ECONOMICS MEANING: Economics is the science that deals with production, distribution and consumption of goods and services

in a society. From a technical perspective, economics studies the process by which limited resources are allocated to satisfy infinite human wants, that is, how different societies allocate scarce resources optimally to satisfy the wants and needs of their members. Economics mainly deals with making choices about production, distribution and consumption of goods and services(commodities) to satisfy present and future needs of the society. Economics also deals with moneyhow it is created, and how its supply is regulated.1

Definition of economics: Every science or a branch of knowledge is concerned with a particular subject. Therefore, the question which a beginner is likely to ask is: What is the subject matter of economics? Therefore, economists have also tried to define the subject matter of economics. By defining the subject matter of economics they have tried to delimit the scope of economics and to distinguish it from other branches of knowledge.2 Perhaps there is no other science or a body of knowledge in regard to which there has been such a great controversy about its subject matter or its proper definition as about economics.3

1 2

Sivagnanam, Business Economics P. 3 Ahuja, H.L., Modern Economics, S.Chand, Ram Nagar, New Delhi, 2006, P. 3 3 Ahuja, H.L., Modern Economics, S.Chand, Ram Nagar, New Delhi, 2006, P. 3

Different economists have defined economics in their own words. The tragedy is that the views of one economist are not shared by the others. So there is no definition of economics which is acceptable to all the economists. Prof. J.M.Keynes has rightly remarked, Economics is said to have strangled itself with definitions. The difference of opinion regarding the definition of economics has led many economists to opine that it is neither necessary nor desirable to define economics. The prominent economists of this opinion are Maurice Dobb, Comet, and Gunnar Myrdal. They believe that economics is a dynamic subject; it is growing. As new ideas are discovered and old ones are revised, economics is acquiring new dimensions. Therefore, it is not possible to define economics in exact words. But Prof. Eric Roll is of the opinion that it is necessary to define a subject for scientific and systematic study. He says that as a farmer must know the boundaries of his farm before cultivating it, a student of economics must also know the definition of economics.4 After discussing some old famous definitions of economics, we shall give some modern definitions of economics. The set of definitions given by various economists fall into three broad classes, that viewed economics:

i) ii) iii)

As a science of wealth The science concerning material welfare of man A science dealing with the problem of allocation of scarce resources among competing ends.

Chopra, P.N., Principles of Economics, Kalyani Publishers, New Delhi, 2003, P.83

ADAM SMITHS DEFINITION OF ECONOMICS AS SCIENCE OF WEALTH The first view is associated with the name of Adam Smith and his disciples. They regarded Economics as a science which studied the process of production and consumption of wealth. The emphasis on wealth is contained in the very title of Smiths Book, An Enquiry into the Nature and Causes of the Wealth of Nations. The target object of the Political Economy of every country, wrote Smith, is to increase the riches and power of that country.5 David Ricardo, J.B. Say, Senior and Prof. Walker all supported views of Adam Smith. According to J.B.Say, Economics is the study of the laws which govern the wealth. Prof. Walker supported Adam Smiths Definition by saying, Economics is that body of knowledge which relates to wealth.

Main points of this type: 1) Economics is the study if wealth only. It deals with consumption, production, exchange and distribution. 2) Only such material commodities constitute wealth as are scarce and useful. 3) Economics studies the causes of wealth changes which means economic development. To increase wealth, production of material goods will have to be stepped up.

Chopra, P.N., Principles of Economics, Kalyani Publishers, New Delhi, 2003, PP.83-84

Criticism of the definition: Adam Smiths definition was severely criticized by social reformers and writers like Carlyle Ruskin and Maurice. Ruskin called economics a bastard science. Main criticisms were: i) Too much importance to wealth was given. Wealth was given the primary place and the welfare of individuals was given the secondary place. ii) In this definition the wealth only constituted the material goods that are scarce in nature and are useful. iii) iv) No difference between individual and social interests. No emphasis was given to the welfare of the individuals. No importance was given to the equal distribution of the income. v) It tells us about the ends i.e., earning of wealth but it does not tell us about the propriety means to earn the wealth. vi) It had defective logic. As the word whose meaning is not clear should not be used to define other things. The meaning of the wealth is not clear here. Therefore, it cannot be used to define economics.

MARSHALLS MATERIAL WELFARE DEFINITION Adam Smiths definition was criticised all over the world. People started thinking economics as the science of bread and butter only. Ruskin and Maurice called it a dismissal science as it encouraged money making. In order to save economics from this severe economics Marshall defined economics in his own words in 19th century in which more emphasis was given to the welfare of the individuals. Marshall in his book Principles of Economics

defined economics as Economics is the 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: 1. Study of Mankind: It is the study of economics activities of the individuals. Individuals perform different kind of activities. But economics the study of economics activities that promote material welfare. 2. Ordinary Business of Life: It is the study of the economic activities of the ordinary individuals only that promote material welfare but not of the extra ordinary individuals such as Sadhus. 3. It studies the personal and social actions of individuals that promote material welfare. 4. Welfare: It stresses on the material welfare only. This was the main difference in regard to Adams definition. Non material welfare was out of scope of this definition MERITS: 1. It was a classified definition. It classified the welfare into material and non material welfare and individuals into ordinary individuals and extra ordinary individuals. 2. Avoided criticism made against Adams Definition. It emphasised more on the welfare of the individuals by providing primary place to it. 3. Definition cleared the nature of economics by defining it as the social science.

4. It cleared the scope of economics. It studies the material activities of the ordinary men only. CRITICISM: Marshalls definition was quite popular until it was attacked by Lord Ribbons in 1932. Main criticisms were: 1. This definition restricted economics to study of man in ordinary business of life. But according to Robbins it is the study of economics problem of the all individuals. This problem is of scarce resources and unlimited wants which is faced by every individual whether rich or poor. Therefore, it is the study of all men whether ordinary or extraordinary. 2. It restricted the scope of economics to the material welfare of the individual only. The non material services of the doctors, singers, teachers which have economic value were out of the scope of this definition. 3. Welfare concept was not clear. Welfare changes according to place, time and circumstances. For a non smoker smoking is injurious to health and is therefore against his welfare but for a smoker smoking increases his welfare. 4. Definition was impractical in nature. His definition divided the welfare into material and non material and activities into economic and non economic which is not possible in practical world. 5. Definition was not analytical in nature. It did not tell us about the central problem of the economics. Definition was only classificatory in nature.

ROBBINS DEFINITION OF SCARCITY OF RESOURCES Robbins not only criticised Marshalls definition and other welfare definitions of economics but also provided a new definition which he considered to be more scientific and correct. He has given this definition in his famous book, An Essay on the Nature and Significance of Economic Science, which he brought out in 1931.6 He defined economics as, Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. MAIN FEATURES: 1. Robbins call wants as the ends. Those concerned with the consumption of goods and services may be called economic ends.7 These ends are unlimited; as one is satisfied many other grow up. It is not possible to satisfy all human needs. 2. Resources which can be used to satisfy human needs are limited in supply. We call such a resource limited whose supply is less than its demand. 3. Resources have alternative uses. Problem arises when the same resource can be used for multiple purposes for eg. Milk. 4. Problem of Choice. As resources are scarce every man has to make a choice in his present and future satisfaction of wants and in his allocation of resources.

6 7

Ahuja, H.L., Modern Economics, S.Chand, Ram Nagar, New Delhi, 2006, P. 8 Chopra, P.N., Principles of Economics, Kalyani Publishers, New Delhi, 2003, P.86

MERITS: Robbins has found many admirers. We can list the major merits of Robbins Definition as under: 1. An analytical definition. Definition made study of economics

analytical. He provided the reasons for the study of economic problem which is the problem of scarcity. 2. Points out the central problem of the economics. Marshalls Definition was defective due to failure of the definition in identifying the central problem. Robbins can be credited with removing this defect. 3. Universally applicable. Robbins definition is applicable everywhere. It is concerned with unlimited wants and limited resources which is the problem facing every country. Whether it is rich or poor, socialist or capitalist, the problem is everywhere the same. 4. Robbins delimited the scope of economics by defining the subject matter of economics. Wherever a choice problem arises due to the resources being scarce and the wants being much more, an economic study is called for. This is the subject matter of economics. CRITICISM: No doubt, Robbins has made economics a scientific study and his definition has become very popular among the economists. This definition brings to light the basic economic problem which confronts the society8. But Robbins definition has also been criticised on several grounds: 1. Concealed concept of welfare. Robbins rejected the Marshalls definition for welfare content. But the Robbins definition itself includes the welfare concept but in a slightly twisted way. His

Ibid P. 7

definition includes the maximum satisfaction concept which is nothing else than the welfare concept. 2. Self Contradictory. Firstly he contended that economics is neutral as regards ends. Secondly, he considers economics as the science of choice. These two contentions are mutually contradictory. 3. Not applicable in rich countries. Economic problems of the some of the country may be due to plentiful incomes rather than scarcity. 4. Inapplicable in socialist countries. This definition is not applicable in the countries which are entirely under the control of government as socialist economy is a planned economy where collective choice is more important than individual choice. 5. This definition does not study the theory of economic growth and development. These theories tell us how national income and per capita income of a country increase over a long period of time and what factors cause such increases.

SOME RECENT DEFINITIONS OF ECONOMICS: For a long time Robbins definition was accepted as a proper one but these days it is felt that Robbins definition does not indicate adequately the scope and subject matter of economics. Robbins definition does not cover the theory of income and employment determination as well as the theory of economic growth. Therefore some modern economists have tried to give new definitions of economics which cover the theory of income and employment determination as well as of economic growth. The modern economists define economics as: "A science of growth and efficiency".

According to Samuelson: "Economics is the study of how people and society end up closing, with or without the use of money, to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption now or in the future among various persons and groups in society". Prof. Henry Smith has given more correct definition. According to him, economics is the study of how in a civilised society one obtains the share of what other people have produced and of how the total product of society changes and is determined.9 By civilised society it is meant that there are some legal institutions as well as rights of property and other things in the society. Characteristics of this definition: i) It contains the problem of distribution of income among the various members of the society. ii) It includes how total national income and employment are determined. iii) It also incorporates the theory of economic growth.

It is therefore more adequate definition. But this definition has neglected the problem of allocation of resources and pricing of products which has been the concern of economics for a long time. In our view the subject matter of the science of economics has grown so wide and vast that it is extremely difficult to put it in a nutshell of a definition. It is because of the difficulties in putting the whole subject matter of economics in

Smith, Henry, A Prospect of Political Economy(1968), P. 20

a definition of a few words that Jacob Vine has given a practical definition of economics. Jacob Vine said Economics is what economists do. In other words, what economics is, can be better understood from what economists do and what they have been doing. Thus what economics is about or, in other words, what is the subject matter of economics can be better known by spelling out the questions economists ask and have been asking.

END NOTES: Wikipedia.org Ahuja, H.L., Modern Economics, S.Chand, Ram Nagar, New Delhi, 2006 Chopra, P.N., Principles of Economics, Kalyani Publishers, New Delhi, 2003 Sivagnanam, Business Economics Jain, T.R., Business Economics, V.K. Publications, New Delhi 2010