t 1 , 1 , • • r• •I • • • • • ,. • I • t • • • • I ~ t • • - • • • ' • • • • • ' t • • --4 I I t •. , ., , ,,, .. r ," 1 " " " ' ' l 'Y , , . ,, _.,,,'-et.

J~
,.,.,. " , Y• , ~· 11

'J 0/Jtlt.ul 11c,mo111y tfi , aid t () hnv, , tra,,g/ed

1

11.,1/ wif11 rh1/lllitto11fi,'

1.2 EVOLUTJON OP eCONOMIC Por the fji:Jkc.t o( clear,, ut und ttrut,.rnJJ n~
THOUGHT and Jo~h:11J ,!xposl tlon, W'-~ cil n group vorioufJ
<ht(lnHlonfi of economt,5 1,rndar four hco(ja:
it li; Jmpurtant to undvr&lflnd lw w tl~0110mlcti h/il;; (1) wcoHh d<:finiU.c>n, (2) wel(u~ dllfinHlon,
duv~J!-)ped al3 11 dl~dpltrw, Lwunmritc (}tJ.CfJtfon~ n,g.t (3) ljcjm;lty udlnJtion cmi.J (4) gmwth..o1'1dnt~4
it!) uld u:t m:mkinJ . It lmpU~ta lhal lh\! prohj1,tork deHnltlon.
nw,1 loo must havo fbClld 80rrut of thclffl ,Joonomlc
,ss~. In the pMt, J.w.1.:momkl:i or P1.)litlrnl fkonomy, 1.3,1 WooJth DCJfJnliton- Adnm Smith
rHl it wo" rtlllud l,rfor~ 1890, (Qrmc:d part of Cloai,1,al economists Hke Adam SmHh, J,S, Mill,
the otJ1er dJs<:l plinot1 llkjj lo~ic'1 psycholo~y, Rk·nrJLJ, ~ nk,r tmJ otlwrs drfinad economl,s
polttiey,, ethlca, etr, Arltitotlt!, i-ho fomrnJtJ cn. .~k tHJ o sdenca of wealth, AJ am Smith, who ls
phil<>1,0phjr (384- 322 IJC), who Ii; r~wirded by P:1m,m11ly rnffflrd~d "" the father of cc:onom1cs,
()Om~ writers 06 the {Ina ecoru>mlit, w1u, bntlc;ally dcfin~d .:ro1\Qmki 06(:1 ,cfettc, whlclr e11qulre,
prt:o(!(:Upi~iJ with Ow gttfl.(Jral philosophy ut tJtlltc )11to the natu,, and cau,t, of wealtli of 11atlo,,,iJ
nnd l»ld~ty, Hut whlw doJn~ ~o, he did refor to ~ hlii famous book, An .Ct1qulry Into the Nature
tJ14 d4Rn1Uon and 6a1pe of 11eonomlcs. II~ defined and Cauars of 011 Wfalth of Notior,1, tw ~mphatJJSed
eco,wmlc, a, the 1clunce of ma,u1ge1t11mt of family the production, grq wth ,snd dletrlbution of
a11d 1tah DLJring the anclcmt and medieval t1mc1,,
1
, wealth H lh~ r;ubjcct matter of cwnomlc9
tioonomieli devule>pcd etti o ~Wn® of 6tat~cra£t,
Th~ merc:an.tU1fit:§, the advocatQfi of economic
tJU)ught whJch prev'1 il~d betwC'cn the 16th on.d /\dtun 8inhh (1723,.00)
mid-18th ccnturi.es, bcluwcd tJw.t w~alth wos of Adom Smtrh, 1 konlth
paramount tmporum~ DJJ a means of making o phJJooopher an.a t.<;0oondn,
pt)w4Jrful staw, Thi,; type of coonomlc thlnklng · i, of~o con•ld~rM a, me
,~fjuJwd in ,naklng economic& aH n i,cicnc~ of father of modtm t!etJnOmlc•.
4 He ft wt-H knnwn for hit
wqaJth•e.arnlng actfv1Uc# of thu lndlvldualtJ 011
daHle work An RnqulJ;y lnu,
well as tha t.tota, [!(onomlC.tJ became o tK:lcncn tht Nature and C,m4" of tM
of w~i,hh much mc,re clearly In the Ju nds of Wt.olt)i oJ NatlimJ, 11ntrally
Ow d a$1,i~I (traditwnal) coonomh.t«., fn foct, H k1wwri a1 w,a"1• of Nutton,, Jt ii conrddered
!"m~r~d u a §(tparat# dlKipl1nt.1 for the fir,;t w be the ftrif modern work .of 41COJM>nucl •Jld
t1~ In the writing~ Qf cJaulc41l economlatlj. Uver remoini the mo,t tm1>0nant bc>ok c>n d11 fubjcct:
6fr~•>t ttwn, cconomlstij h.ovt1 -.tart.ed d4tffnln~ the of ~nomlU tiJl tJ,e pre~nt day, Adam Smhh
~ubj,~rt ,mtter o( t1t;l>nnmJ,ij much morij dearly, Ii c.on•lder~d III the foundcr ~ymbol of frrc
tJwup)1 6l>mewhat In different waya, mQJ·kot ~nomic1 •IJd 1upporttJ of lau,11,Jatr~
(which h• Vnmch rne1m1 •1~avc- al.one') polkle•.
1,3 MAJOR DfiFINITION8 OF ECONOMICS Ho laid l~ lnrtllettu@J fntmtwQrk that tlplolflJ
J1,>w r•tlonol ~tlf lruare#c •nd compttltlon
Wu c;,n hav,, ,u:-Jffl# Jdta of the nature and scopi1 thrQugh 'th4' lnvlilhl~ htnd' leftd m ,1·,e mo,1
,,f t?cim.omkiJ ,,, ltw fftilJj~cl malwr of f!conomtc& ntn,1cnt uae nf rc-rw>urnti fo on twnomy ond
by '11ltJ1Mr11Un,s varlm,18 dcfi11JtlDn6' of ot:tm,.>mkij, thf:ff.!l>y p1'otl)c1lf it>dtl wtlfare. The wrhln~i
f~var l)ftl~ thtt MR.erp,vnc~1 of ut•om1111lcs tta tJ of Adflm &rnlrh hftve had I prnft>Und lm1)oct ~n
b,l•para~tr {Jl<;dpHne more Hum two c1Jnturi~fj modern rennomlcs,

fJf:flNtTIQN OF ~ AICij
 Besides Adam Smith, other classical economist s However, this criticism is unwarra
als0 regarded econ · •
Thus omics as a saence of wealth. and misplaced . Classical economists n:~
' J.B. Say, the noted French economis t, advocated worship of wealth. They h l1
rj5ard.ed economic s: 'as the science which treats emphasis ed wealth because it is the b:\f
o, wealth"A Similarly , Nassau William Senior 5
of physical existence and the basic rneil l1
;rote that 'The subject treated by the Political of raising the standard of living a 11!
. .
conomy.u is not happiness but wealth,." a chievmg eccmom1c growth. nd
T ~ main features of wealth definitio n of 2. Narrow View of Wealth: Major criticis
¼ ~omics are: levelled against classical economist s is ~hrt,
L:,ilf
l . Study of Wealth; According to the wealth they have defined wealth in a very narrow
definitio n, economic s is the study of and restricted sense. Wealth, accordin
~ealth only. The main object of economics to them, consists of material or tangibl:
1s to examine how people earn wealth goods. They have excluded non-matenaJ
and spend it. Wealth has been made the goods or services like health and education
focal point of study in economic s by the from the definition of wealth. By taking
classical economis ts. such a restricted definition of wealth, the
2. Causes of 'W ealth: Economic s seeks to classical economis ts have narrowed down
examine causes which lead to an increase the subject matter of economics to matenal
of wealth. Wealth can be increased by its goods only.
productio n and accumula tion. 3. S e c onda ry Pla ce to Man : Another
3. Economic Man: The wealth definition of shortcom ing of the 'wealth d efinition'
economic s considers an 'economic man' who of economic s is that it has given undue
is aware of hls self-interest. The economic emphasis on wealth an<L in the process,
man tries to achieve hls self-intere st by has reduced man to a secondary place
increasin g his material gains through in the study of economic s. In fact, the
acquisitio n of wealth. ultimate objective of economics is to
promote human and social welfare and
Criticism s wealth is only a means to achieve tlus
The classical economis ts were vehemen tly end. This problem was taken care of by
attacked from various quarters for considerin g Alfred Marshall.
economic s as a study of wealth. The wealth 4. It Ignores the Problem of Scarci ty: The
definition has been criticised on the following wealth definition of economics ignores the
grounds: basic cause of economic activity, namely
1. Too Much Emphasis o n Matedali sm: relative scarcity of economic resources.
Classical economis ts came in for bitter
1.3.2 Welfare Definition--Alfred Marshall
criticism from many thinkers of that
time, particular ly Thomas Carlyle and The subject of economic s had fallen into
John Ruskin. They dubbed economic s disrepute towards the close of the 19th century
so defined as a pig science, a dismal due to overemph asis on the study of wealth
science, bread ttnd butter science, gospel of by the classical economis ts. Marshall was the
mmnmon., etc. They alleged that by defining first economis t who tried to raise the status
eamomic s as a science of wealth, classical of economic s in the public mind. He made
econo~ have ignored the higher values a fundame ntal change in the definition of
of life such as happiness., love, affection, economic s. He gave the 'welfare definition' of
etc. 1ney emphasis ed that happy living, economic s. He defined economic s as follows:
and not getting rich, should be the end [ "Politica l Economy or Ecottomics is a stud~
of human efforts. What matters most is a of mankind in tlie ordinary business of life; ,t
happy life and not wealth. examines tlrat part of individua l and social

4 UNOERSTAN OfNG ECONOMICS

 Alfred Marshall (1842--1924) and political. Economics is concerned
only with the economic aspect of human
Alfred Marshall, who was a
life. Economics, according to Marshall, is
Professor of Political Economy
not concerned with the social, religious
at Cambridge Universityj is
and political aspects of man's life. The
known as one of the founders
ordinary business of life is concerned with
of modern economics. His
the income-earning and income-spending
most famous student,
activities of mankind. Economics studies
J.M. Keynes, described Marshall
how people earn material means of their
as the greatest economist of
livelihood and how they spend these for
the 19th century. Marshall's book, Principles
the satisfaction of their well-being.
of Economics (1890), was considered as the
3. Study of Material Wel fare : Marshall
most influential textbook in economics with
emphasised material welfare as the
world-wide reputation for many years. It
primary concern of economics. According
decisively shaped the teaching of economics
to him, economics is not concerned with
in English-speaking countries. Marshall's main
total human welfare, but is concerned
contn'butions to economics relate to the issues of
with material welfare only, i.e., that part
demand and supply, marginal utility, consumer
of human welfare which is related to
surplus, economies of scale, cost of production,
wealth. Economics studies those activities
etc.
which are most closely connected with
the attainment and the use of the material
action which is most closely connected with the requisites of well-being.
attainment and the use of the material '1M~ 4. Emphasis on Requisites of Well-being:
of well-beinj]'nius, it is, on the one side, a study There is also emphasis on material
of wealth and, on the other and more important requisites of well-being. Obviously, the
~de,yart of the study of man." material things like food, clothing and
shelter are very important economic
~m:~ features of Marshall's definition are: objects. Material needs are very basic
1. Study o f Mankind: Marshall placed needs which must be fulfilled before one
primary emphasis on the study of can think of other needs.
mankind. No doubt, he emphasised both 5. Exclusion of Non-economic Activities:
mankind and wealth in his definition. Marshall has limited the scope of
He agreed with the classical economists economics to those forces and activities
that economics is concerned with wealth, which are amenable to measurement in
as wealth constitutes material requisites of terms of money. That is why political,
well-being. Wealth provides the means for social, cultural and religious activities
existence, comfort and enjoyment of life. of human beings are excluded from the
He believed that wealth is not an end by purview of economics as they are not
itself, but only a means to human welfare. subject to measurement in terms of money.
Thus, according to Marshall, it is the study Following Marshall, many other economists
of man which occupies the central place like Pigou and Keynes also defined economics
in the study of economics. as a study of economic welfare. Pigou defined
2. Study of Ordinary Business of Life: "economics as a study of economic welfare,
Economics is a study of ordinary business which is that part of social welfare that can be
of life. An individual has several aspects brought directly or indirectly into relationship
of life, namely economic, social, religious with the measuring rod of money".

DEFINITION OF ECONOMICS 5
-
, C rit ic is m s ~ 2- do ctor -., lawydr~ , tutlc:hc
r~, uh ;,, f1,,,,
,
'The we lfa re definitions
of M ar sh all and Pigou their orbit. Tllef«J trorvlc.:s
hov~ nutl,11,,,,
-were ge ne al ly an d wi de ly ac ma terial in tlw m, Howcvc-r,
genera11 ber lieved th at welfa ce pt , ed . It w as the
ollO Aot11fy our urgent nc@d lkl r.u, v1,,
re definitions were•
~ in identifying th e correct #
promote wclfaro, Honco, H ,md th,,h 1
of economics. But th is
subject matter hl ln c11,r,,,,
acceptance proved to to 8li
Y thnt eoonomlc:8 18 c:onoorr
.short-lived. Soon, welfare bo mat,erinl thlngt only.
wcJ w, 1

definitions came to be
aiticised, particularly by Lion 4. Jtcolrk tcd Scope of llc
el Robbins. Th e moln onom
criticisms levelled again
st welfare definitions arc: ha 8 oltto crttl cl H d wc l!nrciet1: lfol>liJt -
L Economics Regardt:d
dcflnll l,,,,
38 th c,y rc.11trk t th e
M a Social Sd cn cc ,c ope of i tud y , ,1
O nl y: Marshall ha s be cconomlc8, Ec.onomlct
en cr iti ci se d fo·r tt ud le
treatingcconomks as a social science iicUvitlet which hardly prom i 1Jl ivt t.1,
.rather oto ec:onor,111
than a huma.n sci~ncc. A wclfu c. Many good.I U:ke liq
social science uor, dg im ·th•~
studies the actions of the In ond gu n8 do no t pt om
dividuals llvlng ot o
in organised co m m un llle s welfare, ye t production of cconum 1r
as m em bc n of the~ g1iod ~
the society, whcreaB a coni-Urutet cconomi( activ
humon 1d cncc -ity anJ htnv:
&tudles the hu m an bein it It 8t ud ~d in flconomi.a ,
g lrre.spccUvc
of whether he is Uv lng 5, V.igue Co nc ep t of
H a member of Matcrlo1 Wcl f ,11 v
an or ga ni Bc d co m m Th e wel{are definltton
un ity or liv in g in t are al,o subj,·ct
iso la tio n. ln te rm • of we of cr iti d•m on. th e gr
lfa re dcffniUon, ou nd that m atcritll
th e activitl.es of an \t()la welfare cannot be qumtitat
ted individual like ivt ly measured
Ro bi ns on CNIOO or a
Himalaya Welfare lJ a t ut,tectivc thln
n aalnt lie .g; it i1 p8ychic
outside the orbit of ec on l.n nature. lt relates to the
om ic s becou1c mental ma kc#\Jp
bo th of them. are cu t of of .- pc.~IOn , It dj ffe r, a«
f fro m rest of th e ording W ti rnt, ;
society. Th u, , welfare de pl ac e and in di vi du al. To
finition reutrlcta ut, wcHarc canruA
th.c t(Opc of economics to be meawred in obj(.~tive
the
1t ud y of terms.
pe rtO N Uvtng in orga
nhJcd co m m un iti es 1.3.3 Sc ar ci ty D of ln ttl on
on ly . Thl8 is so m et hi ng -l. lo ne l Robbin•
un acce pt ab le
because 80mc of the
im po rta nt la ws of
Robbin s wa s. not only a
ai tic of the welfar1t

V economics are relt."Vant to definition of cwno m ia ,

an jndlviduat, bu l he alao gave a nt-v,
whether. he is a member of definition 0£ cconomia,
a co mmunity wh ic h ha t come to be
or no t known 1.1 'scarcitJI dtftnlllo
n' .
2. 1mpractie4l1 Oat,r,iflcatio fAcco rdi.ng to Ro bb in , , 11
n of fc onomlc1 1, tl,e
6e00fld critici_sm agalnst we A(tivilic,;: A ,c ~ e whlcl, 1tudl11 hu
man b,havtour a• a
lfare de finition
pointed out by Robbin!f is relatlon1hip be tw ,,n en d,
that di8linction and ,care, ,neari•
b~twee n eco,nom tc and which ave altlmatlt.11 u,
non .. oconomic e,Z J
ad iv iti et i it umu:i cn tif bb ln t' dc H n. lti on cm
ic, ill og ical an d ph,ui1e11 fo ur
illusory t incc all human nd.amental characterisUc1 of
a-e
an eco.numic at pcct a, wc tivitio8 have ·1, UnHmilcd l!t1d1 (Wou\3)
human life:
lL
weJtare iJJ composite and it it Moreover, to hwnan want•. A fu.nd
! Hn.dt hero rd 1' 1
very difficult a.mea
to ,eparaw mautria·1Wf:lfor
c from lhc total economic life i1 that end.I or ta1 tact (~1
weltaru, ore unltmit,ed, Human wa
human wan '
.n.t , are
1, f\,fatenuHtitk /\.tipt:r
f: Ro
bbln,; ha s crit~ d lorge u, number, bu t th4.,~ tend to not onlY
w t lf trc d,:Hnitlon, on ttw
.
over thnc, As on e want i••;
muJtipl~
grout1i.l th at 1at1,fied a1wt 1k,1
t ~ d«t/in.lticmi iriclu want crops up , Jn v1.ew of 1 "
'1n only r-not-0ritd the multi pll cil Y
th Jtl"8 w1tMn their purvltrw of want, a.nd th~ inat P H
, They ,.:xclud c jn th dr numl,f,''
,
ncm4ntttltri31 tltlttf,I lliiw over lim e, tt 18 no t r,ot•i
u,n 1e rvicm• of tht? want, . Mowover, on
blc to ,m tlti fy ;Jl1
lmportnnt fM1

• --
IJ~IDE.RBTAl.lntU"'- ,.,. __ ..,( ,')
 Uone1 Robbin.t (1898-1984) limited. Labour is limited by the size of the
population; land is limited by area of the
Lionel Robbins was one of the
leading and most influential country, and so on. In view of the scarce
English economists of the 20th means, only a limited quantity of goods
century. He was associated can be produced. As such, goods are scarce
with the London School of in relation to their demand. Since the
F.conomics and Political Science resources are scarce, all the wants cannot
(popularly known as LSE) for be satisfied. Hence, we have to decide
over 30 years, both as the which of the wants can be fulfilled now
Professor of Economics and as the Chairman and which ones should be left unfulfilled
of the Board of Governors. He wrote on wages. for the time being. This problem would not
inflation, the economics of war and the history have arisen if th.e resources were available
of economic thought. However, his major work in unlimited quantity. In the words of
was his Essay on the Nature and Significance Prof. Milton Friedm~ "If the means are
of Economics1 in which he gave the famous not scarc.e, tJ,ere is no problem at all; there
definition of economics. His Report on Higher
is Niroana." Scarcity is at the root of most
Education (1963) became a landmark in the
of the human economic problems.
development of higher education in UK in the
1960s anc\ 1970s, which led to the fonnation 3. Alternative Uses of Means: The third fact
of modem British University System. which Robbins' definition emphasises is
that resources can be put to alternative
about human wants is that all wants are uses. For example, a piece of land can be
not of equal intensity. They differ in their used to produce wheat, vegetables, etc.
importance; some wants are more intense Likewise, a labourer can be used on the
than others. Since wants are unlimited, fields or in the factories. The use of scarce
we have to make a choice between the resources in the production of one
more important and less important wants. commodity prevents its use for any other
Obviously, priorities have to be laid down commodity. Therefore, the society has to
among various wants. It is because of make a decision as how to allocate the
difference in the intensity of different scarce resources for the production of
wants that people are able to make a different commodities. The problem of
choice between different wants. allocation of resources for the production
2. Scarce Means: The second fundamental of different rommodities would not arise in
fact of economic life is that means to satisfy case the resources were of specific use or
human wants are limited. Means refer to of single-use because in that case resources
various productive resources such as land, can be used for the production of that
labour, capital, etc., which are needed to specific commodity only. For example,
produce and procure goods needed to as the film stars are adept in acting, they
satisfy human wants. Resources are said would prefer to act in films only.
to be scarce in the sense that the supply of 4. Choice: Since the resources are scarce
resources is limited as compared to their and are also capable of alternative uses
demand. It should be noted here that the and the human wants (ends) are endless,
term scarcity is used not in the absolute people have to make a choice in allocating
sense but in the relative sense, i.e., in these resources for producing different
relation to demand. Although supply of commodities on the basis of their relative
resources has increased over time, yet importance. Human behaviour, therefore,
the demand for resources has always involves some form of choice in using the
outpaced their supply. Thus, resources are scarce resources for producing different

DEFINITION OF ECONOMICS 7
 goods in such a way so as to maximis e a Robin son Cru soe econom y ai; ti,
the gains (in the form of more goods) capitalis t economy or a sociaHs t econ, w
from the use of these resource s, Le., 3, Human Sdenec: Robbins points out ,1 .
optimal allocatio n of resource s. Robbins economics is a human 8dencc and r
has describe d this problem as the problem merely a social science, Thi.ff is bccau,,1, ,, .
of economising scarce resources. problem of choice and resource alloc.~11 ,
'The need for choice arises because of i.s faced by an individu al irrespectiv,,
scarcity. If everythi ng were available in whether he is a member of an organi-.:
plenty, there would have been no need for commun ity or is Uving in isolation .
choice. But the harsh reality of life is that 4. Wider View of Econom ic A ctivit.
all of us face the problem of scarcity and Accordin g to Robbjns, economics stud;i--
hence have to make choice.. We face the all econom ic activiti es-whe ther th, ·.
problem of choice at all levels-in dividual , relate to the product ion of tan gic:~
social, national or international. (materia l) commo dities or s ervice.,.
5. Econom ics as a S ci ence: Accordi ng provided they involve scarcity of m f•ar .
to Robbins , econom ics is a science. in relation to unlimite d wants.
It provide s a. systema tic knowled ge 5. Po&Hive Scienc.c: Robbins emphasises th;;•
with regard to human efforts in solving economics is a positive science. Economic :
economi c problem s arising out of scarce is a systemat ic body of knowled ge whic
means and unlimited wants. Economics provides the framewo rk within which o~
-is about making choices in the backdrop can analyse economi c problem s faced b:·
of scarcity. Economics formulates various the society. Robbins ' definitio n impart,
econom ic laws which help in solving economics the natur-e of a positive sciena:
eronomi c problems. because it regards economi cs to be neu tra:
between ends. Accordi ng to Ro b bim,
Merila
''I, economi cs does not tell the ind ivid ual:
~obbins' definitio n of economics is generally as to what ends should be achievec
nd widely accepted by the economi sts in view and what ends should be sa crifi ced
,f its superiority over the earlier definitions in Econom ics enlighte ns the individu als,
number of ways: enabling them to make rational decis ions,
L Logical :Explanalfon 0£ Economic Problem: but the decision s have to be made by the
Robbins definitio n very clearly brings individu als themselv es.
out the root cau.se of economi c problem,
which forms the foundation of economics Criticis ms t, v,J j__
ab a social science. According to Robbins'
But despite the superiority of Robbins' definitiM
definition, economic problem arises due it has been criticised on several grounds:
to Karcity <>f means in relation to their
l . Narrow View of Econorn ks: Robbins'
demand.
definition has bt.>en criticised on the ground
2.. Unh~T-f>.il Na.hue! 1nc scarcity definition
that it regards economics as a posifr-'e
of ~ i a emphasi ses the universa l
science by making it neutral betwee11 erids·
nature of the subject in the sense that
Many contemp orary economi sts beJie,,e
Kffd.ty of mean.s in relation w cnd.e is
a untversal problem- ~erywhe re and t that they as economi sts are .required to
aU times. Rieb a:t well u poor, traditlo0:1 tell what is good or bad about certaiJl
as w.ell as mode-rn economiQ face the chokes. There is general agreeme nt amoflb
prnble-m o! choice. Scar'Ci ty d c.finWon economi s ts at pre.sent that economi d
of ea mom1,a; b a~ much appli.cabl.c tCJ ts not only a positive science but al~
a normati ve scie n ce, Positive science
8
UNOeRSTANOINO ecoN<JMIC'
 is concerned with 'what is', whereas problems. Economists these days are
normative science is concerned with considered as not only 'tool-makers' but
'what should be' or 'what ought to be' . Thus, also 'tool-users'.
critics consider the 'scarcity definition' 5. Economic Problem M ay N ot Always
as narrow and restrictive in nature. As Arise from Sca rcity: Some critics point
economists have to advise on policy out that economic problem does not
matters, economics cannot remain neutral always arise from scarcity as suggested
between ends. by Robbins. It can sometimes arise
2. Restricted Subject Matter of Economics: from abundance as well. For example,
A serious objection against Robbins' during the Great Depression of 1930s, it
definition is that it has restricted the was not the scarcity but abundance of
subject matter of economics by restricting goods (overproduction) which created an
it to the theory of resource allocation, economic problem in various capitalist
i.e., the theory of product and factor countries of the world.
pricing. Robbins' definition is inadequate
because it does not take account of many
1.3.4 Growth-Oriented Definition-
other important economic problems Samuetson
which are also part of the subject matter As pointed out above, Robbins' definition of
of economics these days. It does not scarcity does not indicate adequately the -subject
focus on the important economic issues matter of economics as it does not cover many
of economic instability, unemployment, issues, particularly the issue of economic growth.
income determination and economic
growth and development, etc. Paul A. Samuelson (1915-2009)
3. Static Definition: The greatest defect in Paul Samuelson was an
Robbins' definition, as pointed out by American economist at the
critics, is that it is static in its contents. Massachusetts Institute of
According to the critics, Robbins has taken Technology (popularly known
a static view of the scarcity problem. as MIT}, who became the first
Robbins' definition does not take into American to receive the Nobel
account the possi bility of increase in Prize in Economics (1970).
resources over time. With economic growth, Professor Samuelson is often
availability of resources and their efficiency considered as the father of modem economics.
increases. Economics is not only concerned He became the most influential and the foremost
with the present economic problems but economist of the second half of the 20th cen~
also with the future problems. Robbins' He made fundamental contributions to economic
science in the fields of welfare economics.
defini tion is regarded as static as it takes
public finance , international economics,
into consid e ration p resently available
macroeconomics, consumer theory, etc. He
means only. was the author of the best-selling economics
4. Economics as a Science: Robbins has textbook of all ti.mes entitled Economics, An
treated economics as a science only. But, Introductory Analysis (1 948). This book has
in fact, economics is both a science and sold nearly 4 million oopies in 41 langu~
an art. Scarcity definition of economics has Through this book. Samuelson has int:rodu~
reduced economics into a pure science, a mill.ions of people to the subject: of economics.
science that is concerned with formulation He also helped in building MIT into one of th~
of economics laws onJy. But economists world"s great centres of graduate education in
these days believe that economics is also economics.
concerned with the solution of economic

I
DEFINITION OF ECONOMICS
 11uireforo, some modem economists have tried to 4. Universal Problem :_ ~muelso n's definih
redclinc economics by emphasising the problem is not only dynarruc in content, it is ~
1

of economic growth. wider in scope. Prof. Samuelson h

Professo r Poul A. Samuels on has given a rightly emphasi sed that the problell'l
new definition of economics, which has come resource allocation is a universal prubk
to be known as 'growth- oriented ' definition. both for barter economies as well a5 r
JAccord ing to Samuels on, "Economics is the money-using exchange economies.
~dy of how people and society choose, witli or 5. Compre hensive: Samuels on's defi n1ti
without the use of ,nonty, to employ the scarce of economics is very comprehensive It
productive reso11rces, which have alternative growth-oriented as well as future-orientL
uses, to produce various commodities over time It has incorpor ated Marshal l's welfo.
and distribute t11em for cons11mpHon now or itr aspect as well as Robbins' scarcity ar
tl,e future among various people and groups in choice aspect.
the society] 6. Broad e r Perspec ti ve: Samuel son
definitio n has broaden ed the subJt\
S ~son's definition of economics emphasises
matter of economi cs so as to incluc
~ fou~wing: consum ption, product ion, exchang,
1. Emphas is on Economic Problems: Like distribution, economic growth, etc.
Robbins, Samuelson also emphasises the Of all the definitions of economics discusSt.
problem of choice arising out of scarce above, Samuels on's definitio n is considerc,
resources and unlimited wants. Thus, this to be the most satisfact ory. It presents th1
definition gives a realistic explanation of problem of choice in its dynamic setting. It ha.
economic problems. also widened the subject matter of economic-,
2. Long-te rm Perspect ive: The problem Besides, Samuels on's definitio n has also ,
of scarcity of resource s is not merely universal appeal. It is applicable to all type·
confined to the present time but also to of economi es-capita list, socialist and mixed
the future. Wants are not static; they are That is why Samuelson's definition is the mos
dynamic. Wants grow and multiply over accepted definition of economics today.
time. Along with expansio n of wants, It is obvious from the above analysis thal
resources also increase over time. Hence, economi cs has been defined different ly b~
we are not merely concerned with the differen t economi sts and the definition o:
allocation of given resource s but also economics has changed over time. There is nc
with how the expansion and growth of universally accepted definition of economics. The
' resources is to be used to cope up with is primarily because economics is a fast growin~
increasing human wants. Thus, Samuelson science, and the subject matter of economic
has taken the long-ter m perspect ive has grown so vast that it is not possible to
of economic problems. Herein lies the give a precise definition of economics for all
superiority of Samuelson's definition over times. The boundaries of economics have !Jeen
that of Robbins. expandin g continuously because 'Economics 11
(still) an unfinished science' (l.euthen). That is wh)
3. Dynamic Approach: Prof. Samuelson has
modern economists have stopped giving any
adopted a dynamic approach to the study
precise definitions of economics. Therefore, thr
of economics by taking economic growth
best way to know what economics is all ab001
as an integral part of economics. As such, or what is the subject matter of economics is Ill
his definition has imparted dynamism to find out what sort of questions economists have
economic problems. This has widened the been discussing. Jacob Viner very aptly says,
subject matter of economics. "Ecouomics is wliat ecouomists do."

10 UNDERSTANDING ECONOMICS