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Definitions of economics

From Wikipedia, the free encyclopedia

There are a variety of modern definitions of economics. Some of the differences may reflect
evolving views of the subject itself or different views among economists.[1]

The earlier term for 'economics' was political economy. It is adapted from the French
Mercantilist usage of conomie politique, which extended economy from the ancient Greek term
for household management to the national realm as public administration of the affairs of state.[2]
Sir James Steuart (1767) wrote the first book in English with 'political economy' in the title,
explaining that just as:

Economy in general [is] the art of providing for all the wants of a family, [so the science
of political economy] seeks to secure a certain fund of subsistence for all the inhabitants,
to obviate every circumstance which may render it precarious; to provide every thing
necessary for supplying the wants of the society, and to employ the inhabitants ... in such
manner as naturally to create reciprocal relations and dependencies between them, so as
to supply one another with reciprocal wants.[3]

The title page gave as its subject matter "population, agriculture, trade, industry, money, coin,
interest, circulation, banks, exchange, public credit and taxes".[3]

The philosopher Adam Smith (1776) defines the subject as "an inquiry into the nature and causes
of the wealth of nations," in particular as:

a branch of the science of a statesman or legislator [with the twofold objective of

providing] a plentiful revenue or subsistence for the people ... [and] to supply the state or
commonwealth with a revenue for the publick services.[4]

J.B. Say (1803), distinguishing the subject from its public-policy uses, defines it as the science of
production, distribution, and consumption of wealth.[5] On the satirical side, Thomas Carlyle
(1849) coined 'the dismal science' as an epithet for classical economics, in this context,
commonly linked to the pessimistic analysis of Malthus (1798).[6] John Stuart Mill (1844) defines
the subject in a social context as:

The science which traces the laws of such of the phenomena of society as arise from the
combined operations of mankind for the production of wealth, in so far as those
phenomena are not modified by the pursuit of any other object.[7]

The shift from the social to the individual level appears within the main works of the Marginal
Revolution. Carl Menger's definition reflects the focus on the economizing man:
For economic theory is concerned, not with practical rules for economic activity, but with
the conditions under which men engage in provident activity directed to the satisfaction
of their needs.[8]

William Stanley Jevons, another very influential author of the Marginal Revolution defines
economics highlighting the hedonic and quantitative aspects of the science:

In this work I have attempted to treat Economy as a Calculus of Pleasure and Pain, and
have sketched out, almost irrespective of previous opinions, the form which the science,
as it seems to me, must ultimately take. I have long thought that as it deals throughout
with quantities, it must be a mathematical science in matter if not in language.[9]

Alfred Marshall provides a still widely cited definition in his textbook Principles of Economics
(1890) that extends analysis beyond wealth and from the societal to the microeconomic level,
creating a certain synthesis of the views of those still more sympathetic with the classical
political economy (with social wealth focus) and those early adopters of the views expressed in
the Marginal Revolution (with individual needs focus). Marshall's inclusion of the expression
wellbeing was also very significant to the discussion on the nature of economics:

Political Economy or 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 wellbeing. 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 man.[10]

Lionel Robbins (1932) developed implications of what has been termed "[p]erhaps the most
commonly accepted current definition of the subject":[11]

Economics is a science which studies human behaviour as a relationship between ends

and scarce means which have alternative uses.[12]

Robbins describes the definition as not classificatory in "pick[ing] out certain kinds of
behaviour" but rather analytical in "focus[ing] attention on a particular aspect of behaviour, the
form imposed by the influence of scarcity."[13]

Some subsequent comments criticized the definition as overly broad in failing to limit its subject
matter to analysis of markets. From the 1960s, however, such comments abated as the economic
theory of maximizing behavior and rational-choice modeling expanded the domain of the subject
to areas previously treated in other fields.[14] There are other criticisms as well, such as in scarcity
not accounting for the macroeconomics of high unemployment.[15]

Gary Becker, a contributor to the expansion of economics into new areas, describes the approach
he favors as "combin[ing the] assumptions of maximizing behavior, stable preferences, and
market equilibrium, used relentlessly and uninchingly."[16] One commentary characterizes the
remark as making economics an approach rather than a subject matter but with great specificity
as to the "choice process and the type of social interaction that [such] analysis involves."[17]
John Neville Keynes regarded the discussion leading up to the definition of economics more
important than the definition itself.[18] It would be a way to reveal the scope, direction and
troubles the science faces.

A recent review of economics definitions includes a range of those in principles textbooks, such
as descriptions of the subject as the study of:

the economy

the coordination process

the effects of scarcity

the science of choice

human behavior

human beings as to how they coordinate wants and desires, given the decision-making
mechanisms, social customs, and political realities of society.

It concludes that the lack of agreement need not affect the subject-matter that the texts treat.
Among economists more generally, it argues that a particular definition presented may reflect the
direction toward which the author believes economics is evolving, or should evolve


Economics is the science that deals with the production, allocation, and use of
goods and services. It is important to study how resources can best be
distributed to meet the needs of the greatest number of people. As we are more
connected globally to one another, the study of economics becomes extremely
important. While there are many subdivisions in the study of economics, two
major ones are macroeconomics and microeconomics. Macroeconomics is the
study of the entire system of economics. Microeconomics is the study of how the
systems affect one business or parts of the economic system.

History of Economics

The first writings on the subject of economics occurred in early Greek times as
Plato, in The Republic, and Aristotle wrote on the topic. Later such Romans as
Cicero and Virgil also wrote about economics.

In medieval times the system of feudalism dominated. With feudalism, there was
a strict class system consisting of nobles, clergy and the peasants. In the system,
the king owned almost all the land and under him were a series of nobles that had
land holdings of various sizes. On these landholdings were series of manors.
These were akin to large farming tracts in which the peasants or serfs worked the
land in exchange for protection by the nobles.

Later the system of mercantilism predominated. It was an economic system of the

major trading nations during the 16th, 17th, and 18th centuries, based on the idea
that national wealth and power were best served by increasing exports and
collecting precious metals in return. Manufacturing and commerce became more
important in this system.

In the mid eighteenth century, the Industrial Revolution ushered in an era in which
machines rather than tools were used in the factory system. More workers were
employed in factories in urban areas rather than on farms. The Industrial
Revolution was fueled by great gains in technology and invention. This also made
farms more efficient, although fewer people were working the farms. During this
time the idea of "laissez faire" became popular. This means that economies work
best without lots of rules and regulations from the government. This philosophy
of economics is a strong factor in capitalism, which favors private ownership.

In the nineteenth century, there was reaction to the "laissez-faire" thinking of the
eighteenth century due to the writings of Thomas Malthus. He felt that population
would always advance faster than the science and technology needed to support
such population growth. David Ricardo later stated that wages tend to settle at a
poor or subsistence level for most workers. John Stuart Mill provided the
backdrop for socialism with his theories that supported farm cooperatives and
labor unions, less competition. These theories were brought to a high point by
Karl Marx who attacked the capitalistic, "laissez-faire" theories of competition
and instead favored socialisms, marked more government control and state
rather than private ownership of property.

Another important idea at this time was the change in how items are valued.
While formerly an item's value stayed the same according to what the item was,
now the worth of an item was determined by how many people wanted the item
and how great the supply of the item was. This was the beginning of the laws of
supply and demand.

In the first half of the twentieth century, John Maynard Keynes wrote about
business cycles - when the economy is doing well and when it is in a slump. His
theories led to governments seeking to put more controls on the economy to
prevent wide swings.

After World War II, emphasis was placed on the analysis of economic growth and
development using more sophisticated technological tools.
In recent years, economic theory has been broadly separated into two major
fields: macroeconomics, which studies entire economic systems; and
microeconomics, which observes the workings of the market on an individual or
group within an economic system. In the later twentieth century such ideas as
supply side economics which states that a healthy econonomy is very necessary
for the health of the nation and Milton Friedman's ideas that the money supply is
the most important influence on the economy were favored.

In the twenty-first century, the rapid changes and growth in technology have
spawned the term "Information Age" in which knowledge and information have
become important commodities.

Definition of economics for Students

1. : the science concerned with the making, selling, and using of goods and services Hint:
Economics can be used as a singular or a plural in writing and speaking.