The term ‘Economics’ is derived from the Greek word ‘Oikonomia’. ‘Oikonomia’ means ‘Household Management’. Greek philosopher Aristotle said, Economics is the science of managing a household. But over time ‘economy’ is no longer limited to Aristotle’s ‘science of managing the household’.
Kautilya, the most famous scholar in Ancient India, wrote a book titled ‘Arthashastra’ can be mentioned; Although Kautilya talks about the practice of Economics. Although a book on Economics was written in the ancient time, modern scholars think that Economics is completely a modern science.
Definition of Economics
Different types of definition of Economics
Different economists have defined Economics in different ways and those definitions of Economics can be divided into three categories.
The three categories of the definitions of Economics are-
- Science of Wealth
- Science of Welfare
- Science of Scarcity
Adam Smith, David Ricardo, and John Stuart Mill define Economics as the ‘Science of Wealth’. These classical economists belonged to the late eighteenth century.
Chief among those who called Economics the ‘Science of Welfare’ was Alfred Marshall. Alfred Marshall is called the father of modern Economics. In addition, economists such as Fisher, Pigou, Davenport, Cannon, Arrow have called Economics as the ‘Science of Welfare’. This class of economists are called neoclassical economists.
Professor Lionel Robbins is the main proponent of the third type of definition— Economics: The Science of Welfare. The definition given by Lionel Robbins is considered by many to be the most scientific. Although his definition of Economics is not flawless, its acceptance has been growing steadily. Economists such as Prof. Lionel Robbins, Crearncross have called Economics the ‘Science of Scarcity’.
Some of the definitions of Economics by some authors are mentioned below:
Adam Smith’s definition of Economics
Adam Smith was a Scottish philosopher and is widely considered as the first modern economist in the world. Adam Smith defines Economics as an inquiry into the nature and causes of the wealth of nations— it is actually reflected from his book.
Adam Smith is called the father of Economics. He wrote a book called ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ in 1776 and gave an idea about the basic issues of Economics. The topic of discussion was how wealth is produced and how it benefits people. Adam Smith placed huge importance on wealth.
Marshall’s definition of Economics
Alfred Marshall was a British economist. The main focus of Marshall’s definition of economy is the daily activities of people related to scarcity.
In his book ‘Economics of Industry’ published in 1892, Marshall said, ‘Economics deals with the common daily activities of human life’.
Here ‘ordinary activities of man’ means how much he earns and how he spends that earned money to meet his various needs.
Cannon, Arrow, Pigou and other economists agree with Marshall’s statement.
Definition of Economics by Lionel Robbins
One of the world’s best social science universities, London School of Economics and Political Science (LSE), Lionel Charles Robbins (Lionel Charles Robbins, Baron Robbins) said in his book ‘Nature and Significance of Economic Science’, “Economics is the infinite scarcity of people and Discusses human behavior in relation to alternative usable finite resources.”
Researchers found 3 characteristics in Professor Lionel Robbins’ definition. These are:
- infinite scarcity
- limited resources, and
- alternative uses of resources.
Every man’s wants are infinite or limitless. When one human deficiency is met, another deficiency immediately arises. This lack of man creates problems and he makes constant economic efforts to deal with these problems. It is from this sense that human economic activity arises.
Wealth has a special meaning in Economics. Goods that have utility have exchange value; That is, supply is limited, transferable and has externalities, called resources. Human resources are very limited compared to infinite scarcity. People face economic problems due to scarcity of resources. Again, as resources are limited, one has to choose which of the various shortages are essential.
Alternative uses of resources
Lionel Robbins’ definition emphasizes alternative uses of scarce resources. Materials of production are interchangeable. Human scarcity is infinite; But production materials or resources are limited. Therefore, how to meet the infinite scarcity with the help of finite resources is one of the main topics of economic discussion.
The same production materials or resources can be used to meet multiple shortages. For example, both paddy and jute can be cultivated on a piece of land, but not together. Jute cannot be cultivated if paddy is cultivated. That is, it is not possible to meet multiple shortages at the same time with limited resources. So alternative use of resources becomes necessary. That is why man has to choose which of his unlimited needs is necessary and the chosen lack has to be met by alternative usable resources.
Scope or Subject Matters of Economics
There are many differences of opinion among economists about the scope or content of Economics. The scope or content of Economics is discussed below.
Economics is a social science
Economics deals with the behavior and functions of socialized people; Here Economics deals with only those activities which are involved in money-income and money-expenditure by discussing or analyzing such activities. The behavior and activities of outcasts are not the subject of Economics.
ome subjects of other sciences are included in Economics
Economy sometimes needs help from other things. There are many economic topics that require the help of political science, psychological science, ethics, sociology etc. to arrive at a decision.
For example: If the income tax is progressive, what will be the mentality of the taxpayers can be known with the help of psychological science.
The main goal of Economics is to eliminate scarcity
How people manage their scarcity is the subject of Economics. Socialized man faces infinite scarcity in his social life. But resources are extremely limited compared to infinite scarcity.
Stoneum and Hague say that Economics is the science of dealing with scarcity and scarcity problems.
How people generate wealth with limited resources and how to alleviate their scarcity and achieve overall welfare through fair distribution of these resources is the main topic of discussion in Economics.
In view of the above discussion, it is clearly evident that the subject or scope of Economics is very broad. Some economists have defined its scope in a broad sense and some in a narrow sense. According to Adam Smith, it is the work of Economics to give an account of the nature and cause of the wealth of nations. Alfred Marshall argued that the subject of Economics is the daily activities of people. On the other hand, according to Professor Lionel Robbins, the practice of dealing with scarcity problems is central to Economics.
Many economic problems can be solved by applying economic laws in practice. It is possible to find out all the solutions related to production, consumption, distribution, government finance, banking and monetary system, market system, commodity pricing, population, international trade etc. by applying economic theory. Therefore, the scope of the economy is also wide.