Question

Compare and contrast various definitions of Economics.

Answer 1

• Adam Smith – Wealth definition:

1. Adam Smith [1723 – 1790], in his book “An Inquiry into Nature and Cause of Wealth of Nations” [1776] defines “Economics as the science of wealth”
2. He explains how a nation’s wealth is created and increased.
3. He considers that the individual in the society wants to promote his own gain and in this process, he is guided and led by an “invisible hand”
4. Adam Smith favours the introduction of the “division of labour” to increase the quantum of output.
5. Severe competition in factories and society helps in bettering the product.
6. The supply force is very active and a commodity is made available to the consumers at the lowest price.

• Alfred Marshall – Welfare definition:

1. Alfred Marshall [1842 – 1924] in his book “Principles of Economics” [1890] defines Economics thus “Political Economy” or Economics as a study of mankind in the ordinary business of life.
2. It examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being.
3. Thus, it is on one side a study of wealth and on the other and more important side, a part of the study of man”.

The important features of Marshall’s definition are:

1. Economics does not treat wealth as the be-all and end-all of economic activities.
2. The man promotes primarily welfare and not wealth. ‘
3. The science of economics contains the concerns of ordinary people who are moved by love and not merely guided or directed by the desire to get the maximum monetary benefit.
4. Economics is a social science. It studies people in society who influence one another.

• Lionel Robbins – Scarcity definition:

1. Lionel Robbins published the book “An Essay on the Nature and Significance of Economic Science” in 1932.
2. According to him, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”.

The major features of Robbins’ definition:

1. Ends refer to human wants. Human beings have an unlimited number of wants.
2. On the other hand, resources or means that go to satisfy the unlimited human wants are limited or scarce in supply.
3. The scarce means are capable of having alternative uses.
4. An individual grades his wants and satisfies first his most urgent want.
5. Economics, according to Robbins, is a science of choice.

• Samuelson’s – growth definition: Paul Samuelson defines Economics as “the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses to produce various commodities over time, and distribute them for consumption, now and in the future among various people and groups of society”.

The major implications of this definition are as follows:

1. Samuelson makes his definition dynamic by including the element of time in it.
2. Samuelson’s definition is applicable also in a barter economy.
3. His definition covers various aspects like production, distribution and consumption.
4. Samuelson treats Economics as a social science.
5. Samuelson appears to be the most satisfactory.