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Updated: November 4, 2013 23:49 IST

Emphasis on empiricism

Narendar Pani
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India’s evolving economy: A. Vaidyanathan; Academic Foundation, 4772-73/23, Bharat Ram Road, Ansari Road, Daryaganj, New Delhi-110002. Rs. 1195.
Special Arrangement India’s evolving economy: A. Vaidyanathan; Academic Foundation, 4772-73/23, Bharat Ram Road, Ansari Road, Daryaganj, New Delhi-110002. Rs. 1195.

In the midst of the heated ideology-inspired debates on the Indian economy it is easy to miss the quieter, though more widespread, influence of empiricism on our understanding of economic processes. Even before the empirical tradition gathered momentum in the 1970s, a large proportion of economic research in the country focused on putting together data-based pictures of the economy. This collection of essays by one of the leading lights of this tradition, A. Vaidyanathan, captures the essential features of this worldview. It reflects the strengths of this tradition, as well as its intellectually constraining refusal to cross the boundaries of individual disciplines.

The dominance of empiricism in Vaidyanathan’s work is most evident when the debate on poverty leads him not to another contribution to overall economic policy but to “questions about the quality and reliability of the data and assumptions underlying estimates of growth of income and consumption, their distribution between regions and classes, and price indices.” While the essay goes on to analyse the shortcomings of the Indian statistical system and suggest remedies, it reflects a wider concern about not just the quality of data, but also the tendency for researchers to take a superficial view of what the data actually says.

This emphasis on empirical accuracy enables the empiricists to develop a picture of the economy as it emerges from the ground. Not being burdened with too many preconceived notions, they are better placed to pinpoint the multiplicity of factors that go into the making of a complex reality. Thus when Vaidyanathan explores irrigation systems he bears in mind that “the working of irrigation institutions, as well as their overall outcomes are significantly influenced by agro-climatic conditions, technology for harnessing and use of water for agriculture, and the socio-economic and political environment.” The analysis that follows then places the required emphasis on the interaction between these factors in a given reality, rather than what is expected from the popular theory of the time.

In choosing to begin with the empirical reality this tradition is often able to directly confront aspects of reality that do not fit easily into economic theory. Among the more striking of such cases is that of the demand for gold. Policy makers typically try to curb the demand for gold through measures that raise its price. But higher prices can in fact have the opposite effect. As Vaidyanathan notes when surveying the empirical work in this area, contrary to expectations, “the higher the gold prices, the higher the demand for gold.” In explaining this pattern Vaidyanathan recognises that “the price of gold relative to share prices and international gold prices are important determinants of gold imports.” But this is not the entire story. Gold also presents other patterns that do not lend themselves easily to economic explanations. Vaidyanathan is worried that the “strong, large and unexpectedly negative impact of household financial savings on gold imports is difficult to explain”. It is possible that this result is because of the traditional response of Indian households of falling back on gold when facing financial uncertainty.

Exploring this or other similar hypotheses would however have taken Vaidyanathan well into the realm of sociology. And the one thing the empiricist tradition in India has consistently refused to do is to cross the disciplinary boundary between economics and the other social sciences. Indian empiricists have no difficulty in breaching boundaries drawn by ideological and other theories. But breaking the deeply entrenched segregation of disciplines is something the empiricists, like most other Indian social scientists, refuse to do.

It is not that Vaidyanathan is completely unaware of the need for a multidisciplinary approach. But his initial instinct even in his search for a multidisciplinary approach is to confine himself within disciplinary boundaries. As Vaidyanathan sees it, a “practical approach would be to constitute multi-disciplinary research teams, and have each of them explore, from their different perspectives, the factors/forces that shape the performance of a particular programme” [emphasis added].

Practical approach

In reality the difference between disciplines in India is too deep for social scientists of one discipline to respect the views of those from another discipline. Indeed, Indian social scientists of one discipline are often not beyond being contemptuous of the methods of those in another discipline. Not surprisingly the ‘practical approach’ Vaidyanathan initially advocates has only led to Indian academics from different disciplines, deeply rooted in their own ways, talking at each other rather than to each other.

It is possible that this reality has not completely escaped someone of Vaidyanathan’s vast experience and insight. But he does not go far beyond merely noting that an “alternative approach is to internalize the interdisciplinary approach in one’s own research”. He does not explore any of the more philosophical issues that an effective multidisciplinary methodology would need to address. When picking elements from different disciplines to answer a particular question how can we be sure we are not merely choosing those that suit a preconceived argument? Or even more fundamentally, once we break out of disciplinary boundaries, what determines the questions we choose to raise?

By putting together a picture of the Indian economy that emerges from the ground, India’s evolving economy should help prevent the widely used empirical tradition in Indian economics from being drowned in its own numbers. But it falls short of being the alternative reality-led perspective that the Indian economy so desperately needs.

(Narendar Pani is professor at National Institute of Advanced Studies in Bangalore)

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