DEFINITION OF ECONOMICS
What is Economics
Evolution of Economics
Wealth Definition of Economics- Adam Smith
Material Welfare Definition-Marshall
Scarcity Definition- Robbins
Comparison Between Robbins and Marshalls Definitions
Which of these Definition is the best?
What is Economics
Economics is a popular useful and significant
social study.
It studies economics activities of a man
Economics activities are those activities which
are concerned with the efficient use of such
scarce means as can satisfy the wants of the
man.
Human wants are unlimited, as soon as one
demand satisfied another crop up.
Most of the means satisfying these wants are limited,
because their supply is less than demand.
These means have many alternatives uses, because
of scarcity of means and their diverse uses, there
emerges a problems of choices
Everybody has to make a choice with regard to use
of his scarce means so that he may get maximum
satisfaction from them.
In conclusion, Economics is the study of those
activities of human being which are concerned with
satisfaction of unlimited wants by utilizing limited
resources.
Normative economics – It deals with what
should be done or how economic problems
should be solved.
Positive Economics – It deals with what are
the economic problems and how they are
solved.
Scarcity of
Resources
Choices of Best
Alternatives
Allocation of
Resources
Definition of Wealth – Adam Smith (1776)
•This definition was given by Adam
Adam Smith Smith.
“Economics is the science of •He is also known as the ‘father of
wealth” economics.
•According to this definition,
economics is a science of the
study of wealth only.
•It deals with production,
distribution, and consumption.
•This wealth-centred definition
deals with the causes behind the
creation of wealth.
Definition of Welfare – Alfred Marshall (1890)
This definition was put forward by
Alfred Marshall Alfred Marshall.
“Economics is the study of man in According to Alfred Marshall, economics
the ordinary business of life” is the study of man in the ordinary
business of life.
It examines how a person gets his
income and how he invests it.Thus, on
one side, it is a study of wealth.
On the other most important side, it is a
study of well-being (welfare).
Definition of Scarcity – Lionel Robbins (1932)
Lionel Robbins
This definition was put forward by Lionel
Economics is the aspect of Robbins.
scarcity in all economic According to him, economics is a science
behaviour that studies human behaviour as a
relationship between end and scarce
means that have alternative uses.
Features:
•The wants of a human are unlimited.
•It has an alternative use of scarce
resources.
•It is an efficient use of resources.
•It is needed for optimisation, i.e., best
allocation of resources.
Definition of Growth – Paul. A. Samuelson (1948)
This definition was introduced by Paul A. Samuelson.
Paul. A. Samuelson
Economics is concerned According to him, “economics is the study of
with determining the how people and society choose, with or without
pattern of employment of the use of money, to employ scarce productive
scarce resources to resources which could have alternative uses, to
produce commodities produce various commodities over time and
‘over time’.
distribute them for consumption now and in the
future among various persons and groups of
society”.
It analyses the costs and benefits of improving
patterns of resource allocation.
This definition is the combination of welfare and
scarcity definition.
Wealth Definition
The famous book An Inquiry into the Nature and Causes of
Wealth of Nations was written by Adam Smith. Adam Smith
stated, “Economics is concerned with an enquiry into the nature
and cause of wealth of nations, and it is related to the laws of
production, exchange, distribution and consumption of wealth.”
Features of the Wealth Definition of Economics
Exaggerated emphasis on wealth: This definition gave too much importance to the
creation of wealth in an economy. Many economists believed that economic success of any
nation depended only on the accumulation of it.
Inquiry into the creation of wealth: This definition indicates that Economics also deals
with an inquiry into the causes behind the creation of it. For example, wealth of a nation
may be increased by raising the level of production and export.
Study on the nature of wealth: This definition further explored that the wealth of a nation
included only material goods; for example, different manufactured items. Non-material
goods were not included. Hence, non-material goods such as the services of teachers,
doctors and engineers are not considered „wealth‟.
Economic Man: This definition is based on the man who is always self-
centred and self-interested in nature. Economic Man focused on his own
well-being and had only one motive—to earn money.
Criticisms
Materialistic concept: This definition laid too much emphasis on wealth and
did not consider human welfare. But it is only one of the many means for
human pleasure and welfare. Hence, this
definition is neglected.
Ambiguous: The definition of wealth is not very clear. In earlier days, it
included only material goods such as money, gold, silver, land, sugar, tea and
ghee which are visible. Non-material goods were not included. Hence, non-
material goods such as services of teachers, doctors and engineers are not
considered „wealth‟ under this definition.
Narrow scope: This definition claims wealth as the only subject of
Economics and does not study the concept of welfare. Therefore, it is
considered incomplete and narrow.
Stress on the concept of Economic Man: This definition is based on the
concept of Economic Man which emphasized that the main motive of a man
is to acquire wealth. However, other motivations of a man like feeling
affection and emotions are neglected.
Scarcity and choice: This definition ignores scarcity and choice, which are
important concepts of Economics. In the real sense, economic activities
occur because goods and services satisfying human wants are scarce in
nature for innumerable uses.
Importance of man ignored: The definition by Adam Smith gives
unnecessary importance to wealth
leaving aside the importance of human beings.
