get due credit for its study, but is also seemingly less paid than regular Commerce subjects like Accounting and Finance?
We are doing so because economics is the foundation to the understanding of accounting practices and finance, but is not as exact in its application.
The basis of Economics is the study of psychology or rather the narrow version of understanding why people spend what they do, how much will they spend versus how much they will save and how can governments control this behaviour to meet their agenda.
Such kind of knowledge of application is increasingly getting currency in its importance for adjusting an organization’s strategies in the market in order to improve its financial performance.
While some amount of mathematics does enter the subject, particularly in specialized branches like econometrics, it is entirely possible to progress in economics without being burdened by most of the complexities maths involves.
In practical life, the understanding that an economist acquires is often suppressed due to the professional considerations of the organization she works for. Nevertheless, since the knowledge is available to her employers, she does perform a critical task in whatever organization she works in.