What is Economics\Definition of Economics

What is Economics:

Economics is the study of those activities of human beings which are concerned with the satisfaction of unlimited wants by utilizing limited resources.

The term economics was first of all used by Dr. Marshall in 1980 in his famous work “Principles of Economics”.

The form in which we study economics today is shaped by Adam Smith, the founder of Modern Economics, famous book “An Enquiry into the Nature and Causes of Wealth of Nations”.

Definition of Economics:

1) Wealth Definition
2) Welfare Definition
3) Scarcity Definition
4) Growth Oriented Definitions

Each of the above definition will be studied under four headings:

1) Definition
2) Features
3) Merits
4) Criticism

Wealth-Definition:

1) Definitions:

 Adam Smith: “Economic is an enquiry into the nature and causes of wealth of nations”.
 Walker: “Economics is the body of knowledge which relates to wealth”.
 J.S. Mill: “Economic is the practical science of the production and distribution of wealth”.
2) Features:
 Economics is a study of wealth only.
 Nature or meaning of wealth. (Material goods)
 Causes of wealth
 Economic man (who is fully aware of his self-interest and who makes persistent efforts to achieve his selfish ends to the maximum)


3) Merits:

It has helped to develop Economics as an extensive and independent study concerning problems of wealth.


4) Criticisms:

 More emphasis on wealth
 Narrow meaning of wealth
 Concept of Economic Man
 Neglect of Welfare
 Neglect of the problem of scarcity and choice
 Neglect of means to attain wealth.

Material Welfare-Definition:

1) Definitions:

According to 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 with use of material requisites of wellbeing”.

2) Features:
 Importance to the study of Man
 Study of social man (saints & monks are excluded)
 Ordinary business of life (Wealth getting & spending)
 Study of real man
 Material requisites (necessary, essential, required)
 Welfare

3) Merits
 More relevant than wealth definition
 Comprehensive
 Scientific

4) Criticisms
 Regarding Ordinary Business of Life
 Limited Scope
 Uncertain concept of Welfare
 Economics is a Human Science
 Impractical

Scarcity-Definition:

1) Definition:

 Lord Robbins: “Economics is a science that studies human behavior as a relationship between ends and scarce means which have alternative uses”.
 Scitovosky: “Economics is a science concerned with the administration of scare resources”.

2) Features:
 Unlimited wants or ends (Economic wants)
 Limited or scarce Means
 Alternative uses of means
 Wants differ in urgency
 Economic problem (Problem of choice making)
 Opportunity cost

3) Merits:

 Positive Science
 Study of human behavior (instead of study of a social man)
 Wider scope
 Universal

4) Criticisms:

 Ignores Social aspect of Economic Activities
 Economic is not natural as Regards Ends
 Very wide scope of Economics (should be concerned with economic activities only)
 Not only a positive science
 Impractical (W>M, how to make optimum use of mean to get Maximum satisfaction)
 Scarcity is not the cause of Economic problem (Unemployment takes place, when labor > demand)
 Use of words “means” & “ends” (Acquiring B.Tech. is an end of student. After achieving the same it becomes means to get job)

Growth-Oriented Definitions:

In terms of growth-oriented definitions, economics is concerned with the efficient use and allocation of scarce resources so as to accelerate the rate of economic growth and promote social welfare.
Basically, it is the combination of the merits of definitions given by Adam Smith, Marshall and Robbins.

1) Definitions:

According to Prof. Samsuelson, “Economics is the study of how people and society ends up choosing with or without use of money, to employ scarce productive resources that could have alternative uses, it produces various commodities over time and distributes them for consumption, now or in the future, among various persons and groups in society. It analyses costs and benefits of improving patterns of resource allocations”.


2) Features:

 Economic Resources (Study of economic resources)
 Efficient allocation of resources (choice making main problem)
 Full utilization of resources (full use & employment)
 Increase in resources (objective is to increase productivity of resources in future)

3) Merits:

 Realistic Explanation of economic problems
 Practical
 Universal
 Dynamic (not restricted to the present-day problems but it studies their future problems as well)

Author : Md Arfe Alam

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