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uc Economics definition & Typesc
uc ›ntroduction of Sir Alfred Marshallc
uc Alfred Marshall¶s Definition Of economics c
uc jharacteristics Of definitionc
uc jriticism On Alfred¶s Definitionc
uc jonclusion c
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c
   
Economics is the study of how we the people engage ourselves in production,
distribution and consumption of goods and services in a society. We can define goods and
services as
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Goods are the things which are produced to be sold.c
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Services involve doing something for the customers but not producing goods.
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Normative economics refers to 
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, e.g. what ought to be
the goals, of public policy. Normative statements cannot be tested.
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The analysis of facts and behavior in an economy OR
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The English economist Alfred Marshall (1842-1924) was the founder of the "new
economics." He rejected the traditional definition of economics as the
"science of wealth" to establish a discipline concerned with social
welfare.

Alfred Marshall was born in   on July 26, 1842, the son of

a cashier at the Bank of England. At jambridge he abandoned plans
to enter the Anglican clergy and graduated in mathematics. Elected to
a jambridge fellowship, Marshall planned then to pursue molecular
physics. ›nstead, he was drawn first to metaphysics, particularly
ethics, which he studied in Germany for a year, then to psychology,
and finally to economics as a practical means for implementing ethics.

›n 1868 Marshall's college, St. John's, established a special lectureship for him in moral
science. ›n 1875 he returned from a study of trade protection in the United States to attempt
to make political economy a serious subject at jambridge. When, in 1877, he married Mary
Paley, a former student then lecturing in economics at Newnham, the women's college at
jambridge, he became ineligible to continue his fellowship. University jollege, Bristol, had
just been founded, and Marshall, a firm believer in extending adult educational opportunities,
agreed to become first principal and professor of political economy. ›n 1883 Marshall became
a fellow of Balliol and lecturer in political economy to students preparing for the ›ndian civil
service. Two years later he took the chair in political economy at jambridge. Until his
retirement in 1908, Marshall dominated a singularly influential school of economics, with
separate and tripos status after 1903. From 1890 until his death on July 13, 1924, Marshall
was the patriarch of the new economics.

›n 1890 Marshall's Principles of Economics was welcomed enthusiastically by economists

and a popular audience as a revolutionary work in economics. His other major works
were The Economics of ›ndustry (1879), written with his wife; Elements of Economics of
›ndustry (1892); and ›ndustry and Trade (1919). Besides his writing and dedicated teaching,
Marshall created the British Economics Association in 1890 (Royal Economics Society after
1902), and he directly influenced government policy on currency, prices, gold and silver,
fiscal affairs, poor relief, local taxes, and international trade.

The content and method of Marshall's economics were largely original, but his basic
assumptions were derived from the 19th-century belief that social reform depended initially
upon the reform of character. He never doubted that every man sought his own, or at least his
children's, best interest; that "work" purified human nature, stimulating personal and social
progress; or that capitalism would be inherently progressive if it was made more efficient.

Marshall's economic analysis began w ith the quasistatic, evolutionary institutions of free
enterprise and developed as a search for measurable regularities in economic phenomena.
Since money could be measured regularly, Marshall studied prices. His most important
technical contributions were in price and value analysis. The value of things, which he
recognized as necessarily relative and subjective, was expressed as money prices, reached
through an elastic play of forces behind demand and supply. "Utility," the power of goods
and services to satisfy consumers' wants, and demand fluctuated in relation to price. Price, in
turn, was determined both by the cost of production and by judgments about utility, the
two inseparable blades of the economic scissors. Utility, being subjective, was not
measurable, but it did reflect a psychological attitude critical in any economic activity. This
was typical of the "marginal disutility of labor," that point at which the worker decided that
he had nothing further to gain from additional work.

Nineteenth-century political economy ended and the new economics began with Marshall's
pioneering use of econometrics; his creation of economics as a rigorous discipline with its
own content and method; his attempt to unify competitive economic theories and practices;
and his belief in the evolutionary nature of economic knowledge.
Marshall's overweening influence led two generations of economists in Britain and America
to spend their professional lives discussing, restating, developing, interpreting, altering, and
questioning his doctrines and tools of analysis.


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Political Economy or Economics is a study of mankind in the ordinary business of life. ›t

examines that part of individual & social action which is most closely connected with the
attainment & with the use of material requisites of well-being.thus, it is on one side the study
of wealth and on the other important side it is the study of man.




 
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The definitions given by Welfare School of Economists have the following main 

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 Economics does not regard
wealth as the be all and the end all of the human activities. ›t is only a mean to the fulfillment
of an end which is human welfare. Welfare and not wealth is therefore, of primary
importance to man.
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 Economics is a study of an ordinary man who lives in free
society. A person who is cut away from the society is not the subject of study of Economics.

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 Economics does not study all the activities of
man. ›t is concerned with those actions which can be brought directly or indirectly with the
measuring rod of money.

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 Economics is concerned with the ways in which man
applies his knowledge, skill to the gifts of Nature for the satisfaction of his material welfare.




cMarshall¶s definition was criticized by   c " . He in his book #
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definitions of economics. These criticisms are summed as under:

1.Welfare is not measurable. ›t varies from individual to individual, person to person and age
to age. A thing may give pleasure to a person but it may be harmful for the others. There is
not any instrument for its measurement. Robbins criticizes the idea of welfare. ›t is difficult
to decide what welfare is and what not welfare is. There are many activities which do not
promote the human welfare but they are regarded economic activities e.g. the manufacturing
and sale of alcohol etc.

2. Marshall's definition has limited the scope of economics. According to him all those
activities which do not promote the material welfare are totally ignored. As they are
immaterial. Robbins does not think it right for the economists to confine their attention to the
study of material welfare, because in the actual study of economic principles, both the
material and immaterial are taken into account. Robbins rejected Marshall's definition as
being classificatory because it makes a distinction between material welfare and non-material
welfare and says that economics is concerned only with material welfare.

3. As Marshal said Economics is a study of mankind in the ordinary business of life. ›t is

difficult to know, what is the difference between ordinary course of business and extra
ordinary course of business?.

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For a long time, the definition of Economics given by Alfred Marshallcwas generally
accepted. ›t enlarged the scope of economics by taking emphasis that its studies wealth and
man rather than wealth alonec

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