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Thursday, November 09, 2006

Why MBA

No...I'm not going to talk about the cliched arguments about how investment in business education from a good bschool yields a positive NPV in the long run. Nor is it about what you and I as individuals expect from an MBA education.

Was wondering why the economy needs MBAs? Will the macro-economy be worse off without business graduates? According to Solow, the growth prospects of an economy in the long run are determined by the capital stock, labour stock and productivity. The reason why the government is subsidising our education is in the hope that graduates from elite bschools will go on to run businesses more efficiently and thereby improve the productivity of the aggregate economy. In 'growth theory' jargon, they hope that MBAs will increase the rate of 'technical progress' in the economy.

After subsidising management education for over forty years, it is about time for the powers that be to ask some pertinent questions.

-Are MBAs from IIMs more efficient and productive than managers who don't have a business degree/have one from a lesser bschool?

-If yes, should we attribute the efficiency to the inherent competence of these executives or to the 'education' they received at IIM?

-Most importantly, do MBAs actually think along these lines? If I were to continue taking decisions based on gut feeling post MBA despite having learnt Linear programming at IIM, would I not be letting the tax payer down?

Food for thought. The debt that IIMites owe to society is humongous considering the largely superfluous learning we acquire at college. The Private gains of Business education ( better career prospects, brand value) outweigh whatever little benefit that accrues to the economy because of our human capital.

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Comments:
-Are MBAs from IIMs more efficient and productive than managers who don't have a business degree/have one from a lesser bschool?

I have to grossly generalize to answer this question. Yes. However, the generalizations are such that this answer can't be applied to any specific company/manager.

-If yes, should we attribute the efficiency to the inherent competence of these executives or to the 'education' they received at IIM?

//To both.

-Most importantly, do MBAs actually think along these lines? If I were to continue taking decisions based on gut feeling post MBA despite having learnt Linear programming at IIM, would I not be letting the tax payer down?

//Along "what" lines? Decisions are based on a combination of gut feel plus logic. Both head and heart. Linear programming and other decision models can't be used explicitly, but are taken care of in the mind.
 
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