DEFINITION: Economics
A. Wealth
Adam Smith, who is regarded as Father of Economics, defined economics as “a science which
enquires into the nature and cause of wealth of nations”.
There is no one definition of Economics which has a general acceptance. The formal
roots of the scientific framework of economics can be traced back to classical economists.
Features of Wealth Definition
• Characteristics: It takes into account only material goods Exaggerated the emphasis on wealth
It inquires the caused behind creation of wealth
• Criticisms: It considered economics as a dismal or selfish science. It defined wealth in a very
narrow and restricted sense. It considered only material and tangible goods. It gave emphasis
only to wealth and reduced man to secondary place.
B. Welfare Definition
According to A. Marshall “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 material requisites of wellbeing”.
• Characteristics: It is primarily the study of mankind. It is on one side a study of wealth; and
on other side the study of man. It takes into account ordinary business of life – It is not
concerned with social, religious and political aspects of man’s life. It emphasises on material
welfare i.e., human welfare which is related to wealth. It limits the scope to activities amenable
to measurement in terms of money
• Criticisms: It considers economics as a social science rather than a human science. It restricts
the scope of economics to the study of persons living in organized communities only. Welfare in
itself has a wide meaning which is not made clear in definition.
C. Scarcity Definition
According to Lionel Robbins: “Economics is the science which studies human behavior as a
relationship between ends and scarce means which have alternate uses.”
Features of Scarcity Definition
• Characteristics: Economics is a positive science. New concepts: Unlimited ends, scarce
means, and alternate uses of means. It emphases on Choice – A study of human behavior It tried
to bring the economic problem which forms the foundation of economics as a social science. It
takes into account all human activities.
• Criticisms: It does not focus on many important economic issues of cyclical instability,
unemployment, income determination and economic growth and development. It did not take
into account the possibility of increase in resources over time. It has treated economics as a
science of scarcity only.
D. Growth Definition
According to Prof. Paul A Samuelson “Economics is the study of how men and society choose
with or without the use of money, to employ the scarce productive resources which have
alternative uses, to produce various commodities over time and distribute them for consumption
now and in future among various people and groups of society. It analyses the costs and benefits
of improving pattern of resource allocation”.
Features of Growth Definition
• Characteristics: It is not merely concerned with the allocation of resources but also with the
expansion of resources. It analyzed how the expansion and growth of resources to be used to
cope with increasing human wants. It is a more dynamic approach. It considers the problem of
resource allocation as a universal problem. It focused on both production and consumption
activities. It is comprehensive in nature as it is both growth-oriented as well as future-oriented. It
incorporated the features of all the earlier definitions
• Criticisms: It assumes that economics is relevant for scarcity situations and it ignored surplus
resource conditions.
E. Modern Definition
According to Prof.A.C.Dhas, “Economics is the study of choice making by individuals,
institutions, societies, nations and globe under conditions of scarcity and surplus towards
maximizing benefits and satisfying their unlimited needs at present and future”.
In short, the subject Economics is defined as the “Study of choices by all in maximizing
production and consumption benefits with the given resources of scarce and surplus,
Features of Modern Definition
Characteristics:
• It takes into account all the earlier definitions – wealth, welfare, scarcity and growth.
• It covers both micro and macro aspects of economics.
• It considers both production and consumption activities.
• It emphasizes Choice Making dimension as crucial in economics.
• It aims at obtaining maximum benefits with given resources
• It is suitable in conditions of both scarcity and surplus.
• It takes in to account the present and future –Time dimension – Growth dimension.
• It is relevant in the context of globalization and sustainable development.
