A blog about economics instruction. "Things should be made as simple as possible, but not any simpler."--Albert Einstein

Monday, May 09, 2005

Economics as the Foundation of the Gestalt

No word play intended, but William F. Sharpe is a pretty sharp guy. Professor Sharpe, 1990 Nobel prize winner in Economics, writes, “. . . one needs a gestalt from which to make business judgments.” To put it another way, the whole is greater than the sum of the parts, and business people had better darn well know it. The issue is how can colleges and universities instill in students the gestalt they must possess to make sound business judgments.

I'm glad to see that a Nobel prize winner and I agree on the prime importance of economics in creating the gestalt. Critical foundations of the gestalt include microeconomics and macroeconomics. In most syllabi the goal is listed as "the economic way of thinking." Sharpe notes that the micro and macro contexts of business are not very likely to be front and center in a business environment. In short, business leaders must master the economic way of thinking in school or risk forever missing the key elements in the creation of gestalt.

Let me use an analogy. I've never had the patience to put together a jig-saw puzzle, but I can imagine how it's done most effectively. I would pull out all the pieces with straight edges and then begin to build the outside edges of the puzzle. I'd pay attention to colors in order to mate adjacent pieces of the puzzle. I'd use the picture on the box the pieces came in as a guide. For example, if the only thing red in the puzzle was an object in the middle of the picture, I'd find the red pieces and put that part of the puzzle together. Proceeding in a systematic way, utilizing all information, I would put the puzzle pieces together. To me, a systematic process to put all the pieces of the business world together is what economics provides.

Simply put, the job of economics instructors is critical in creating first-class business leaders. But then, you already knew that, didn't you?



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