Symbiosis International University Symbiosis School for Liberal Arts

Foundational Course in Economics

 Brief Overview 

A foundational course in economics will focus on the world view that economics as a discipline has striven to create. This would include not only the contemporary expositions of the subject matter but also precursors that have contributed to this particular style of theorizing. Also, study of contrasting schools of thought presents weaknesses that exist in all the strands of ideas in economic theory.

Usually economics is perceived as an isolated and sometimes arcane discipline where theories and so called laws stand in their own right showing clearly the patterns of factual behavior and recommend policy decisions. This sort of myopic reliance has mostly added to the confusion and at times, deception in the field of economics.

It is usually forgotten that models or theories of economics only present a general guideline that theorist thinks will be applicable on societies given such and such circumstances. It is also imperative to understand that such guidelines have in their fundamentals certain axioms that are taken to be true for individuals as well as for collective of individuals. This forms the core basis for reasoned argument and basis or scientific thought that can be traced to Aristotelean logic (three laws of thought). Students of economics should be well aware of this conflation between real world and hypothetical world thus created by the virtue of model or theories.

To raze this prevalent confusion where economic models are taken to mirror reality in the most general sense, we need a perspective for the preceding theories and need to critique them based on the realities that we confront in everyday experience. Before learning any discipline of social science, in my view, one needs to learn to think in a structured form and should have the capability of synthesizing reasoned body of arguments without the interference or rather impositions placed by the theory or schools of thought as well as personal predilections. For this one can look at the philosophical elements present in not just the academia but also popular thought in the world of arts (films, music, theatre etc.), literature and science.

 Course Objectives 

  1. To understand Economics as a field of study, holistically with an interdisciplinary approach.
  2. Develop a background for the discipline as well as rid oneself of popular misconceptions about economic theory and its practice.
  3. Learn about the evolution of economics as a science as well as understanding scientific method as is used in both natural as well as social sciences. Also, exploring the validity of other ways to ascertain socio-economic phenomena.
  4. Training oneself to synthesize thoughts logically which leads to sensible critique of the models and theories learned in the subject.
  5. Determine the pragmatic side of theories and models in a dynamic and almost chaotic currents of the real world.
  6. Learn to perceive economic science as ever evolving rather than a static set of principles.

 Teaching Methodology 

  1. Emphasis on interactive and informed discussions.
  2. Drawing from multiple sources to understand any concept.
  3. Motivating the class participants to constantly critically examine the current events in the light of the understanding developed in class.
  4. Emphasis on rationalization of the application of the ideas explored and developed in class.
  5. Motivating the class participants to keep abreast with the contemporary ideas in socio-political sphere.
  6. Evaluations on continuous basis in various styles such as multiple choice, essay writing, subjective analysis and peer review.

 Requirements 

The ability to read and write and the readiness to challenge one’s own opinions and conclusions objectively.

 Course Outline 

Sr. No.

Topics

Hours

1. · Economics as a science. Difference between natural and social science.

· What does science mean; what is the method and what are the advantages of this method?
· Contrast it with other methods and everyday thinking.

3

2. · Role of mathematics as a tool to understand certain truths. Approximation, intuition and estimate.

· Three laws of thought by Aristotle and are they really laws of thought i.e. do we need to think as per laws of thought of that is how we think?

3

3. · Understanding meaning, definition and terminology becomes important to understand a system of arguments. Synthesis of a theory is nothing but a systematic stipulation of arguments supporting each other, which as basis have axioms. Hence, understanding axioms is vital to understand a theory in any discipline.
· What role does logic play in stating an argument and why is something illogical? How sometimes it is not directly intuitive but indirectly intuitive.

4

4. · What is logical positivism? What was that all about and why does an internally consistent system is incapable of proof? Some logical paradoxes shed light on internal inconsistencies of a system – Zeno's paradox, Russell’s Barbour of Seville and Gödel’s incompleteness theorem.

2

5. · The assumption of rational behavior says that economic agents behave rationally in a way that maximizes their benefit (utility). How rational are human beings exactly and does it need to be taught? This assumption needs to be fully explored through various examples and academic discussions relating to rational and irrational behavior.

3

6. · What do schools of thought mean; why do they differ? The schools of thought differ primarily on the assumptions they make about the agents of the phenomena in question. For example – classical school of thought (Adam Smith, Ricardo etc.) makes an assumption that people are motivated by private gains which indirectly contributes to public welfare.

4

7. · Does economic understanding restrict itself to discipline of economics?
· What are the other ways of determining economic phenomenon?
· What are the other sources - arts, literature, science, popular culture, alternative genre of documentaries, satires and music etc.?

4

8. · The rationale of economics as a discipline: What justifications does economics as a science have, if any, to exist as a separate and independent discipline? There are several strands in the popular culture that have challenged the status quo of economics as a discipline. Exploring their arguments in the context of various failures and economic crises that economies have witnessed, historically and in recent times, is needed.

4

9. · Introduction to the Principles of Economics:
Understanding of the basic terms and the concepts to be explored in the future sessions. Trade-offs, opportunity cost, equity, efficiency, economic incentives, margins, rationality, rational behavior, externality, inflation.

4

10. · Economics as Science; Positive versus Normative Economics:
In what respects the methodology of economics resembles the sciences. Why is it important to employ scientific method? Positive economics, studies the phenomenon as it is present, whereas normative economics asks ethical and moral questions and passes value judgments.

2

11. · Models in Economics:
Why is it convenient to represent economic hypothesis in simpler mathematical or structural models. How it is done with two-dimensional Cartesian coordinates.

3

12. · Competitive Market and concept of Demand:
The law of demand under the construct of competitive market. The factors influencing quantity demanded. The kinds of goods for which the law of demand holds and for those where regularity of demand is compromised.

· Concept of Shifts in Demand Curve and the Market Demand:
The meaning of shift and demand as opposed to increase in quantity demanded. The sum total of individual demand curves.

3

13. · Supply and its determinants:
Factors which influence supply of goods and commodities in the market. Behavior of the supply curve.

· Shifts in Supply curve:
The causes of Shifts in Supply and the variables accounting for it.

2

14. · Concept of Market Equilibrium and Price determination:
Circumstances under which quantity demanded equals the supply with respect to the price.

1.5

15. · Elasticity of demand:
Determinants of Elasticity and its computation. Importance of understanding elasticity in the scope of markets and how adjustments are made accordingly by suppliers and consumers in response to elasticity. Types – Price-, Income- and Cross-Elasticity of Demand.

· Elasticity of supply:
The determinants of elasticity of supply curve. Its relevance to the market variable and its computation. Also, the difference in the long and short run supply and the reasons for short run supply being more elastic.

3

16. · Price Ceiling and Price Floor:
The government intervention via price ceilings and floor price in the economy. The pertinence of such actions and the outcomes of this intervention. Binding and non-binding price ceiling. Price floor on wage market and the unemployment factor.

1.5

17. · Concept of Utility:
Cardinal measure of utility and the various implications of it on demand and supply variables. Law of diminishing marginal utility.

1

18. · Concept of Money:
Types of money, quantity of money, monetary measures, and the role of RBI as the monetary authority. The difference between currency and money and money and wealth.

· Creation of Credit or Money by Banks in the Economy:

The circulation of money and its multiplication done by the commercial banks called as the multiple creation of credit. Its relation with inflation, unemployment, aggregate demand. The origins of monetary policy and its overwhelming importance in today's world with a special emphasis on Indian Economy.

4

19. · Public Finance – Concept of Budget:
Concept of Budget with reference to Indian Economy. How it is prepared and what does it include? Cursory reference to the fiscal policy.

· Public Finance – Deficit:
Measurement of various concepts of deficit followed in Indian Economy such as – fiscal deficit, overall budgetary surplus/deficit, primary deficit and its relevance to other economic variables.

2

20. · Financial Markets – An Introduction:
Field of finance is full of various types of financial and debt instruments. We will explore the nature and their role in monetary flow in economy (emphasis given on Indian economy). Also understanding the concept of value (present value and future value) in relation to the interest rate and why the value of money doesn't really stay constant because of the element of interest and the reasons for its applicability. We will also focus briefly on the recent financial crisis of 2008.

4

21. · GDP – National Income Measures:
The meaning of gross domestic product and its relevance as an economic indicator in Economy. Its measurement and determinants.
· The meaning of GDP deflator and the calculation of real and nominal GDP based on measurement of inflation. Also the measurement of inflation from CPI – Consumer Price Index.
· The meaning of index itself and the way it can be used to denote various socio-economic or financial figures or measurements.

2

 

· Total

60