Major Definitions of Economics

We can group various definitions under four heads -

 Wealth Definition
 Welfare Definition
 Scarcity Definition
 Growth –oriented Definition

Wealth Definition
Adam Smith- Known as the Father of Economics - Scottish Economist
Adam Smith traditional or Classical Economist Defined Economics as –
“A science which enquires into nature and causes of wealth of nations.”
His famous book- An enquiry into nature and causes of wealth of nations.

J.B. Say the most noted French economist, regarded economics

“ as the science which treats of wealth.”

The main features of wealth definition of economics are:

Study of wealth:
According to the wealth definition, economics is the study of wealth only. The main object
of economics is to examine how people earn wealth and spend it. Wealth has been made the
focal point of economics by the classical economists.
Causes of Wealth:
Economics seeks to examine causes which lead to increase of wealth. Wealth can be
increased by its production and accumulation.
Economic Man:
The wealth definition of economics thinks about an economic man who is aware of self-
interest. The economic man tries to achieve his self- interest by increasing his material gains
through acquisition of wealth.
Criticism:
Too Much Emphasis On Materialism – Thomas Carlyle and John Ruskin defined
economics as- pig science, bread and butter science, a dismal science, gospel of mammon
etc. They alleged that by defining economics as a science of wealth, classical economists
have ignored the higher values of life, such as happiness, love, affection etc. But the classical
economist emphasized wealth because it is the basis of physical existence and the basic
means of raising the standard of living and achieving economic growth.
Narrow view of Wealth:
Wealth according to them, consists of tangible goods. They have excluded non-material
goods or services like health and education from the definition of wealth.
Secondary Place to Man:
The classical economists have reduced man to a secondary place in the study of economics.
In fact, the ultimate objective of economics is to promote human and social welfare and
wealth is only a means to achieve this end.
It Ignores the Problem of Scarcity:
The definition of wealth ignores the basic cause of economic activity, namely relative
scarcity of economic resources.

Welfare Definition:
“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 the use of material requisites of well-being. Thus, it is, on one side, a study of
wealth and, on the other and more important side, a part of the study of man.”
Main features of Marshall’s Definition:
Study of Mankind – Marshall placed primary emphasis on the study of mankind. He
believed that wealth is not an end by itself, but it is only a means to human welfare. Thus,
according to Marshall, it is the study of man which occupies the central place in the study of
economics.
Study of Ordinary Business of Life-Economics according to Marshall, is not concerned
with the social, religious and political aspects of man’s life. The ordinary business of life is
concerned with the income-earning and income – spending activities of mankind. Economics
studies how people earn material means of their livelihood and how they spend these for the
satisfaction of their well- being.
Study of Material Welfare: Economics is not concerned with total human welfare, but it is
concerned with material welfare only i.e. that part of human welfare which is related to
wealth . Economics studies those activities which are “ most closely connected with the
attainment and the use of material requisites of well-being.”
Emphasis on requisites of Well-being: The material things like food, clothing and shelter
are very important economic objects. Material needs are very basic needs which must be
fulfilled before one can think of other needs.
Exclusion of Non-economic Activities: Marshall has limited the scope of economics to
those forces and activities which can be measured in terms of money. That’s why political,
social, cultural and religious activities of human beings are excluded from the purview of
economics as they are not subject to measurement in terms of money.
Scarcity Definition – Lionel Robbins
“Economics is the science which studies human behaviour as a relationship between ends
and scarce means which have alternative uses.”

Four Fundamental Characteristics of Human Life According to Robbins

1. Unlimited Ends (Wants) – Ends here refer to human wants. A fundamental fact of
economic life is that human wants are unlimited. They are not only large in number,
but they tend to multiply over time. It is not possible to satisfy all the wants. However,
an important fact about human wants is that all wants are not of equal intensity. They
differ in their importance. We have to make a choice between more important and
less important wants.

2. Scarce Means - The second fundamental fact of economic life is that means to satisfy
human wants are limited. Means refer to various productive resources such as land,
labour, capital etc.

3. Alternative Uses of Means - The third fact which Robbins’ definition emphasizes is
that means of production or resources can be put to alternative uses. For example, A
piece of land can be used to produce vegetables, wheat etc. and a laborer can be
used either in the fields or factories. Therefore, the society has to make a decision as
how to allocate the scarce resources in the production of different commodities. If
the resources were of specific or single use in that case, they had to be used only for
the production of that one commodity.
4. Choice - Since the resources are scarce and are capable of alternative uses and the
human wants are unlimited, people have to make a choice in allocating these resources
for producing different commodities on the basis of their relative importance.
Therefore, the need for choice arises because of scarcity. Thus, the human behaviour ,
uses some form of choice, in using the scarce means in producing goods in such a way
so as to maximize the gains in.
5. According to Robbins Economics is a science. It contains a systematic knowledge
with regard to human efforts in solving economic problems arising out of limited
means and unlimited wants.

MERITS
1. Logical Explanation of Economic Problems – Robbins’ definition clearly brings
out the root cause of economic problems, which forms the foundation of economic
as a social science. According to Robbins’ definition, economic problem arises due
to scarcity of means in relation to their demand.
2. Universal nature -The problem of scarce means and unlimited wants is universal.
Rich or poor, traditional as well as modern economies face the same problem.
3. Human Science - Robbins points out that economics is a human science and not
merely a social science. This is because the problem of choice and resource
allocation is faced by an individual irrespective of whether he is a member of
organized community or is living in isolation.
4. Wider View of Economic activity - According to Robbins, economics studies all
economic activities – whether it is the production of tangible (material goods) or
services – provided they involve scarcity means in relation to ends (wants)
5. Positive Science - Robbins emphasizes that economics is a science. Economics is a
systematic body of knowledge which provides framework within which one can
analyze economic problems faced by the society. His definition imparts economics
the nature of positive science because it regards economics to be neutral between
ends. According to Robbins, economics does not tell the individuals as to what
ends should be achieved and what ends should be sacrificed. Economics enables
the individuals to take rational decisions, but decisions have to be taken by the
individuals themselves.

CRITICISM
1. Narrow View of Economics – There is general agreement among economists
at present that economics is not only a positive but also a normative science.
Positive science is concerned with what it is and normative science is concerned
with what it should be. Thus the critics felt that the economists have to advise
on policy matters, economics cannot remain neutral between ends.
2. Restricted subject matter- Robbins has restricted the subject matter of
economics. By restricting it to the theory of product and factor pricing. It does
not focus on the important economic issues of economic instability,
unemployment, income determination and economic growth and development.
3. Static Definition - According to critics, Robbins has taken a static view of the
scarcity problem. His definition does not take into account the possibility of
increase in resources over time. With economic growth, availability of resources
and their efficiency increases.
4. Economics as a Science - Robbins has treated economics as a science only.
But, in fact it is both a science and an art. Scarcity definition of economics has
converted economics into a pure science, a science which is concerned with
formulation of economics laws only. But economists these days believe that
economics is also concerned with the solution of economic problems.
5. Economic Problem May not Always Arise from Scarcity- Economic problem
may also arise from abundance as well. For example, during the Great
Depression of 1930s, it was not the scarcity but abundance of goods
(overproduction) which created economic problem in various capitalist
countries of the world.
Growth Oriented Definition By Paul A. Samuelson
“Economics is the study of how people and society choose, with or without the use
of money, to employ the scarce production resources, which have alternative
uses, to produce various commodities over time and distribute them for
consumption now or in the future among various people and groups in the
society.” Paul A. Samuelson

MAIN FEATURES
 Emphasis of Economic Problem – Samuelson also puts emphasis on the problem
of choice rising out of the scarce means and unlimited wants. Thus, this definition
gives a realistic explanation of economic problem.
 The problem of scarcity of resources is not merely confined to the present but
also to the future. Wants are not static; they are dynamic. Wants grow and
multiply over time. Along with wants, resources also increase over time. Hence,
we are not merely concerned with the allocation of given resources, but also with
how the expansion and growth of resources to be used to cope with increasing
human wants.
 Prof. Samuelson has adopted a dynamic approach to the study of economics by
taking economic growth as an integral part of economics. This has widened the
subject matter of economics.
 Prof. Samuelson has rightly emphasized that the problem of resource allocation
is a universal problem in case of both barter economies as well as money using
exchange economies.
 Samuelson’s definition of economics is very comprehensive. It is growth-oriented
as well as future oriented. It has incorporated Marshall’s welfare aspect as well
as Robbins scarcity and choice aspect.
 Samuelson’s definition has broadened the subject matter of economics so as to
include consumption, production, exchange, distribution and economic growth.
 Of all the definitions of economics discussed above, Samuelson’s definition is
considered to be the most satisfactory. It presents the problem of choice in
dynamic setting. It has also widened the subject matter of economics. It has also a
universal appeal. It is also applicable to all types of economies – capitalist,
socialist and mixed.