It appears to me
that there is some mutual disdain between MBAs and economists. So I decided to
resolve the problem in a manner befitting a neo-rationalist.
Economics would
define a rational individual as one whose returns to investing in education are
higher than the costs. Let’s say there
are 3 types of returns to education: monetary returns, which are frequently
advertised by placement cells; social returns: let’s say this is the disutility
from having people who don’t really know you asking you “But why _________ (insert-name-of-course)?”
– we seek to minimise this; and private returns – your ability to satisfy your
own prejudices about education and knowledge by studying the course that you
choose. The costs of education are monetary costs, the psychological costs of
having every weekend ruined by a Monday test for two years, physical costs in
the form of sleep deprivation and the opportunity cost of sitting home and
doing nothing.
Monetary costs and
physical costs are usually higher for MBAs. Let’s assume that the psychological
costs and opportunity cost are the same for both. MBAs clearly have higher
monetary and social returns to education. Private returns that exceed the sum
of monetary and social returns signify a greater-than-average-sized ego and I’m
sure that can be accommodated satisfactorily in the realms of rationality. It
appears to me that economists use the positive NPV method while MBAs try to
maximise the difference between expected wages and signalling costs. We act
smug and they act smart.
It should be
possible to create software that calculates return on education based on
student profile, placement statistics of the institute and cost of the course
with a corresponding probability distribution for jobs that the student is
likely to land. It would be a runaway hit in India. Matrimonial sites will have
a field day trying to steal the code.
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