Look beyond the engineering field

In the post-2008 crash business world, a quantitative, data driven, and analytics led approach has been adopted in uncovering complex feedbacks that operate in, what is, a highly networked economy.

That the economy has evolved into a complex network is quite evident in the 2008 US stock market crash where the contagion spread from a crisis in the so-called ‘sub-prime market’ to the rest of the world, inducing a worldwide recession. The quantitative turn that is being witnessed today is partly due to the failure of mainstream thinking in Economics that relied on mechanical analogies with methods and tools that proved inadequate to understand the modern economy.

Mainstream thinking perceives markets as mechanical systems and believes in the ‘self-correcting’ properties of prices, which, following any disruption by shocks, is supposed to bring normality back to markets, be it financial, labour  or commodity. In that scheme of things, financial markets, which coordinate the decisions of borrowers and lenders, purportedly have no effect on other economic variables such as employment, output, distribution of income etc. Thus, the mainstream insulated itself from the real world complexities, oblivious to the evolution of the interconnected modern economy in the information age. The 2008 crisis challenged this conventional way of thinking that is entrenched both in academia and in the policy community.

The modern economy is a network of multiple markets that connects individuals, small businesses, banks, corporations and governments. Understanding the architecture of the network and how feedbacks operate among these entities has become an imperative for businesses. In a complex networked economy, with feedbacks running between entities at various levels, it is a ‘no-brainer’ that the mechanical analogies of mainstream Economics and the associated tools are of little use in understanding the complexities. The business world has recognised this failure and has taken to data driven analytics to uncover feedbacks in today’s networked economy.

Emerging sectors

With more businesses realising the power of analytics, the big data driven ‘quantitative revolution’ is underway around the world. As a result, new cross-cutting business sectors have emerged. The new age Economics jobs are interdisciplinary in nature that goes beyond Economics graduates’ traditional skill-set. The Financial Technology (FinTech) sector is one example, where it harnesses two domains, finance and information technology.

Following the 2008 crash, the finance sector is moving towards new secure technologies, like Block Chain, for their products. This is the fastest growing sector in the global finance domain and in the context of digitisation and the inevitable financialisation of the Indian economy, the FinTech sector is expected to grow here also.

In the modern sectors such as Internet of Things and Medical Technology, economic assessment — whether it is the user, market or technology assessment — relies heavily on big-data and analytics.

Even in the traditional business sectors, like retail and wholesale, there is a move towards exploiting analytics using big data. In this context, there is a greater need for students with strong analytics and computing or IT skills. Particularly, in the financial sector, be it in developing program trading strategies for high frequency trading or for back-testing, there is a growing demand for students with diverse skill-set, such as economics, analytics and computing.

Outside of banking and finance, economics students usually make a career in policy think tanks, central banks, and international development agencies among others. Some of these entities have realised the shortcomings of the traditional approach to policy analysis and are moving towards more interdisciplinary approaches, be it in the monetary policy area or in banking and financial regulation.

This, in turn, has opened up opportunities for students with science and tech backgrounds, but with some training in economics/finance, at least, at the postgraduate level.  

In terms of education and training in Economics, Science and Technology students should look for interdisciplinary programmes that deal with the interface between Economics and Finance. In response to the evolving landscape, there are postgraduate programmes in areas like Financial Analytics and Computing, Business Analytics and FinTech that Science and Technology students should look for to develop an interdisciplinary skill-set suited for the modern economy. 

(The author is with the National University of Ireland, Galway)