Economics: Economics is the social science
that analyzes the production, distribution, and consumption of goods and
services. The term economics comes from the Ancient Greek “oikonomia”, where
‘oikos’ means "house" and `
nomos’ means “custom" or "law". In this sense “oikonomia” means
"management of a household, or "rules of the house".
There are a
variety of modern definitions of economics. Some of the differences may reflect
evolving views of the subject or different views among economists.
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 macroeconomic level: Economics is a
study of man in the ordinary business of life. It enquires how he gets his
income and how he uses it. Thus, it is on the one side, the study of wealth and
on the other and more important side, a part of the study of man.
Lionel Robbins (1932) developed implications of
what has been termed "perhaps the most commonly accepted current
definition of the subject". Economics is a science which studies human
behaviour as a relationship between ends and scarce means which have
alternative uses.
Lastly we
can say that, the theories, principles, and models that deal with how the
market process works. It attempts to explain how wealth is created and
distributed in communities, how people allocate resources that are scarce and
have many alternative uses, and other such matters that arise in dealing with
human wants and their satisfaction.
Q2. Discuss the subject-matter of
Economics (Nov’11).
The subject
matter of Economics is the economic behaviour of man which is highly
unpredictable. Money which is used to measure outcomes in Economics is itself a
dependent variable. It is not possible to make correct predictions about the
behaviour of economic variables.
Various
economists have different views about the subject matter of economics. Adam
smith, in his book “An Inquiry into the nature and causes of Wealth of Nations
which was published in 1776 defined economics as an enquiry into the nature and
causes of wealth of Nations in other words it lays importance on wealth rather
than welfare of human beings. It shows to a man uses wealth produces wealth and
how wealth is exchanged and distributed in the economy.
According to
the 19th century economists Alfred Marshall, “Economics is the study of mankind
in the ordinary business of life. It enquires how he gets his income and how he
uses it. 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.
It is on the
one side a study of wealth and on the other and more important side is a part
of the study of man”. Professor Marshall has shifted the emphasis from wealth
to man. Alfred Marshall gives priority to human beings and placed wealth at
secondary level.
If we talk
about Robbins concept of subject matter of economics, according to Robins, it
studies behaviour of a man and relates it between ends and scarce resources
which have alternative uses. According
to Robbins wants are unlimited in number while means are scarce, not only
limited but alternative uses. The main
problems arises that how to utilize the scarce resource to fulfill the
unlimited wants is a subject matter of economics.
According to
modern economist like Peterson and Samuelson the subject matter of economics is
a science that studies only those activities of human being which he undertakes
to maximize his satisfaction by making proper use of scarce resources.
All these
economists have combined in their definition the essential elements of the
definitions by Marshall and Robbins. According to modern economists the
efficient allocation and use of scarce means results in increase in economic
growth and social welfare is promoted.
Q3. State and explain the definition
of Economics provided by Alfred Marshall.
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 macroeconomic level:
"Economics
is a study of man's action in the ordinary business of life it inquires how he
gets his income and how he uses it. It examines that part of individual and
social actions which is mostly closely connected with the attainment and with
the use of material requisites of well being. Thus economics is on one side a
study of wealth and on the other and important side a part of the study of man
".
Features of Marshall’s definition:
1) Economics is interested in human welfare
not in wealth
2) It is a social science. A person who is
cut away from the society is not the subject of study of economics.
3) Economics does not study of all the
activities of man. It only studies ordinary business of life.
4) Economics is a concerned with the ways in
which a man works on natural resources for the satisfaction of material wants.
Criticisms of Marshall’s Definition: In 1931, Lionel Robbins published
his book “Nature and Significance of Economics Science”, following are the
grounds of his criticism of neoclassical economics definition by Alfred
Marshall.
1. Narrow
down the Scope of Economics: According to Prof. Lionel Robbins the use of the
word “Material” in Marshall’s definition narrows down the scope of economics.
There are many things in the world, which are non material but they are very
significant for promoting human welfare.
For example
the services of doctors, lawyers, teachers, engineers, professors etc. these
thing satisfy our wants and are scarce in supply. If we exclude these services
from the economics, then its cope will be very much restricted. Therefore, in
the actual study of economics principles, both the material and immaterial
things are taken into accounts.
2.
Classificatory Type of Definition: Marshall’s definition was rejected by Robins
as being classificatory because it makes a distinction between material and
immaterial welfare and says that economic is concerned only with material
welfare.
3. Relation
between Economics and Welfare: Robbins hardly criticized Marshall’s definition
due to the reason of the relation between economics and welfare. Robins said
that there are many activities which do not promote human welfare but they can
satisfy their wants and therefore, can be regarded economic activities, for
example the manufacturing and sale of alcohol goods or opium etc. here Robins says
“whey talk of welfare at all? Why not throw away the mask along altogether?”
4. Welfare
is a Vague Concept: Professor Robins raised another objection about “Welfare”.
In Robbins opinion, welfare is a vague concept. It is purely subjective. It
differs from man to man, from place to place and from age to age. Robins says
that what is the use of a concept which cannot be quantitatively measured and
on which two persons cannot agree as to what is conducive to welfare and what
is not.
5. Involves
Value Judgment: Robins object that the word “Welfare” involves value judgment.
According to Robbins the work of the economists is not to judge the value of a
commodity whether it promotes welfare or not. Economists are forbidden to pass
any decision.
6.
Impractical: The definition of economics by Alfred Marshall is of theoretical
nature. Alfred Marshall definition of economics is not possible in practice to
divide human activities.
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