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Definitions of Economics

The document traces the evolution of definitions of economics from Adam Smith in 1776 to A.C. Dhas in 2011. It analyzes the wealth, welfare, scarcity, and growth definitions of Smith, Marshall, Robbins, and Samuelson respectively. The modern definition by Dhas takes into account choices made by individuals and societies under conditions of both scarcity and surplus to maximize benefits through production and consumption. The core concepts that economics focuses on are choice-making and optimizing given resources to achieve growth over time.

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INTRODUCTION • Economics is a study of ‘Choices’ or ‘Choice- Making’ • Choice-making is relevant for every individuals, families, societies, institutions, areas, state and nations and for the whole world. • Hence, Economics has wide applications and relevance to all individuals and institutions.
Meaning of the word ‘Economics’ • The word ‘Economics’ originates from a Greek word ‘Oikonomikos’ • This Greek word has two parts: – ‘Oikos’ meaning ‘Home’ – ‘Nomos’ meaning ‘Management’ Hence, Economics means ‘Home Management’
• Economics emerged as a subject with high level of applications in all other disciplines due to its basic principle of ‘Choice making for optimization with the given resources of scarcity and surplus’. • To arrive at this phenomenon in the definition of economics, it has taken almost 235 years.
Evolution in the Definitions of Economics • A. Wealth Definition (1776) Adam Smith • B. Welfare Definition (1890) Alfred Marshall • C. Scarcity Definition (1932) Lionel Robbins • D. Growth Definition (1948) P.A. Samuelson • E. Modern Definition (2011) A.C. Dhas
Wealth Definition (1776) • Adam Smith, who is regarded as Father of Economics, published a book titled ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ in 1776. • He defined economics as “a science which inquires into the nature and cause of wealth of nations”. • He emphasized the production and growth of wealth as the subject matter of economics.
ADAM SMITH Wealth of Nations (1776)
Features of Wealth Definition • Characteristics: It takes into account only material goods Exaggerated the emphasis on wealth It inquires the caused behind creation of wealth • Criticisms: It considered economics as a dismal or selfish science. It defined wealth in a very narrow and restricted sense. It considered only material and tangible goods. It gave emphasis only to wealth and reduced man to secondary place.
Welfare Definition (1890): • In 1890, Alfred Marshall stated that “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 with the use of material requisites of wellbeing”. • It is on one side a study of wealth; and on the other side, a study of human welfare based on wealth.
ALFRED MARSHALL Principles of Economics (1890)
Features of Welfare Definition • Characteristics: It is primarily the study of mankind. It is on one side a study of wealth; and on other side the study of man. It takes into account ordinary business of life – It is not concerned with social, religious and political aspects of man’s life. It emphasises on material welfare i.e., human welfare which is related to wealth. It limits the scope to activities amenable to measurement in terms of money • Criticisms: It considers economics as a social science rather than a human science. It restricts the scope of economics to the study of persons living in organized communities only. Welfare in itself has a wide meaning which is not made clear in definition.
Scarcity Definition (1932 • According to Lionel Robbins: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” • He emphasized on ‘choice under scarcity’. In his own words, “Economics ,,, is concerned with that aspect of behaviour which arises from the scarcity of means to achieve given ends.”
LIONEL ROBBINS An Essay on the Nature and Significance of Economic Science (1932)
Features of Scarcity Definition • Characteristics: Economics is a positive science. New concepts: Unlimited ends, scarce means, and alternate uses of means. It emphases on Choice – A study of human behavior It tried to bring the economic problem which forms the foundation of economics as a social science. It takes into account all human activities. • Criticisms: It does not focus on many important economic issues of cyclical instability, unemployment, income determination and economic growth and development. It did not take into account the possibility of increase in resources over time. It has treated economics as a science of scarcity only.
Growth Definition (1948) • According to Prof. Paul A Samuelson “Economics is the study of how men and society choose with or without the use of money, to employ the scarce productive resources which have alternative uses, to produce various commodities over time and distribute them for consumption now and in future among various people and groups of society. It analyses the costs and benefits of improving pattern of resource allocation”. • This definition introduced the dimension of growth under scarce situation.
PAUL A SAMUELSON Economics: An Introductory Analysis (1948)
Features of Scarcity Definition • Characteristics: It is not merely concerned with the allocation of resources but also with the expansion of resources. It analysed how the expansion and growth of resources to be used to cope with increasing human wants. It is a more dynamic approach. It considers the problem of resource allocation as a universal problem. It focused on both production and consumption activities. It is comprehensive in nature as it is both growth-oriented as well as future-oriented. It incorporated the features of all the earlier definitions • Criticisms: It assumes that economics is relevant for scarcity situations and it ignored surplus resource conditions.
Modern Definition of Economics (2011) • According to Prof.A.C.Dhas, “Economics is the study of choice making by individuals, institutions, societies, nations and globe under conditions of scarcity and surplus towards maximizing benefits and satisfying their unlimited needs at present and future”. • In short, the subject Economics is defined as the “Study of choices by all in maximizing production and consumption benefits with the given resources of scarce and surplus,
A. C. DHAS Modern Definition of Economics (2011)
Features of Modern Definition • Characteristics: • It takes into account all the earlier definitions – wealth, welfare, scarcity and growth. • It covers both micro and macro aspects of economics. • It considers both production and consumption activities. • It emphasises Choice Making dimension as crucial in economics. • It aims at obtaining maximum benefits with given resources • It is suitable in conditions of both scarcity and surplus. • It takes in to account the present and future –Time dimension – Growth dimension. • It is relevant in the context of globalisation and sustainable development.
In Sum • A review of all these definitions and their evolution indicate that the core of the subject economics is ‘choice making’. • It is a subject concerned about achieving growth by optimizing the given resources, based on choices. • The evolution of the definition of economics has taken 235 years, with the origin of Adam Smith in 1776.
– Adam Smith (1776) emphasized on wealth (Production Activity), – Alfred Marshall (1890) focused on (Production and Consumption Activities), – Lionel Robbins(1932) highlighted the problem of scarcity (Choices under scarcity), – Paul A Samuelson(1948) focused on production and consumption activities and achieving growth under scarcity (choices under scarcity and growth), – A.C.Dhas(2011) gave emphasis on choice making in maximizing production and consumption benefits under scarce and surplus, and achieving growth (choices under scarcity and surplus, and growth).
• The core of economics is ‘Choices’ • The fundamental economic activities are production and consumption • The aim of economics is optimizing given resources (both scarce and surplus) and achieving growth
REFERENCES • Dhas AC (2011): http://economicscripts.blogspot.in / 2011/08/ modern-definition-of-economics.html • Marshal, Alfred (1949): Principles of Economics, Macmillan and Co. Limited, London (Originally published in 1890). • Robbins, Lionel (1952): An Essay on the Nature and Significance of Economic Science, Macmillan and Co. Limited, London.(Originally published in 1932) • Samuelson, Paul A (1948): Economics: An Introductory Analysis, McGraw-Hill, USA. • Smith, Adam (1937): An Inquiry into the Nature and Causes of the Wealth of Nations, The Modern Library, New York, (Originally published in 1776).
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