compare and contrast between wealth, welfare and scarcity definitions of economics
Answers
The following points highlight the top four definitions of Economics. The definitions are: 1. General Definition of Economics 2. Adam Smith’s Wealth Definition 3. Marshall’s Welfare Definition 4. Robbins’ Scarcity Definition.
1. General Definition of Economics:
The English word economics is derived from the ancient Greek word oikonomia—meaning the management of a family or a household.
It is thus clear that the subject economics was first studied in ancient Greece.
What was the study of household management to Greek philosophers like Aristotle (384-322 BC) was the “study of wealth” to the mercantilists in Europe between the sixteenth and eighteenth centuries.
Economics, as a study of wealth, received great support from the Father of economics, Adam Smith, in the late eighteenth century.
Since then, the subject has travelled a long and this Greek or Smithian definition serves our purpose no longer. Over the passage of time, the focus of attention has been changed. As a result, different definitions have evolved.
These definitions can conveniently be grouped into three:
(i) Smith’s Wealth definition;
(ii) Marshall’s Welfare definition; and
(iii) Robbins’ Scarcity definition.
2. Adam Smith’s Wealth Definition:
The formal definition of economics can be traced back to the days of Adam Smith (1723-90) — the great Scottish economist. Following the mercantilist tradition, Adam Smith and his followers regarded economics as a science of wealth which studies the process of production, consumption and accumulation of wealth.
His emphasis on wealth as a subject-matter of economics is implicit in his great book— ‘An Inquiry into the Nature and Causes of the Wealth of Nations or, more popularly known as ‘Wealth of Nations’—published in 1776.
According to Smith:
“The great object of the Political Economy of every country is to increase the riches and power of that country.” Like the mercantilists, he did not believe that the wealth of a nation lies in the accumulation of precious metals like gold and silver.
To him, wealth may be defined as those goods and services which command value-in- exchange. Economics is concerned with the generation of the wealth of nations. Economics is not to be concerned only with the production of wealth but also the distribution of wealth. The manner in which production and distribution of wealth will take place in a market economy is the Smithian ‘invisible hand’ mechanism or the ‘price system’. Anyway, economics is regarded by Smith as the ‘science of wealth.’
Other contemporary writers also define economics as that part of knowledge which relates to wealth. John Stuart Mill (1806-73) argued that economics is a science of production and distribution of wealth. Another classical economist Nassau William Senior (1790-1864) argued “The subject-matter of the Political Economics is not Happiness but Wealth.” Thus, economics is the science of wealth. However, the last decade of the nineteenth century saw a scathing attack on the Smithian definition and in its place another school of thought emerged under the leadership of an English economist, Alfred Marshall (1842-1924).
3. Marshall’s Welfare Definition:
Alfred Marshall in his book ‘Principles of Economics published in 1890 placed emphasis on human activities or human welfare rather than on wealth. Marshall defines economics as “a study of men as they live and move and think in the ordinary business of life.” He argued that economics, on one side, is a study of wealth and, on the other, is a study of man.
Emphasis on human welfare is evident in Marshall’s own words: “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 with the use of the material requisites of well-being.”
Thus, “Economics is on the one side a study of wealth; and on the other and more important side, a part of the study of man.” According to Marshall, wealth is not an end in itself as was thought by classical authors; it is a means to an end—the end of human welfare.