Definitions of Economics

Wealth, Welfare, Scarcity, Growth and Modern Definitions of Economics

A. Wealth Definition (1776): 

Adam Smith, who is regarded as Father of Economics, defined economics as “a science which enquires into the nature and cause of wealth of nations”. He emphasized the production and growth of wealth as the subject matter of economics.

Characteristics:
It takes into account only material goods

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.

B. Welfare Definition (1890):

According to A. 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 the use of material requisites of well being”.

Characteristics:

It is primarily the study of mankind.

It is on one side a study of wealth; and on other side 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.

C. 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 alternate uses.”

Characteristics:
Economics is a positive science.

Concepts: Unlimited ends, scarce means, and alternate uses.

It emphasises 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.

D. Growth/Development 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”.

Characteristics:

It is not merely concerned with the allocation of given resources but also with the expansion of resources, tries to analyze 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.

It is both growth-oriented as well as future-oriented.

Criticism:

It assumes that economics is relevant for scarcity situations.

It ignored surplus resource conditions.

E. Choice Making/Modern Definition of Economics (2011)

According to Prof.A.C.Dhas, “Economics is the study of choice making by individuals, institutions, societies, nations and world under conditions of scarcity and surplus towards maximizing benefits and satisfying their unlimited  present and growing future needs.”

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, for present and future needs.”

Characteristics:

It takes into account earlier definitions.

It covers both micro and macro aspects of economics.

It considers both production and consumption activities.

It emphasises Choice Making dimension of economics.

It aims at obtaining maximum benefits with given resources

It is suitable in conditions of both scarcity and surplus.

It takes into account the present and future i,e., time dimension.
It incorporates the characteristics of all the earlier definitions.