Niti Aayog’s (even India’s) real problem: Many macroeconomists, no microecons

The author picks up an important issue but like previous other pieces barely digs enough.

He says Niti Aayog is looking for economists but there is deficit:

Niti Aayog, the government think-tank which replaced the outdated Planning Commission, has a unique problem: it is short of economists in a country where you can’t chuck a brick in Delhi without hitting an economics establishment or two. Every brokerage worth its P/E multiple has an economist or two lurking in the woodwork. Universities have entire streams of students doing economics – though, one must add, often without the foggiest knowledge of the real world of political economics.

According to a BusinessLine story today (5 May), Niti Aayog, which is headed by ace economist Arvind Panagariya, is “compelled” to seek “home-grown” economists from the Indian Economic Service (IES) cadre. An anonymous source quoted for the story has this to say-

It (NITI Aayog) is facing difficulties in getting good, professional economists, who are aware of the country’s socio-economic structure and can help in grassroots issues. Getting back IES officers, who are already familiar with such development and planning work for the government, is being seen as a good option…

He then points to celebrated economists from India and asks why we fail to produce good econs? He says the reason is not having enough people knowing micro. e author picks wrong examples which themselves moved into macroeconomics and thus become famous. It wasn’t the case that they became famous for being micro-economists. He actually makes the case for choosing macroeconomics over microeconomics by pointing to wrong Indian examples.

The answer: we has too many of the wrong sort (macroeconomists) and too few doing “unsexy” work in microeconomics. Put in oversimplified terms, macroeconomics is about figuring out how the overall economy will behave (GDP growth, inflation, etc), while microeconomics is about how individual firms and buyers will respond to specific signals of price, demand or other stimuli.

Macroeconomics is about figuring out broad directions, while microeconomics is about figuring out specifics. Macroeconomics has been the sexiest field of economics since Keynesian times, when microeconomists failed to provide answers to the problem of digging economies out of the ditch when individual and firm-level decisions to consume or save were making the problem of economic depression worse.

So, as any microeconomist could have told you, entire generations of economists took the high road to the sexy, post-depression economics of macro instead of the less fashionable one of micro. TCA Srinivasaraghavan anticipated this problemmonths before Modi got elected. He noted that the answers the new Prime Minister will seek can only come from microeconomists, but he won’t have enough of them.

This is an outcome of a problem and not problem per se. The real issue is slipping of economics education in India.

Most of India’s top economists are barely associated with any Indian university other than giving guest or convocation lectures.  There was a time when the big names of Indian economics policy world thronged Indian universities. Now there is hardly anybody. So, there was a great possibility to find people who understood Indian micro issues.  As these people taught in Indian places, there was a virtuous cycle of sorts.

Now this probability of finding someone in Indian univs has slipped to almost zero levels. When was the last time any position of importance on economic matters was selected from an Indian university/institute?  It is far easier for governments to pick popular Indian names in US universities and that is what they have been doing. These people are picked who remain within the bureaucracy and keep moving from one policy position to the other.

Now as the author says, macroeconomics is pretty standard stuff and applies across countries in almost similar ways. So,wherever you come from it does not broadly matter. You could use the same ideas and talk about C+I+G and get away with lack of know-how of country specific matters. Infact, the way modern macro is preached knowledge of country specific matters could be a disadvantage as it is highly theorised and mathematical in nature.

In micro, knowledge of all these local elements are important and here nothing much is happening. This can only happen if we have more people getting familiar with Indian issues and then encouraging their students to address those matters.

Another problem is complete take over of economics curriculum by the western universities. All that is taught here is just picked from there and narrated here. Things like Indian economy are taught mainly at development or macro level as the author also says. India is far more complex and unless we bring the broad Indian society nuances within the micro theory. But all these are broadly missing from most books and teaching.

We are either taught how to lift poverty or lower inflation. The micro issues of firms, consumers etc are just paid lip service..


2 Responses to “Niti Aayog’s (even India’s) real problem: Many macroeconomists, no microecons”

  1. mudit Says:

    Quite agree with the views here but for micro-economist to do any work in India, he needs access to data of various granularities from village level right up to the city then to state and which can then be aggregated to country specific. E.g inflation some of the items are hamam soap, in city how many people really use it. To be honest many times i have tried to explore such issues but no solution in sight. Would you be up for collaboration on this.

  2. Amol Agrawal Says:

    Hi Mudit,

    It is a question of chicken and egg. What comes first, data or people willing to build the data. 🙂

    Having said this, I think till we don’t have dedicated people willing to put their heads down and build data we are not going anywhere. Actually you might be surprised to find a lot of data buried in various govt departments and other places. It is just that we are not doing enough to build all these databases together.

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