Definition of Economics

Definition of Economics

Adam Smith’s “An Inquiry into the Nature and Causes of Wealth of Nations” in the year 1776 gave the birth to Economics as a discipline. Adam Smith is therefore known as father of Economics. During earlier years this discipline was known as Political economy. It is adapted from French Mercantilist usage of économie politique, which extended economy from the ancient Greek term for household management to the national realm as public administration of the affairs of state. Towards the close of 19^th century the word economics came into currency. The word Economics has been derived from two Greek words oikos (meaning a house) and nemein (meaning to manage). Economics has been defined by various economists.

Wealth Definitions:

Adam Smith defines the subject as, “a branch of the science of a statesman or legislator [with the twofold objective of providing] a plentiful revenue or subsistence for the people ... [and] to supply the state or commonwealth with a revenue for the public services”.

J.B.Say defines economics as, “the science of production, distribution and consumption of wealth”.

The use of term wealth categorises these definitions in the category of wealth definitions. These were severely criticised by many economists on the following grounds:

(i)                 Thomas Carlyle called it a Dismal Science, concerned only with attaining material wealth.

(ii)               The term wealth narrowly used to mean material eealth and many non-material things such as social services education health remained outside the preview of this subject.

(iii)             The scope of economics narrowed

(iv)             Some Economists also called it the bread and butter science as it teaches how to earn wealth for material wellbeing.

The Wealth Definitions were discarded towards the end of 19^th century.

Welfare Definitions:

Alfred Marshall was the first economist who came forward and shifted its emphasis from wealth to welfare.

In his widely read textbook, Principles of Economics, published in 1890, Marshall defines economics as follows: "Political Economy or "Economics is the study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected and social action which is most closely connected with the attainment and use of the material requests of wellbeing." Marshall the founder of neo-classical school of thoughts or welfare school of economics and his followers are of the view that on the one hand economics is the study of wealth and on the other hand it is the study of man who is more important than wealth welfare of man is the primary aim of economics.

A.C. Pigou, says, the range of our enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money” Thus Pigou restrict the study to only that part which are performed for money i.e. economic activity only. Much non-economic activities which are not performed for money remains outside its preview e.g. mother’s love for kids, our daily pooja at our residence and so on.

The important features of welfare definitions are:

·         Study of Man

·         Ordinary business of life

·         Wealth is not the end of all human activity

·         It studies the individual and social activities

·         It studies material wellbeing

Robbins criticised Marshall’s definition on the following grounds:

·         Takes only material things or those which exists in physical form. Thus many services remained outside the scope of the subject.

·         Production of commodities of warfare that does not promote material welfare and causes health hazards e.g. wine, cigarettes, opium, poison, etc. remained outside its subject matter of economics.

·         Robbins says welfare is also a subjective concept and differs in different countries at different times. It varies from person to person.

·         Welfare cannot be measured in terms of money.

Scarcity Definitions:

Robbins defines economics in his book Nature and significance of economic Science (1932) as : “Economics is the science which studies human behaviour as a relationship between ends and scare means which have alternative uses.”

Important features:

·         Economics is a science of choice- it says wants are unlimited. This is experienced by all of us. When one wants gets satisfied another arises. Therefore, people have to fix priority and choose which want they wish to satisfy first.

·         Means are scare:-Resources are scares in relation to wants.

·         Resources have alternative uses. If any resource has only single use then the question of choosing does not arise at all.

The Robbins definition is criticised for:

·         Not explicitly mentioning the concept of welfare in the definition.

·         This definition makes Economics as a Human Science instead of Social Science.

·         This definition narrows and restricts the scope of economics. It does not talk of growth and development.

·         The problem is not always of scarcity, abidance also creates economic problems.

Modern Growth-Oriented Definition of Samuelson

·         In relatively recent times, more comprehensive definitions of Economics have been offered. Thus, Professor Samuelson writes, “

·         Economics is the study of how men and society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses to produce various commodities over time and distributing them for consumption, now or in the future, among various persons or groups in society. It analyses costs and benefits of improving patterns of resource allocation”.

Features of the Modern Growth-Oriented Definition

Growth-orientation:

·         Economic growth is measured by the change in national output over time. The definition says that, Economics is concerned with determining the pattern of employment of scarce resources to produce goods thus it is dynamic in nature.

·         There is an element of time in this definition.

·         It bring the problem of resource allocation between present and future consumption in  to the economics.

·         Distribution also is an important field added in the definition explicitly.

 The modern definition of Economics is the most comprehensive of all the definitions and wider in its scope. All the issues that were highlighted in the earlier definitions are included here. In addition, the issues of development of a backward economy, as well as those of growth in a mature capitalist economy, form part of this definition. Economics as it stands today is built on the basis of this comprehensive definition.

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