‘How has the National Education Policy 2019 impacted the lives and discipline of economists?’

The nature of evolution of Economics as a discipline of study

 

Economics as a discipline was initially debated over whether it ought to be studied as an art or as a science. Further deliberations over the discipline questioned the scope of its application- whether it ought to be aimed towards increasing material welfare of society alone or augmenting a deeper human instinct of rightful rationalization in everyday decision-making. Contemporary economists believe that Economics has a wider scope of application, in enlarging people's capabilities, meeting equality in the distribution of resources, balancing growth between profitable and essential sectors and creating a path for nations to develop while also catering to the needs of the future generations and their environments. Is this in contrast to what the classical thinkers of the discipline described as the subject? Adam Smith, the father of capitalism and Economics stated that 'Economics is an inquiry into the nature and causes of wealth of nations'. Alfred Marshall, a succeeding classical defined Economics as 'The study of man in his attainment and use of the material requisites of well-being'. Lionel Robbins, a third successor in the classical domain articulated that 'Economics is the science that studies human behaviour as a relationship between ends and scarce means which have alternative uses'. Whether these definitions were sufficient to describe the entirety of the subject was arduous to decipher given that society and the environment represented a need quite in contrast to a mere acquisition of wealth and material well-being. The shift in the nature of economies from being demand and growth-driven ones to more inclusive and sustainable models brought in the necessity to question the very basic definitions of Economics. Thinkers and philosophers who went beyond the realm of the classists, elucidated that Economics involved the study of human behaviour, emotions, the basic needs of a nation in terms of education, healthcare and infrastructure, enabling a country to meet its basic demand of food security while catering to the agricultural sector and balancing the target of growth with environmental conditions.[1]

 

 

Was there a specific need to develop these contemporary definitions? Perhaps the answer lies in how the subject of Economics evolved itself through time, historical events and thought-processes. What role has education in specific played in helping evolve the subject? The answer to that too lies in the way education is seen more as an empowerer than as a mere disseminator of information through history and the development of the intellectual mind.

 

The focus of Economics on Macroeconomics and a transition to financial equity

 

The idea of 'equilibrium' in Economics is a compelling one and the idea of achieving the same in everyday decision and government policy-making is even more compelling. 'Equilibrium' is the equation of opposing forces. The phenomenon being common to mainstream Physics has also seen wide theoretical usage in Economics. Conditions of demand (a want, need or desire) and those of supply (a provision to meet the want) are seen as opposing and the point where the two conditions meet is what is often termed as the fundamental nature of equilibrium. For these opposing forces to meet is a matter of time, policy-making and what is often called the nature of business fluctuations. However, the point at which they meet is said to bring in long-run stability and equalisation of forces in an economy, often without the need for government intervention. Early Macroeconomics (based on the study of the economy as a singular, all-encompassing unit), was driven by the theorization of Economics being a discipline based on the attainment of permanent equilibrium. The assumption of a laissez-faire economy (one devoid of government interference), the supposition of self-correcting market forces prevailing (one that automatically adjusts demand and supply to pull an economy out of a recession or depression without the need for external support) and that of full-employment ( a condition stating the complete employment of all resources willing and able to work at the prevailing wage rate) all resorted to the singular idea of perfect equilibrium. Latter economists even rejected the view of equilibrium between demand and supply and advocated the importance of demand-driven policies in achieving growth. However, this relentless pursuit of 'equilibrium' and subsequently 'demand' as  pivotal points led to the exclusion and a subsequent revolutionary upheaval of the questions of human rationality and supply-driven dynamics.[2] The issues and solutions to real unemployment (workforce being unemployed involuntarily), enhancing the effectiveness of a non- laissez-faire economy (which is the reality in many economies) and sustaining not just the demand, but more importantly the supply and availability of resources were brought to the fore-front.

 

Earlier objectives of the discipline from the definitions of Economics seen above, seemed to aim at a wealth-augmenting approach. From a Macroeconomic perspective, that was seen as increasing GDP rates (Gross Domestic Product Rates) and from a Microeconomic perspective, that was seen as increasing consumer spending-power. It came as a surprise however, that the development of Public Finance within the sphere of Economics in the late 1700s through the classical understanding emphasized on the view-points of fiscal and distributional equity among members in society.[3] The need to bridge income and consumption gaps between the rich and the poor even led to the creation of today's modern tax structures primarily based on progressivity. The idea behind the classical view-point of equalising prevalent inequalities was to instil the principle of equi-marginal sacrifice, i.e., an equality in the sacrifice of the additional utility of income  (in the form of tax) by every member of society, so as to leave every member in society equally better-off or worse-off. Better-off as a result of the distribution of tax benefits and worse-off as a result of the economic sacrifice involved in paying taxes.

 

An obvious question that arises is whether education can help achieve the same distributional equity? The answer to the former lies in the nature of education provision as a public good (non-rivalrous and non-excludable in nature) which ought to be provided in a manner that bridges skills, competencies and capabilities. In the context of real-world data, educational structures and policies of Finland, Latvia and Poland are ranked as the most equal in terms of participation with enrolment rates of almost a 99%.[4]

 

 

Bridging the gap between human rationality and emotions: The emergence of Behavioural paradigms in assessing Economic needs

 

It is not by surprise that many of the leading economists carried out assessments of the discipline through a bifocal lens- one on the focus of traits of self-interest, utility maximisation (based on rationality) and the other on the focus of general welfare (based on improved emotions).[5]

This doesn't come by surprise due to the fact that human psychology was brought into the analysis of the economy at an early stage. This far-sightedness however lost its ground in the mid-20^th century when a phenomenon bridging the gap between changes in policy stances and people's expectations of economic outcomes came into being- commonly known as the rational expectations theory.[6] The rational expectations theory stated that people based their economic decisions on three primary outcomes- their human rationality, the information available to them and their past experiences based on the performance of a policy variable. Nowhere here was there a mention of the role of human emotions in decision-making which made the theory parched. They theory set out to work on the standard assumption that people are driven by means to maximize their utility (on the part of consumption) and maximize their profit (on the part of production). The theory was extensively used in the creation of several sub-theories from the 'Efficient Market Hypothesis', to the 'Permanent Income Theory' and 'The Life-cycle theory of Consumption'. The former is based on the understanding of market prices fully and rationally reflecting all available market information and the latter two are based on consumption driven only by permanent income and consumption cycles consisting of dissaving first followed by a period of high savings only. The problem with most of these theories was that most human behaviour was predicted only on the basis of a given, known, quantifiable variable without a divergence into the applicability of the unknown, yet impactful phenomenon of human cognition and discernment.

 

The near-sightedness in the evolution of the discipline ended in the 1980s when economists felt that the rational expectations revolution had gone too far and had become inapplicable in real-life economic scenarios. The disparity seen between theory statements and the reality fostered more empirical thinking in the field. This empirical thinking questioned economic scenarios which rationality alone could not solve. The problem of stagflation, one of the most paradoxical issues in the theme of the subject which characterized the existence of stagnation along with inflation could not be answered by the conventional rationalist.         The 'anomalies' that existed in the difference between people's expected behaviour and actual behaviour with respect to consumption and savings could not be answered by rational economics either. A basic anomaly on people's spending patterns which stated that the amount people were willing to pay to obtain an object of economic value was lesser than the amount people were willing to accept in order to give up the object found no link to rationality. This gave rise to Richard Thaler, Daniel Kahneman and Amos Tversky who developed the discipline called 'Behavioural Economics'. Ideas of what make people more loss-averse than gain-seeking in their decision making, what makes a person overvalue possessions (such that the amount he is willing to pay to acquire an asset is less than the amount he is willing to accept to do away with it), what 'nudges' certain behaviour in line with the results policy-making seeks and what makes people value money in more relative terms than absolute terms led to a more disciplined study of human behaviour and emotions.[7]

 

If the study of human emotions rung a major bell in the process of economic decisions, can this study of human cognition be extended to the sphere of education and academia? Can theories of the 'Nudge', 'Mental Accounting', 'Human prospects' and 'Endowments' all explained above be extended to explain what propels a person to pay a higher amount for education or what makes a person less or more loss-averse when investing in education, or what makes a person value education more or less than his other intellectual possessions? This is a matter of time and in-depth research to be carried out to create extensions of the behavioural aspect of the discipline.

 

The impact of education on the Economic paradigm- Role of India's National Education Policy, 2019

 

The view of education as a public good within the economic sphere

 

In Economics, education is viewed as a public good, not to be excluded on the basis of ability to pay and not to be rivalrous with other goods and services that would give it a competitive price. This is a shift away from the traditional economic thought of pricing through 'market equilibrating forces' of demand being equal to supply. In the sphere of education, the main motive of policy-makers has been to try best to maintain and increase supply at administered prices (at least in the sphere of public education). Whether that relatively subsidized flow of education has retained quality is another debate, yet it has been seen as an equalising factor across income levels, genders, religions and nationalities.

 

In India, this need for equalisation is even more imperative in the eye of high economic inequalities and the need for upliftment beyond just economic needs. The conceptualisation of India's National Education Policy 2019 seems to be an integration of Western ideas of education with the pre-existing Indian one. The idea of a liberal education to bring in flexibility along with 'increased critical thinking abilities, higher order thinking and deeper learning, mastery of content, problem solving, team work and communication skills' is a step away from the dogmatic focus on the convention- being the route to hardcore science and mathematics.

 

Can these shifts along with the core of the NEP impact the functioning and the thought-processes of economists and the way we view our economy?

 

The Education Policy and the creation of employability

 

The answer to the above question lies in the primary elements of the NEP. To begin with, the section on ' Focus on high quality research' addresses the gap of a research foundation and a technique of inculcation of research in education in India. With the setting up of the 'National Research Foundation' along with integration of research into the Masters degrees, the impact on the economy would be multi-fold with prospects of improved post-graduation employability along with increasing employment opportunities in Universities themselves in search of research guides and facilitators. Quality considerations could increase competitiveness and benchmarks in the hiring of professors, guides and research staff with an increase in the insistence of Doctoral holdings for hired faculty.

 

The Education Policy and its impact on the socio-economic condition of children, the demographic dividend and fertility rates

 

The second primary and oft-welcomed proposition of 'Early Childhood Care and Education', aiming to upgrade the access, safety and quality of care and education to children in the age range of 3-6 years by 2025 also creates far-reaching social and economic implications. With an early social empowerment, a reduction would be seen in the quantity of child labour. A shift would also be seen in domestic spending patterns with a higher investment in possessions and property that would facilitate adolescent learning and a lower investment in items of self-consumption. Studies have also shown a high co-relation between education and improved health with the former impacting the latter to a great extent. ECCE would bring in a proposed improvement in health and nutrition levels, lowering malnutrition rates and building physical and mental immunities. The ECCE is also regarded in the NEP as 'perhaps the greatest and most powerful equaliser' in terms of brain development, school-preparedness, improved learning outcomes and overall economic growth.

 

In terms of the content of education provided, the NEP methodologically focuses on the structure of curriculum and pedagogy. With the aim of creating a curriculum foundation comprising a 'flexible, multilevel, play-based, activity-based, and discovery-based learning', the diversity of thought in school children would be encouraged. With the introduction of 'experiential learning' and 'exploratory learning', pragmatism in thinking and a connection to real-world scenarios would be developed. Focus on curricular reform through an integration of ethical reasoning with logical reasoning and socio-emotional learning with computational thinking would tap on the 'rational' as well as on the 'emotional' aspects (mentioned above) of  youth development bringing in a balance in cognitive and intellectual capacity. Such a pedagogical shift could have positive effects on students' productive capacity adding value and quality to a potential future-work force. The idea of a 'demographic dividend', i.e. the growth of an economy based on improved skill-sets of a young work force could see its highest potential as a result. Overall an improved workforce, with a focus on gender inclusivity could also potentially lead to a decline in fertility and mortality rates also helping India balance its population growth.

 

The impact of the education policy of the structure of employment and socio-economic inclusion

 

Major emphasis for improved economic prospects for any community or social setting requires a strong foundation in higher education. Reforms within this sphere through the expansion of the reach of higher education (enrolment of 5000 and more students) to begin with along with a multi-disciplinary approach (in the form of transforming single stream institutes into multi-disciplinary institutes) would increase the degree of cross-integration across disciplines. The revival of the liberal arts in higher education along with faculty and institutional autonomy would bring in educational openness as well as a grounding in stronger financial responsibility and freedom in curricular innovation. Appointments of faculty and institutional leaders based on merit would create transformations in the form of employment to institutes; the shift from contractual employment to competitive employment could enhance the quality of institutional faculty. An overall emphasis on research in higher educational institutes too would increase the value of collegiate skill generation and employment.

 

Lastly, the localisation of education along with a focus on grass-root level needs would enhance socio-economic empowerment through the lens of social inclusion. Examples of the Anganwadi system of education along with the Integrated Child Development Services has improved provision of healthcare for mothers and infants. Such reforms could have fa-reaching implications in increasing India's Human Development Index. Such socio-economic educational integration rings a bell with norms of socialism within the structure of India's mixed economic system. Where capitalism fails to address the most pivotal economic issues, an inclusive, integrated and liberal educational structure would.

 

Conclusion

 

As quoted directly from the NEP- 'Quality education is strongly correlated with higher incomes and rates of home ownership, and lower rates of unemployment, crime, and arrest. In terms of the growth of the national economy, it has been estimated that the development of a strong educational programme is among the very best investments that India could make, with an expected return of `10 or more for every `1 invested. In summary, it is recognised that a strong investment in education gives the best chance for children to grow up into good, moral, thoughtful, creative, empathetic, and productive human beings.' [8]

 

The success of the above is a matter of time, planning and strategic implementation.

 

 

 

REFERENCES:

 

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[1] Lanahan, L. Economic Development: A Definition and Model for Investment Maryann Feldman* Theodora Hadjimichael** Tom Kemeny⌃.

 

[2] R. K. New Classical Macroeconomics. Library of Economics and Liberty.

 

[3] M. (n.d.). Classics in the theory of public finance. International Economic Association.

 

[4] B. (n.d.). The most equal, and unequal, education systems. The Educator.

 

[5] Barberis, N. (2018). Richard Thaler and the rise of behavioral economics. The Scandinavian Journal of Economics, 120(3), 661-684.

 

[6] Mishkin, F. S. (1995). The rational expectations revolution: a review article of: Preston J. Miller, ed.: The rational expectations revolution, readings from the front line (No. w5043). National Bureau of Economic Research.

 

[7] Thaler, R. H. (2015). Misbehaving: The making of behavioral economics. New York: W. W. Norton & Company.

 

[8] M. H. R. D. (2019). Draft National Education Policy.