A lecture by Prof Yusuf Syed – Head of Fixed Income and Investor Relations- Axis Bank
It is very rare when a student is asked to reflect on himself and question the philosophy of the fundamentals of his education. The students of Meghnad Desai Academy of Economics were made to do exactly the same.
Mr. Syed stated that a century back economics was not purely based on mathematics, statistics and numerical data but had a deep philosophical angle to it. Centuries back economist’s proposed philosophical opinions and analysis which laid the foundations for economic principles and theories. The same applied to the natural sciences.
This phenomenon was very European centric but Indian civilisation just bypassed this economic revolution. It was easier to adopt a helicopter approach- taking all the knowledge and theories proposed by western academicians and universities and applying the same to the Indian context. It basically means that economists planted roots that were not adaptable to Indian soil but eventually the trees grew bearing fruits and flowers but the roots were still weak. Any economic disaster could shackle the foundations leading to erosion of all the applied economic principles and theories.
We as human being need to understand that we place faith in a few people such as our central bankers to frame monetary and economic policies for the country. As a central banker he/she may well be aware of an economic principle going awry and hence has no right to apply the same on the common man.
The above arguments talk about a similar approach adopted by the Austrian School of Economics. It talks about the basic principle of subjective theory of value which advances the idea that the value of a good is not determined by any inherent property of the good, nor by the amount of labor necessary to produce the good, but instead value is determined by the importance an acting individual places on a good for the achievement of his desired ends.
Human beings are rational and irrational at the same time. What is good for you may not be good for the other person?
This explains the concept of bargaining. The Austrian School of Economics considers human beings as a unit of measurement. This rebukes the concept of money as a unit of measurement.
We always differentiate between wealth and money in economics but in this regard we are also eliminating money as a unit if measurement and replacing it with human beings.
Then what really is money and wealth?
Money is something a person has earned and that is his claim on society. That earning could be equated in terms of a rock, paper, and gold, silver. In a macro setting a central bank exists and here it is imperative to mention that money is not produced but diluted by the central bank.
Wealth refers to value being created when he/she offers a service of performs a trade.
Most free market economists are philanthropists and work on the thought process that “It is better I spend on money on something of value or don’t spend it at all”.
This philosophy gives man great ability to understand unforeseen circumstances. Just imagine the power of your mind and in your hands to change things for the better.
This discussion has been thought provoking, not dismissing the current fundamentals but to step back and question your very own existence in this system.
Date(s) - 28/09/2016