What is Economics ?

ECONOMICS

Economics is an old as human beings as it studies the life of human beings living in a

• Society, 
• Country or 
• World.

ORIGIN OF WORD ECONOMICS.
The word economics is based on two Greek words:

i. OIKOS.
Meaning more or less household on family or state, and

ii. NOMOS.
Meaning rules or natural laws on the laws made by the state.

DEFINITION OF ECONOMICS.
There are three points of views regarding the definition of economics.

CLASSICAL VIEW.                                                   
Economics is a science of wealth.
                             

NEO CLASSICAL VIEW.
Economics is a science of welfare.

MODERN VIEW.
Economics is a science of scarcity and choice.


1 - CLASSICAL VIEW OF ECONOMICS.

Professor Adam Smith, a Scottish economist (known as the father of economics) and the advocate of classical point of view of economics discussed the definition of economics in his prominent book “An enquiry into the nature and causes of wealth of nations” in 1776 in the following words.

“Economics is a science of wealth which studies the production, consumption, exchange and distribution of wealth of nations”.

FEATURES.
The main features of the classical definition of economics are as under.

• PRODUCTION of wealth by the four factors of production i.e.
                  a. Land
                  b. Labour.
                  c. Capital.
                  d. Enterprise.

• CONSUMPTION of wealth by the.
  
   a) Individual and household sector to fulfill their necessities, comforts and luxuries,
   b) Business, industrial and corporate sector in the reproduction of goods and services and expansion of the organization,
  c) Government and public sector to run the administration and for the growth and development of
                 i. Primary sector - The sector, which contains the activities directly related to the natural resources, is called primary sector of economy. i.e. agriculture, forestry, fishing, plantation, and farming,
                 ii. Secondary sector - The sector, which relates to the production of goods is called secondary sector of economy. i.e. industry, construction, and energy production, and                          
                 iii. Tertiary sector - The sector, which relates to performing services is called tertiary sector of economy. i.e. banking and finance, insurance, transport and communication, trade and commerce, and information technology of the economy.

• EXCHANGE of wealth at
  a) national and
  b) international level
  in performing the business and foreign exchange transactions.

• DISTRIBUTION of wealth among the factors of production i.e.
  a. Rent.
  b. Wage.
  c. Interest.
  d. Profit.

CRITICISM.

The main points of criticism of the classical point of view of economics are discussed below.

a) It gives an idea about the production of wealth by using fair or unfair means, which is unrealistic.
b) It does not give any importance on the welfare of human beings by the use of wealth.

2 - NEO CLASSICAL VIEW OF ECONOMICS.

Professor Alfred Marshall, an English economist in his book “Principles of Economics” in 1890, presents the neo classical view of economics in the following words.

“Economics is a science of welfare which studies the behaviour of mankind in ordinary business of life, it examines that part of individual and social actions of a man which are closely connected with the attainment and with the use of material requisites of well being”.

FEATURES.

The main features of the neo classical definition of economics are as under.
a. It is a study of human beings i.e. ordinary person.
b. In their day to day activities i.e. in normal life.
c. It examines the individual and social behaviour of people i.e. their actions and reactions.
d. In the attainment of goods and services which provides material welfare to them.

CRITICISM.

The main points of criticism of the neo classical point of view of economics are discussed below.
a) It deals with the behaviour of the people living in the society, which narrows the scope of economics.
b) It deals in those activities, which provide material welfare, which is unrealistic in real world.
c) It deals in the use of those goods, which provides welfare, but in real society it is not true.

3 - MODERN POINT OF VIEW OF ECONOMICS.

The modern point of view of economics is presented by Professor Lionel Robbins, an English economist, in his book” An essay on the nature and significance of economic science” in 1932 in the following words.

“Economics is a science of scarcity and choice which studies the human behaviour as a relationship between multiple wants and scarce means which have alternative uses”

FEATURES.

The main features of modern definition of economics are as under.

a) Human wants are unlimited in number.
b) Human wants changes with the time and compete with each other.
c) Human resources are limited.
d) Human resources have alternative uses.

In other word we can say modern point of view of economics is based scarcity approach, which leads toward the choice.

SCARCITY.
Scarcity is a situation where the availability of resources, products or services is less than their demand in the economy. Scarcity leads to a problem of choice.

CHOICE.
Choice is the preferences of individuals, households and firms about the selection of a commodity or service among available option or alternatives.

PRICE. 
Price is the value of a commodity or a service expressed in terms of money.

CRITICISM.
The main points of criticism of the modern point of view of economics are discussed below.

a) The ethical point of economics is ignored.
b) The purpose of human action is ignored in this point of view.
c) In this definition economics is treated as a pure science, which narrows its scope.

Kindly Share Your Valuable feedback and don't forget to use social bookmarking widgets to spread the info!!