Scope of Economics

• The scope means fields of study. The

scope is very wide . It comprises of
the :
• (I) Study of subject matter
• (II) Nature of Economics
• (III) Relationship with other sciences
• (IV) Limitations of the study
 Nature of Economics
The nature of economics deals with
the question that whether economics
falls into the category of science or
arts.
Various economists have given their
arguments in favor of science while
others have their reservations for
arts.
 Economics as a Science

• To consider anything as a science, first,

we should know what science is all about?
‘Science’ has its origin in terms ‘Scientia’
of latin language meaning ‘to know’.
“ Science is a systematic body of
knowledge concerning the relationship
between the cause and effect relationship
of a particular phenomena .”
 Economics as a Science

In science, facts and figures are collected and are

analyzed systematically to arrive at any certain
conclusion. For these attributes, economics can be
considered as a science.
However, economics is treated as a social science
because of the following features:
 It involves a systematic collection of facts and figures.
 It is based on the formulation of theories and laws.
 It deals with the cause and effect relationship.
These points validate that the nature of economics is
correlated with science. Just as in science, various
economic theories are also based on logical reasoning
 Economics-a Positive
Science
A positive science is one that
studies the exact and actual situation
of a subject.
“ Positive science confines itself to
accurate description of
phenomena ,it explains what is, how
it works and what are its effect.”
It is simply a study of what , how and
why?
Any suggestions has no place in
 Arguments in favor of
Economics being a Positive
Science
In the opinion of Lord Robbins, if
economics is to confine itself to
being a positive science ,it will enjoy
the following advantages :
• More Logical
• More Efficiency
• More Unanimity
• More Neutrality
• Formulation of theories
 Economics- a Normative
Science
• A normative science is one that aims
at setting the ‘norms’ or ‘ideals’.
• “ A normative science or a regulatory
science is a body of systematized
knowledge relating to criteria of what
ought to be and concerned with the
ideals as distinguished from the
actual. The object of normative
science is the determination of ideals
.”
Arguments in favor of Economics
being a Normative Science
Following arguments are advanced in
favor of economics being a
normative science.
• More Practical
• More Useful
• More Economical
• More realistic Approach
 Economics as an Art

It is said that “knowledge is science, action

is art.”
“ Art is the practical application of
knowledge for achieving definite ends.”
Economic theories are used to solve
various economic problems in society. As an
art, economics helps us in the solution of
our practical problems. Its study enables us
to know the best methods of achieving
economic ends.
 Arguments in favor of
Economics being an Art
Many economists consider as an art
on the following grounds:
• Solution of the Problems
• Realistic Situations
• Empirical Basis of Assumptions
• Verification of Economic theories
 Conclusion
• In words of Coosa ,“ science requires art,
art requires science, each being
complementary to each other.”
• Regarding the nature of
economics ,Chapman has said, “ economics
is positive science dealing with economic
facts as they are, a normative science
enquiring facts as they ought to be and an
art finding out the ways and means by
which the desired ends can be reached .’’
 Relationship with other
Sciences
• Economics is classified as a social science.
This view makes economics an academic
relative of political science, sociology,
psychology and anthropology. All of these
disciplines study the behavior of human
beings individually and in groups.
• They study different subsets of the actions
and interactions on human beings. For this
reason they are sometimes termed as
behavioral sciences.
 Relationship with other
Sciences
• Economics and Psychology:
Economics is particularly concerned with consumption,
production and resource use by individuals and groups.
Economics is also concerned with the procures by which
households and firms make decisions about the use of
scarce resources.
• Inevitably, this definition of the ‘territory’ of economics
leads to some overlapping with the other disciplines.
Psychologists and economists share an interest in what
motivates people to take certain action.
• However the primary interest of economists lies in those
actions that are reflected in market activity or in
economic decisions made through government.
 Relationship with other
Sciences
• Economics and Sociology:
While sociologists are interested in all facts of
organized human activity, economists are interested
mainly in organized activities that related to the
production and consumption of goods and services.
As a general rule economists assume that individuals
pursue their self-interest and respond to various
signals or incentives in the light of that self-interest.
• Although this may seem obvious, it is somewhat
different viewpoint on human behavior from that of
psychologists and sociologists. This perspective often
leads economists to draw different conclusions.
 Relationship with other
Sciences
• Economics and Political Science:
Economics interacts with almost all other
academic disciplines. It is intimately
intertwined with current events, and it has a
significant effect on political events, both
domestic and international. Economics has
various things common with political science.
For example, in both subjects we teach public
finance, financial relations between the centre
of the study as also the economics of
planning.
 Relationship with other
Sciences
• Economics and Decision Sciences:
• Economics is also part of a group of disciplines called
decision sciences which includes some branches of
statistics, applied mathematics, operational research,
and some areas of management and engineering. All
of these disciplines deal with how individuals and
groups make decisions.
• Economists are specifically interested in those
decisions relating to production consumption and
resource use. As a decision science, economics is
closely related to business and management courses.
 Relationship with other
Sciences
• Economics and Statistics:
• One major function of an economist is to conduct research. The job
of the company economist is to investigate economic aspects of
various decisions Government agencies and private business firms
generate a vast array of economic statistics on such matters as
income, employment, prices and expenditure patterns. A two-way
street exists between statistical data and economic theory.
• Statistics can be used to test the consistency of economic theory
and measure the responsiveness of economic variables to changes
in policy. At the same time, economic theory helps to explain which
economic variables are likely to be related and why they are
linked. Statistics do not tell their own story.
• We must utilize economic theory to properly interpret and better
understand the actual statistical relationships among economic
variables.
 Relationship with other
Sciences
• Economics and Geography:
• There are some very simple ways in which geography
affects economics: for example, long distances and
difficult terrain affect the ability to distribute goods,
while factors like climate might affect the kind of goods
and services that people want. The distribution of natural
resources also has a huge affect on the economy.

But there are also human elements to economic

geography. For example, you might look at how
economic factors determine where and how people live,
such as when people move to places where they can get
a job more easily.
 Relationship with other
Sciences
• Economics and History:

Economic history provides one way to test

theory;
it forms essential material to making good
economic theory.
Economics therefore needs economic history.
And so academic economists need to engage
with our economic past to prepare the next
generation of economists.
Relevance of Economics in
Business Management