Economics Definitions

Economics is the branch of social science that studies the production, exchange, distribution, and consumption of goods and services. In general economics is a subject which deals with human behaviour .

1. "Economics is an enquiry into the nature and causes of wealth of nations."- Adam Smith.

2. Economics is the science which treats of wealth. "-J.B. Say.In the above definition wealth becomes the main focus of the study of Economics. The definition of Economics, as science of wealth, had some merits. The important ones are:

(i) It highlighted an important problem faced by each and every nation of the world, namely creation of wealth.

(ii) Since the problems of poverty, unemployment etc. can be solved to a greater extent when wealth is produced and is distributed equitably; it goes to the credit of Adam Smith and his followers to have addressed to the problems of economic growth and increase in the production of wealth.

The study of Economics as a 'Science of Wealth' has been criticized on several grounds. The main criticisms leveled against this definition are;

(i) Adam Smith and other classical economists concentrated only on material wealth. They totally ignored creation of immaterial wealth like services of doctors, chartered accountants etc.

(ii) The advocates of Economics as 'science of wealth' concentrated too much on the production of wealth and ignored social welfare. This makes their definition incomplete and inadequate.

3. "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 the material requisites of well-being. Thus, it is on the one side a study of wealth and on the other and more important side a part of the study of the man", Alfred Marshall

4. Robbins gave a more scientific definition of Economics. His definition is as follows: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses".

The definition deals with the following four aspects:

(i) Economics is a science: Economics studies economic human behaviour scientifically. It studies how humans try to optimise (maximize or minimize) certain objective under given constraints. For example, it studies how consumers, with given income and prices of the commodities, try to maximize their satisfaction.

(ii) Unlimited ends: Ends refer to wants. Human wants are unlimited. When one want is satisfied, other wants crop up. If man's wants were limited, then there would be no economic problem.

(iii) Scarce means: Means refer to resources. Since resources (natural productive resources, man-made capital goods, consumer goods, money and time etc.) are limited economic problem arises. If the resources were unlimited, people would be able to satisfy all their wants and there would be no problem.

(iv)Alternative uses: Not only resources are scarce, they have alternative uses. For example, coal can be used as a fuel for the production of industrial goods, it can be used for running trains, it can also be used for domestic cooking purposes and for so many purposes. Similarly, financial resources can be used for many purposes. The man or society has, therefore, to choose the uses for which resources would be used. If there was only a single use of the resource then the economic problem would not arise.

5. "Economics is the body of knowledge which relates to wealth "-Prof. Walker.

6. ''Economics investigates the nature of wealth and the laws of production and its distribution, "-J.S. Mill

7. "The subject treated by political economics is not happiness, but wealth"-Prof. Senior

8. "Economics is 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 amongst various people and groups of society". Paul A. Samuelson

The above definition is very comprehensive because it does not restrict to material well-being or money measure as a limiting factor. But it considers economic growth over time.

These definitions have, thus, made wealth as the subject matter and central point of economics. To them, only and only important thing was wealth.

Nature or Meaning of Wealth:

The term 'wealth' in these definitions is used to signify those material goods which are scarce. Material goods are those goods which can be seen and touched, for example, cloth, furniture, book, gold, silver, etc. Non-material goods or services are those which cannot be seen or touched, for example, the services of a professor, lawyer, doctor, dancer, clerk, peon etc. are not considered as wealth and so remain outside the scope of the study of economics.

There is no one universally accepted answer to the question "What is economics?" Browsing the web, we will find various answers to the question:

  • The Economist's Dictionary of Economics defines economics as "The study of the production, distribution and consumption of wealth in human society

  • "Economics is the study of how individuals and groups make decisions with limited resources as to best satisfy their wants, needs, and desires".

  • Economics is a social science that studies how society chooses to allocate its scarce resources, which have alternative uses, to provide goods and services for present and future consumption.

  • "Economics is the social science that examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants."

Scarce and Limited resources:

below mentioned are the scarce resources, which are to be utilised carefully and to get maximum benefit and those are.

1. Land: Land is that factor of production which is freely available from nature. In it, not only on the surface of soil is included, but also all other free gifts of the nature below the surface and above the surface are included; for example, forests, minerals, fertility of soil, water, etc. According to Marshall, "Land means the material and the forces which nature gives freely for man's aid, in land and water, in air, light and heat." Land is also called a natural resource.

2. Labour [skilled]: Labour is a human factor of production. In it all those mental and physical activities of man are included which are performed in order to earn money. The services of a carpenter, black-smith, weaver, teacher, lawyer and doctor, etc., are called as labour according to economics.

3. Capital: Capital is that man-made factor of production which is used for more production. Factors like machines, tools, raw materials, buildings, railways, factories, etc., are called capital. The saving of a man when invested to earn will also be called capital.