Sunday, October 19, 2008

Financial crisis - Economics at its best!

The world has seen this meltdown happening in front of its eyes. Scores of print and prime time have been consumed, talking about the drama unfolding in Wall Street and Dalal Street. Experts, analyts, commentators, market observers, investors, brokers and numerous other participants in the financial markets have seen their personal portfolios nosedive. Hence, I am not going to write about all that, as it is public knowledge.

But what I definitely feel is that, this market meltdown is a fantastic lesson in the subject of economics. All that I ever studied about markets being imperfect, of artificial prices, of inflation impacting various things, of price elasticity, of stock market movements, of demand and supply et al have seen visual expression for the first time in my life. I always loved economics as a subject - I remember, I turned in the longest answer paper in that subject (10 pages!), back in b-school. And I never ever felt that it was a subject. Every time I studied economics, I felt as if I was reading up on things that happen in day-to-day life (minus the financial crisis, of course).

This meltdown has made me recall all those lessons that I had studied in college. I always used to wonder how a market movement can actually paralyse an economy. In hindsight, I think I was left wondering a bit about the theories (no offence to economists, I admire them!) - in terms of how those big graphs and charts actually panned out in real life. I understood the principle behind the theories very well, but hardly had an idea about the real impact of those intriguing theories. Make no mistake about it - I am talking about folks like Samuelson, Keynes, and the other in economics who I truly admire and respect, and who had penned down some legendary thoughts on economics all those centuries back. The fact that what they wrote all those eons ago hold true, actually seen various cycles - 1929 Depression, 1991 crisis, 2001 recession and many others come to my mind - are testament to the longevity and universal application of this fantastic subject.

I am glad that I studied Economics. It was one of my favourite subjects and I strongly recommend it for students of all streams of academics. I also liked Accounting and Income Tax. But, I found Economics sublime. Almost, a dream subject. I am tempted to do an M.A. in it now and reinforce what I am learning in real life, as it were. I just wish, I had the time!!:(


Aditi said...

The current market conditions are truely going to give rise to new economic theories. And there will be lots of leasons learnt.

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