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THE SKY: Is a vast expanse of blue so real none could deny its “existence”.Yet, in reality, it is nothing but illusion.

THE HORIZON: Is always in sight. Yet, the closer to it one gets, thefarther away it recedes.

YOUR IMAGE IN THE MIRROR: Is real as you are. Yet, are “you” thatimage?

THEORY: Has been defined in many ways. Most definitions include oneor more of the following parameters:

An account or explanation of a phenomenon, a way of making senseof things.

Clearly defined terms.Hypotheses on how we might change things or of what things influenceothers.

s ‘reality’ the sky that ‘theory’cannot reach? Is theory thehorizon that leads intellect on?Are ‘theory’ and ‘practice’reflections of one another?

Talking of reality, which is morereal – ‘theory’ or ‘practice’? Istheory of any practical relevance atall? Or is it mere intellectualbabble? Does ‘practice’ shape‘theory’ or is it the other wayround? Questions that have hugechicken-and-egg kind ofphilosophical implicationsattached to them (such as thedebate about perception versusreality), but that nevertheless relatejust as much to everyday realities- “mankind in the ordinarybusiness of life”.

I don’t have to study HomeScience to be a good wife; I don’thave to master the theories of

monetary economics to operate abank account or have a doctoratein financial theory to be a greatstockbroker. Grandma’s remediescure the common cold faster thanany theory of medicine might helpprescribe; customs, values andpractices we grow up withcontribute a great deal to ourwellbeing. Stories abound ofpeople who have made a successof their lives with no formaleducation whatsoever in theirrespective fields. But at the sametime, one has to acknowledge thattheories of economics or medicineare not complete junk and that theword ‘intellectual’ still commandssome respect in the dictionary.

Making allowances for context,‘theory’ has been usedsynonymously with ‘law’,‘hypothesis’, ‘model’ or

‘principle’. Theory is the essence ofany science: a science draws itscontent and defines its scope in itstheories. Numerous examples oftheories may be cited: Einstein’sTheory of Relativity, Darwin’sTheory of Evolution, but when wetalk of theory in the context oftheory and practice, it is mostlysocial sciences theory we refer to.Some examples of theory ineconomics are the Heckscher-Ohlin Theory of InternationalTrade, Rostow’s Theory ofEconomic Growth and theArbitrage Pricing Theory in thedomain of financial economics.

To be more precise, theory is abody of knowledge. Theory is astatement of fact, an explanation ofa relationship between a cause andan effect. A theory is normallybased on a set of assumptions

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(which in most of economic theoryis summed up in the phrase – “allother things being equal” or ceterisparibus) and has an independentand one or more dependentvariables.

Theories in physical sciences areprecise and there is no doubt thattheir application enhances humanwelfare. This is becauserelationships in physical sciencesare deterministic. When a theorydeclares that variable x isdetermined by variable y, in otherwords, that x is a function of y orx=f (y), we can rest content thatknowing the value of y wouldcompletely specify the value of xat least until this has beencompletely refuted and someonehas enough evidence to prove thatx = f(z). Relationships in socialsciences are, however, more of anon-deterministic or probabilistickind in the sense that they are lessprecise. An underlying equation ofa deterministic kind is assumed toexist and an ‘error term’ isgenerally added on. For example,if you are trying to establish arelationship between CAT scoresand management final examscores, you could say that to someextent a good score on the CAT isan indication of a good final examscore. However, no matter for anypatterns in past data, you couldnever compute a student’s exact

final exam score if you have hisCAT score ready.

It’s hard to see a world withoutrelating to some sort ofgeneralisations, concepts, theories,values or frames of reference. Werely on beliefs and assumptions tomake sense of our experiences. Weclassify people and things as“good” and “bad”, interesting,dynamic, worthless, magnificent.Where do these qualificationscome from? Aren’t they human“inventions” and aren’t they insome way based on some priortheory of what is ‘good’, ‘bad’, or‘interesting’? We see some thingsas significant, others as mundane,

we assume we know why thingsare happening, and depending onwhat culture we come from, we’retaught to challenge or accept newideas; to use prior ideas to confirmor refute new ones.

A generation of thinkers andrebellious youngsters frowns uponthe domain of theory regarding itthe playground of academicwizards. Theory is viewed as acollection of symbols and abstract,incomprehensible logic (ironic as itmay sound) with little or norelevance whatsoever to real-lifehappenings. At the other extreme,policymakers in economies invarious stages of evolution seem to

����������� ����� ������������The most evident argument for theory being the most practical of

practices is perhaps that while “theory” can and has been defined innumerous ways, it’s hard to do the same with “practice”. What‘practice’ exactly are we referring to when we talk about theory beingor not being practical? Is being practical about survival? Is it abouthaving the means to survive, i.e., the material aspect? Adaptation toan environment, a culture, a set of rules?

A. Theory Simplifies: A society or a nation is made up of thousandsof individuals, each with a different set of beliefs and ideas and thebest that any law or policy can do is to be the most representative itcan be. Theory can be very helpful here as a base for policy, becausetheory is a generalisation that has been proved to be representative.Policy based on sound theoretical foundations helps to hold a societytogether and prevents it from breaking apart. Theory also provides anintellectual standard by which to define and measure.

B. Theory Represents a Critical Thought Process that SignifiesProgress: ‘Theory’ evokes a ‘Western’ methodology of thought basedon critical thinking that began during the Middle Ages. Rene Descartes’path-breaking philosophy, “I think and therefore, I am” can beattributed to much of today’s research and development. An individualor society incapable of thinking for itself cannot dream of development.Theory is wisdom. It is an explanation that was thought out by someindividual who cared enough to think beyond the selfishness of hisself, to survey and experiment with his ideas, test their validity, quantifythem, bring them out as a precise and clear statement. Over time, atheory has perhaps been read and criticised, withstood refutations,accepted by a group of people, passed on, and still continues to bewisdom as much as basis for progress.

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����������� ����� ������������“Practice” if it has to be defined may have to do with customary

ways of operation or behavior, or knowledge of how something iscustomarily done. Thus you see that practice is also knowledge thatkeeps developing with time, may we say, knowledge that cannot bequantified?

A. Appropriate Pre-Conditions for Application of Theory maybe Absent: The existence of a body of knowledge signifies neither itsjust comprehension nor the presence of the perfect set of preconditionsfor its application. Assumptions made in theory may not hold in reallife, entire frameworks may be different from conditions where thetheory was created. Application of ideas taught in ‘Western’ stylemay be difficult if not impossible in ‘developing’ societies. There is awide divergence between the circumstances of application that atheory intended and those that actually are in “developing”economies. For instance, the infrastructure and enforcementmechanisms such as credible banking systems and efficient judiciarynecessary for implementation of economic theory are simply absentin many developing countries. The reliance on economic theory as aguide to problems may thus make implementation of policies muchmore difficult than it seems at face value. Economic history, especiallythat of the last few decades abounds with tales of theoriesmisunderstood or faultily applied.

B. A “Scientific” Way of Thinking May not be THE Best in AllCircumstances: There are two justifications for this argument. Theoryis almost always a quantification of fact and sometimes thisunsuppressed process of quantification may lead to results quitecontrary to what was intended. You cannot put a number oneverything that takes place in the universe. There is a part ofknowledge (including customs, traditions and ways of life) that maynot lend itself to easy bending into hypotheses. For example,alternative systems of medicine and the practice of yoga are gainingincreasing importance in otherwise more scientifically advancedsocieties.

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have a flair for indiscriminateapplication of theory as the magic-wand solution to all sorts ofproblems from building bridges toproducing grains.

Getting down to the practicalaspect, an engineer would never beas good till he actually gets downto working with his tools. Anyscientific theory gets consolidatedinto actuality with practice. Theevidence of a good theory is in its

practice. How else would amateurswith a gift of the gab do better thanmarketing professionals in thesame FMCG business? Haven’t weall come across great writers bornto the most humble homes? Orexemplary actors who have neverentered the portals of an actingschool? The value of either cannotbe underestimated. Enough reasonwhy B-schools around the worldprefer those with a few years ofexperience.