Teaching ED and Economics together!!

Teaching ED and Macro this term is a heady combination...While macro forms the basis for my thought process, ED is that inspiration element...Jobs always exist..they need to be identified. Similarly economic thought exists, it needs to be appreciated. What I am experiencing this term is more difficult than before. I find myself struggling to break myths that young minds have accumulated. I find their rigidities more scary than their lack of understanding. I know that learning will happen only when you also unlearn faster..it can also only happen when you decide that there could be a contrarian view.

Learning economics is like learning poetry...what appears sad and mundane to you, may appear vibrant and opportunity to another. This is also the basis for entrepreneurial thinking. Over the years, studying economics has helped change the way I think about everything and entrepreneurship happened from the need to give back to society what I gained.

I hope this term helps me get these young minds into at least questioning the obvious and if they need to accept the regular, can they justify it to themselves all the time? In ED it is more difficult to break notions and more important so that it helps them look at the same things differently.. Macroeconomics is as much fun as challenge...and the classes are more like war zones these days..I need to make peace soon..

Decoupling China - what are the odds?

To take Piyush forward on the decoupling debate, the developed world seems to be awe-inspiringly looking forward to some miracle in China and at the same time debating whether it wants to let the reins of control go to the Oriental East. Piyush argues in his post that the emerging markets are more coupled today than ever before. The question - What will it take China to change the geo-political balance? Is the great dollar reserve that went all the length of the Great Wall finally shrinking up? If there indeed was an opportunity for China, what would it do for the Indo-China bilateral relations?

To answer some of these, let me put forth the following propositions (can be contested) - China is a large exporter to the US, but does not have influence over the rest of the world. China's manufactures are not strategic...they may be filling up Walmart's but still remain in control only of low value add products. China has been suggesting a shake up of its over $2 trillion reserves..but is worried about the impact this would have on its export competitiveness.

What is in this changing environment for Indo-China relations? Coming to the bigger concerns of India's role in ASEAN, UN and other bodies, China's relative rise to the top will dwarf the already weak claims of India. What do we need to do to prove that we are part of the decoupling brigade?

Another way to look at the China option is to evaluate the political response. Is China really going to be the next big economic change post recession? What does China have to do to gain its place in the world.

(The post I have referred to above is by Piyush on the decoupling debate. You can read it at http://discuss-international-finance.blogspot.com/)

Does the market always work?

The more I teach economics and read it, the more I am convinced that market works. There is nothing like pricing a good. Today's class showed me that too. My students seem to be concerned about saying the wrong things rather than saying what they think and letting themselves be judged. The moment you associate a grade with a comment, they are scared of saying anything. That is why I think the market works....because the more you value good participation, the more the involvement and greater the learning. So people are rational and they respond to economic incentives. That makes it easy for us to design rewards and punishments for every act.

The market also works in distributing information evenly. The discerning student who sought information sounded much more logical and constructive. What I mean when I say 'evenly' is that it seeks its best price and removes the possibility of irrelevant information flowing in. So in essence market means the agent's ability to command a price and thereby direct the quality and flow of the decision. Doesn't the market make it difficult for the non-payer to participate in decision making? The non-payer is not a stakeholder in the economic activity. He need not pay monetarily, but his involvement in the non-monetary acts determines his stake and thereby level of involvement.

Therefore, to conclude, I have observed that market principles work best when left to themselves. At the cost of sounding so Adam Smith-like, I would mention that even a student beginning his journey into economics knows how to make trade offs and can see opportunity costs of decisions and is articulate about making the optimal choice. Isn't that sufficient testimony that markets work everywhere?