THE BUSINESS OF ECONOMICS : MASTER PRECIS

 

The Free exchange column on why economics does not understand business stated that ''economics likes to see itself as a foundational discipline, like physics, not a practical one, like engineering''. [April 8th, The Economist].

In their quest to be physics-like and evidence based, economists are prone to a form of selection bias by focusing on problems where data are relatively abundant.

In doing so, they tend not to study problems where data are necessarily scarce.

OFTEN when studying firms that are leaders in adopting technology or innovative business models we can only analyze small samples, or even a sample of one in the case of a pioneer.

Studying small samples means obtaining qualitative information and inferring logically causal processes about management decision-making, organisational governance, culture and politics within and across firms as they strive to innovate and remain competitive.

Such approaches are well developed in cognate disciplines such as management, sociology and politics, among others.

Adopting such approaches by working collaboratively with such disciplines can only strengthen the toolbox of economists and contribute to a better understanding of business.

Economics may still continue to be a foundational discipline, but it has the potential to become as practical as engineering.

The World Students Society thanks authors : Chander Velu - Professor of innovation and economics  Department of Engineering, Sriya Iyer, Professor of economics and social science Faculty of Economics University of Cambridge.