ECONOMICS FOR ENGINEERSUNIT – ITopic – I DEFINITION OF ECONOMICS – VARIOUS DEFINITIONS
What is Economics?
Economics is a popular, useful and significant social study. It studies economic activitiesof a man. Economic activities are those activities, which are concerned with the efficientuse of such scarce means as can satisfy the wants of man. Human wants are unlimited, inthe sense, that as soon as one want is satisfied another crops up. Most of the means of satisfying these wants are limited, because their supply is less than demand. These meanshave alternative uses; there emerge a problem of choice. Everybody has to make a choiceregard to the use of his scarce means so that he may get maximum satisfaction fromthem. In short, Economics is the study of those activities of human beings, which areconcerned, with the satisfaction of unlimited wants by utilizing limited resources.Economics is not concerned with lifeless matter, as is the case with natural science like physics and chemistry.
Evolution of Economics:
The term ‘Economics’ is derived from two words of Greek language, namely, Oikos(Household) and Nemein (to manage) meaning thereby Household management. Earlier ii used to be called as political economy. As a scholarly subject, the study of economics is barley 200 years old. The form of economics studies today is shaped by ADAM SMITH,the founder of modern Economics. His famous book, “ an enquiry into nature and causesof wealth of nations:” was published in 1776.In 1933, Prof. Ragnar Frisch, the famous economist of Oslo University Norway, dividedthe study of economics into two parts-1.Microeconomics also known as Price Theory2.Macroeconomics also known as Theory of Income and Employment.
Definition of Economics:
It is difficult to give an accurate definition of economics. A test of good definition is thatit delimits boundaries of the subject clearly and correctly. In the words of Seligman, “Economics has suffered more than any other discipline from the malaise of polemicsabout definitions”. In this respect Barbara Wootton’s remarks, “ whenever six economistsgather there are seven opinions”, appears to be quite pertinent.There are two distinct approaches of the economists in respect of the definition of economics:1
1.No need of defining economics
According to some modern economists the subject of economics has been growingcontinuously. It will therefore be improper to limit its growth to the confines of a givendefinition.
2.Necessity of defining economics
Most of the economists agree with a view that defining economics is a must as it becomes possible to study of a subject, knowledge of it scientifically and properly. Nobel laureateProf. Samuelson observes, “Beginners often wants a short definition of economics and inresponse to this demand there is no shortage of supply”.In order to facilitate the study, definitions of Economics have been broadly divided intofour parts:1)Wealth Definition – Adam Smith2)Welfare Definition – Marshall3)Scarcity Definition – Robbins4)Growth Oriented Definition – Samuelson
ADAM SMITH DEFINITION OF ECONOMICS AS SCIENCE OF WEALTH
According to classical Economists like Adam Smith, J.B. Say, Walker, J.S. Mill etc.economics is a subject that studies nature of wealth and its production, consumption,exchange and distribution etc.
Definitions:
•
Adam Smith, “Economics is an enquiry into the nature and causes of wealth of nations”.
•
J.B. Say, “ Economics is the science which treats Wealth”.
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Walker, “ Economics is the body of knowledge which relates to wealth”.
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Senior, “ The subject Treated by political economics is not happiness but wealth”.
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J.S. Mill, “ Economics is the practical science of production and distribution of wealth”.2
Features
1)
Economics is the study of wealth only.
It deals with consumption, production,exchange and distribution. It gives primary place to wealth and secondary place tostudy of man.2)
Nature or Meaning of Wealth.
Only such material commodities constitutewealth are scarce and useful. Material goods are those goods which can be seen or touched, for example cloth, furniture etc. Non – material goods like services andfree goods like air and water are not wealth.3)
Causes of Wealth
. Economics seeks to investigate the causes that lead to increaseof wealth. There are two ways of increasing wealth:a.By increasing the supply of goods through large – scale production made possible by saving the commodity b.By increasing the demand for goods through extension of market.4)
Economic man
The supporters and followers of wealth definition of economicshave imagined such a man who is fully aware of his self – interest and who makes persistent efforts to achieve his selfish ends to the maximum. Such a man is calledeconomic man.
Merits:
The main merit of wealth definition is that it has helped develop economics as anextensive and independent study concerning problems of wealth. Economics had notdeveloped as an independent and important study before 1776. Previously economicsused to be treated as a study dealing with wealth getting, trade and agricultural activitiesof the state. According to wealth definition the purpose of the study of economics is toincrease the prosperity of both individual and the state.
Criticisms:
i.
More emphasis on wealth
This definition has given more importance to wealththan to man. Wealth takes precedence over man. In fact, wealth is a means tosatisfy man’s wants. Man, not wealth should have been given greater importance.ii.
Narrow meaning of wealth
According to this definition wealth means onlytangible goods such as apple, furniture, desk, fan etc. Non – material goods or services like that of doctor, nurse, lawyer etc. have been excluded from it.iii.
Concept of Economic Wealth
Wealth definition of economics is based on theconcept of economic man. But according to Marshall and his followers such aseconomic man who works for his selfish motives alone is not found in real life.Economics is therefore is a study of real social human being and not of economicman.3
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