Economics

Topics: Economics, Macroeconomics, Unemployment Pages: 10 (2651 words) Published: August 27, 2013
Definition of Economics

What is Economics?
Economics is the social science that studies the production, distribution and consumption of goods and services. The term economics comes from the Greek for “oikos” means house and “nomos” means custom or law, hence the term economics means “rules or laws of household”.

Adam Smith’s Definition of Economics: Adam Smith wrote a book in 1776 whose title was “Wealth of Nations”. In his book he discussed the word ‘wealth’ through its four aspects: production of wealth, exchange of wealth, distribution of wealth and consumption of wealth. Therefore it can be said according to Adam Smith: “Economics is a science of wealth”.

Criticism on Adam Smith Definition of Economics:

As Adam Smith declared economics as a Science of Wealth. Some economists of 19th Century criticized this definition. The main criticisms on the definition of Adam Smith are given in brief as under.

1. Too Much Importance to Wealth: Adam Smith gives primary importance to wealth and secondary to human being. This emphasis has now shifted from wealth to human being. Man occupies primary place and wealth a secondary one. The real fact is that man is more important than study of wealth.

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2. Narrow Meaning of Wealth: In the definition the word “Wealth” means only material goods such as vehicles, industries, raw material, Banks etc. It does not include immaterial goods like services of doctor, lawyer and teachers.

3. Concept of Economic Man: According to this main objective of human activities is only to earn more and more wealth. In others words he earns only for his self interest and social interest is completely ignored. But Alfred Marshall and his followers pointed out that economics does not study a man who works only for his own interest, but a common man.

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4. Man Welfare is Missing: The other objection by Marshall is that mans welfare has not been mentioned in Adam’s definition of economics. He has stressed much on wealth. Wealth is a means to an end, the end being the human welfare.

5. It Does Not Study Means: The definition lays emphasis on the earning of wealth as an end in itself. It ignores the means for the earning of wealth.

Alfred Marshall Definition of Economics:

According to Alfred Marshall, “Economics is a study of mankind in the ordinary business of life. It examines that part of individual and social action which is most closely connected with the attainment and use of material requisites of well being”.

Criticism on Welfare Definition of Economics by Alfred Marshall:

1. Narrow down the Scope of Economics: According to Prof. Lionel Robbins the use of the word “Material” in Marshall’s definition narrows down the scope of economics. There are many things in the world, which are non material but they are very significant for promoting human welfare. For example the services of doctors, lawyers, teachers, engineers, professors etc. these thing satisfy our wants and are scarce in supply. If we exclude these services from the economics, then its cope will be very much restricted. Therefore, in the actual study of economics principles, both the material and immaterial things are taken into accounts.

2. Relation between Economics and Welfare: Robbins hardly criticized Marshall’s definition due to the reason of the relation between economics and welfare. Robins said that there are many activities which do not promote human welfare but they can satisfy their wants and therefore, can be regarded economic activities, for example the manufacturing and sale of alcohol goods or opium etc.

3. Welfare is a Vague Concept: Professor Robins raised another objection about “Welfare”. In Robbins opinion, welfare is a vague concept. It is purely subjective. It differs from man to man, from place to place and from age to age. Robins says that what is the use of a concept which cannot be quantitatively measured and on which two persons cannot agree as to what is conducive...
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