School of Economics | Definition of Economics
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Definition of Economics

Definition of Economics:

It is necessary to define the subject which we want to study. Definition of a subject facilitates the understanding of its meaning, nature, characteristics and limitations. There­fore, it is necessary to begin the study of economics with its definition.

But it is difficult to provide a universally accepted definition of economics because the economists are divided on the question of definition of economics. J.N. Keynes remarked, “Political economy is said to have been strangled itself with definitions.” Mrs. Barabara Wooten has said, “Where six economists are gathered, there are seven definitions.”

Though the dispute of definition of economics has not yet come to an end, even an analytical study of all the available definitions is necessary to arrive at a conclusion.

Avail­able definitions of economics can be divided into four parts:

I—Wealth Definitions.


II—Welfare Definitions.

III—Scarcity Definitions.

IV—Growth Definitions.

I. Wealth Definitions:

Early classical economists defined economics as the science of wealth. Adam Smith, J.B. Say, F.A. Walker and other contemporary economists of 18th and early 19th centuries are the economists who defined economics as that part of knowledge which is related with wealth.

According to Them:

1. “Political Economy is a study of the nature and causes of the wealth of nations.”—Adam Smith

2. “Economics is the science which treats of wealth.” —J.B. Say

3. “Economics is that body of knowledge which relates to wealth.” —FA. Walker

Salient Features of Wealth Definitions:


Important features of wealth definitions may be summarised as follows:

1. Central point of the subject matter of economics is wealth.

2. Wealth occupies more important place than man.

3. Wealth is the only base of human pleasure.

4. An ordinary man is an economic man who performs economic activities motivated by his ‘self’ only.

5. Individual prosperity adds to national wealth and prosperity.

Criticisms of Wealth Definitions:

Wealth definitions have been sharply criticised on following grounds:

1. Wealth has been more emphasised than man. These definitions have confined economics to ‘gespel of mamon’, ‘science of bread and butter’, ‘a dismal science’.

2. These definitions imagined an ‘economic man.’ According to these economists, wealth is the only motivating force for all human activities. But this is wrong. A man is motivated by social feelings also, apart from wealth.

3. These definitions use the term ‘wealth’ in a narrow sense. According to these definitions, wealth includes only material goods. The fact is that wealth means all the goods and services that have utility, scarcity and transferability.

II. Welfare Definitions:

Alfred Marshall was the first economist to set at rest the criticisms of wealth definitions. He emphasised that man is not for wealth but wealth is for man. The view of Prof. Marshall was supported by Prof. Pigou, Cannon and Clark, etc.

According to Him:

“Economics is a study of mankind is the ordinary business of life. It examines that part of social action which is most closely connected with the attainment and with the use of material requisites of wellbeing.”

On the basis of above definition, it can be concluded that according to Prof. Marshall Economics is the study of material welfare of mankind.

Salient Features of Welfare Definitions:

1. Economics is the Study of Ordinary Business of Life:

Economics is the study of ordinary business of life. Ordinary business of life relates to those activities which are performed by an ordinary man for earning and using his income.

2. Economics is a Social Science:

Economics is a social science. It studies the economic problems of those individuals only who live in a well organised society.

3. Economics Studies only the Economic Activities:

Economics studies only those economic activities that promote material welfare of human being. Thus, non- economic activities are not included in the scope of economics.

4. Dominance of Man:

Welfare definitions have emphasised upon the importance of man. According to Prof. Marshall, man is not for wealth, wealth is for man. According to him, wealth is only a means and not an end. End is human welfare.

5. Economics is Both a Science and an Art:

According to Prof. Marshall, economics is a science as well as an art. Economics is a positive science because it studies the principles of human life in a systematic manner. It is a normative science also because it attempts at attaining material welfare. It is an art also because it develops the methods of attaining human welfare.

Criticisms of Welfare Definitions:

For a long time, welfare definitions of economics were accepted without criticisms and it was being felt that the problem of defining economics has come to an end. But this situation could not continue forever. In 1932, Prof. Lionel Robbins broke new grounds in defining economics in his book‘The Nature and Significance of Economic Science’.

Some of the important criticisms of welfare definitions are as follows:

1. The Classification of Human Activities into Economic and Non-Economic is Impracticable:

Welfare definitions classify human activities into economic and non- economic. Prof. Robbins was of the view that such distinction of human activities is illusory and impracticable because all human activities have an economic aspect.

2. The Classification of Material and Immaterial Welfare is Impracticable:

According to welfare definitions, economics is the science of material welfare. Prof. Robbins criticised this view on the ground that it is wrong to differentiate between material and immaterial welfare. He was of the view that human welfare is associated with both the material and immaterial means of welfare.

3. Economics is a Human Science, and not only a Social Science:

According to Prof. Marshall, economics is only a social science but the critics are of the view that it is a human science also not only a social science. Many laws of economics apply on those people also who do not live in well-organised society.

4. Illusory Meaning of Ordinary Business of Life:

According to Prof. Robbins, human activities cannot be classified as ordinary and extraordinary. Secondly, the study of economics cannot be confined to ordinary business of the life only because the activities of extra-ordinary business of life such as war, monopoly, imperfect competition etc., are essentially the subject matter of economics.

5. Welfare Definitions make Economics a Normative Science:

Prof. Robbins criticised welfare definitions on the ground that these definitions have made economics a normative science. He believed that it is not proper to relate economics with welfare. He remarked, “Whatever economics is concerned with, it is not concerned with the causes of material welfare as such.” According to him, economics is a positive science.

6. Narrow Scope of Economics:

Prof. Robbins criticised welfare definitions on the ground that these definitions have narrowed the scope of economics by excluding non-economic, immaterial and unsocial activities.

III. Scarcity Definitions:

Prof. Lionel Robbins not only criticised welfare definitions but also proceeded to give a new definition to economics. He gave his definition in his book ‘Nature and Significance of Economic Science’ published in 1932. According to him, “Economics is a science which studies human behaviour as a relationship ends and scarce means which have alternative uses.”

The views of Prof. Robbins were fully supported by many famous economists including Eric Roll, Cairn-cross, Friedman and Stigler etc.

Salient Features of Scarcity Definitions:

1. Human Wants are Unlimited:

Human wants are unlimited and the intensity of all the wants is different. Though a particular want can be satisfied at a particular time but as soon as one wants is satisfied, another crop up. Thus, a man is always surrounded by his wants. He can never satisfy all of his wants. Therefore, the need arises to choose between more and less urgent wants. It gives rise to the economic problems.

2. Means to Satisfy Human Wants are Scarce:

The resources available with every person are limited therefore; he is to choose rationally between limited resources and unlimited wants. A man has to decide which want to satisfy and which to leave. Then he is to decide which want should be satisfied first and which after some time. He has to see how best he can use his limited resources.

3. Scarce Resources have Alternative Uses:

The problem of unlimited wants and scarce resources becomes more serious because of the fact that scarce resources have alternative uses. These resources can be put to several alternative uses. If we want to use the given resources for a particular use, all other alternative uses of these resources will have to be given up. It gives rise to the problem of choice and a man has to choose the best possible uses of his resources.

4. Economics is a Human Science:

According to Prof. Robbins, economics is a human science. It studies the activities of all the persons, whether they are or they are not a part of society.

5. Economics is a Positive Science:

According to Prof. Robbins, economics is a positive science. According to him, economics is the science of resources and is not concerned with ends.

6. Analytical:

Scarcity definitions of economics are analytical. According to these definitions, economics studies the aspects related with choice and human activities. It is not confined to the study of some particular types of activities.

Criticisms of Scarcity Definitions:

Scarcity definitions have been criticised by many economists.

Important criticisms of these definitions are as under:

1. Economics is not only a Positive Science:

According to Prof. Robbins, economics is a positive science. But many economists like, Souter, Parson and Macfic etc., regard economics as a positive and normative science both.

2. Economics cannot be Neutral between Ends:

According to Prof. Robbins, economics is neutral between ends but it is not a real implication. Economics is concerned with human behaviour and therefore, it cannot be neutral between ends.

3. Economics without the Concept of Welfare and Measuring Rod of Money:

The definition of Prof. Robbins has been criticised on the ground that it establishes economics without the concept of welfare and measuring rod of money. The reality is that all the human activities are motivated to get welfare. Similarly, the science of economics is incomplete without measuring rod of money.

4. Economics is not only a Value Theory:

According to Prof. Robbins, economics is the study of allocation of resources. Thus, according to Robbins, economics has been confined only to a theory of value but the scope of economics is much wider than the allocation of resources and price theory. It should include the study of national income and employment also.

5. Economics is not only Micro Analysis:

According to Prof. Robbins, economics is concerned with individual behaviour of satisfying unlimited wants with scarce resources having alternative uses. Thus, economics has been confined to micro analysis only. But it is not true.

6. Robbins has Restricted and Widened the Scope of Economics:

Prof. Robbins has widened the scope of economics by giving his definition in terms of the problem of scarcity and choice. The problem of choice applies on all the human activities but all these cannot be included in the scope of economics.

7. Economics is not only a Science but an Art also:

According to Prof. Robbins, economics is only a science which aims at formulating economic principles only. But this is not a reality. These principles should be implemented properly for the welfare of human beings. Thus, economics is an art also.

8. Robbins has Imagined a Very Rational Man:

According to the definition of Prof. Robbins, a man allocated his scarce resources most efficiently so that he may satisfy most of his wants. Thus, Prof. Robbins imagines that a man always behaves rationally. But the practical experience of life does not prove this imagination.

IV. Growth Definitions:

Modern economists define economics in following manner:

“Economics is the study of how man 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.”

Thus, modern economists regard economics much more broadly. According to them, economics is concerned with suggesting the ways and means in which the available re­sources can be allocated rationally and in which these resources can be further increased so that maximum satisfaction of wants may be assured.

Comparison between the Definitions of Marshall and Robbins:

Which of the definitions of Prof. Marshall and Prof. Robbins is better is an alive controversy. Both the definitions are based upon different views.

A comparison of these definitions reveals the following facts:

1. The definition of Prof. Robbins is more scientific than that of Prof. Marshall because it provides a scientific base to the study of economics in the form of scarcity and choice.

2. The definition of Prof. Robbins is more logical than that of Prof. Marshall because it highlights a reality of life that human wants are unlimited and the resources to satisfy these wants are limited, that too with alternative uses.

3. According to Prof. Marshall, economics is only a social science but according to Prof. Robbins, economics is a human science.

4. According to Prof. Marshall, economics studies only the economic activities while according to Prof. Robbins, economics studies both the economic and non-economic activities.

5. According to Prof. Marshall, economics aims at increasing human welfare while according to Prof. Robbins economics is not concerned with human welfare.

6. According to Prof. Marshall, economics is both the science and art. According to Prof. Robbins economics is only a positive science and not an art.

7. The definition of Prof. Marshall is classificatory while the definition of Prof. Robbins is analytical.

Thus, it may be concluded that no definition of these two can be regarded as better. Theoretically, the views of Prof. Robbins are more justified but practically the views of Prof. Marshall are more practical.

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