A brief lesson note on introductory aspect of Economics.
What is Economics?
The subject Economics has no specific definition. It has been defined in several ways by various economists as a social science which studies human and their behaviours. Some of the definitions given by some of the experts in the field include the following:
Definition of Economics by Different Economists
Adam Smith’s Definition of Economics
Adam Smith was a Scottish philosopher, widely considered as the first modern economist. Smith defined economics as “an inquiry into the nature and causes of the wealth of nations.”
Criticism of Smith’s Definition
- The wealth-centric definition of economics limited its scope as a subject and was seen as narrow and inaccurate. Smith’s definition forced the subject to ignore all non-wealth aspects of human existence.
- The Smithian definition over-emphasized the material aspects of well-being and ignored the non-material aspects. It was assumed that human beings acted as rational economic agents who mindlessly strived to maximize their own well-being.
- The Smithian definition prevents the subject from exploring the concept of resource scarcity. The allocation and use of scarce resources are seen as a central topic of analysis in modern economics.
Alfred Marshall’s Definition of Economics
British economist Alfred Marshall defined economics as the study of man in the ordinary business of life. Marshall argued that the subject was both the study of wealth and the study of mankind. He believed it was not a natural science such as physics or chemistry, but rather a social science.
Criticism of Marshall’s Definition
- The Marshallian definition, like the Smithian definition, ignored the problem of scarce resources, which possess unlimited potential uses.
- Marshall’s definition restricted economics as a subject to only analyze the material aspects of human welfare. Non-material aspects of welfare were ignored. Critics of the Marshallian definition asserted that it was difficult to separate material and non-material aspects of welfare.
- The Marshallian definition does not provide a clear link between the acquisition of wealth and welfare. Marshall’s critics claimed that it left the subject in a state of perpetual confusion. For instance, there are plenty of activities that might generate wealth but that can reduce human welfare.
Lionel Robbin’s Definition of Economics
Lionel Robbin, another British economist, defined economics as the subject that studies the allocation of scarce resources with countless possible uses. In his 1932 text, “An Essay on the Nature and Significance of Economic Science,” Robbins said the following about the subject: “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”
Criticism of Robbin’s Definition
- Robbin’s definition of economics transformed the subject from a normative social science into a positive science with an undue emphasis on individual choice. His definition prevented the subject from analyzing topics such as social choice and social interaction theory, which are important topics within modern microeconomic theory.
- Robbin’s definition prevented it from analyzing macroeconomic concepts such as national income and aggregate supply and demand. Instead, economics was merely used to analyze the action of individuals, using stylized mathematical models.
John Stuart Mill viewed Economics as the practical science of
The modern definition, attributed to the 20th-century economist, Paul Samuelson, builds upon the definitions of the past and defines the subject as a social science. According to Samuelson, “Economics is the study of how people and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in the future among various persons and groups of society.”
Nature And Scope Of Economics
1. Economics as a science
2. Economics as an artnature of economics
Scope of Economics
1. Microeconomicsthe nature of microeconomics
2. Macroeconomics: It nature and scope of macroeconomics
Basic Economic Concepts
Needs: These are basic requirements for survival like food and water and shelter. In recent years we have seen a percieved shift of certain items from wants to needs. Telephone service, to many, is a need. I would argue, however, that they are wrong.
Scarcity – the fundemental economic problem facing ALL societies. Essentially it is how to satisfy unlimited wants with limited resources. This is the issue that plagues all governmet and peoples. How do we conquor the issue of scarcity? Many people have thoaught they had the answer but the issue of scarcity still exists.
Scale of Preference: Scale of preference is defined as a list of unsatisfied wants arranged in the order of their relative importance. In other words, it is a list showing the order in which we want to satisfy our wants in order of priority. In the scale of preference, the most pressing wants come first while the least pressing ones come last.
Choice: Choice is defined as a system of selecting or choosing one out of a number of alternatives. Human wants are many and we cannot satisfy all of them because of our unlimited resources. We therefore, decide which of the wants we can satisfy first. Choice arises as a result of numerous human wants and the scarcity of the resources used in satisfying these wants. Since it is difficult to produce everything one wants, choice has to be made by accepting or taking up the most pressing wants for satisfaction based on the available resources.
Questions learners usually ask in this topic and their answers.
1. Why is scarcity a fundamental problem in economics?
Answer: Economics seeks to study the relationship between ends and means. Ends are unlimited while the means are limited. Scarcity simply means resources are limited in relation to the ends. Economics is therefore concerned with allocating the limited resources among the competing and unlimited wants.
2. How do government solve the problem of scarcity?
Answer: Governments are faced with the problem of allocating scarce resources among competing unlimited wants. In doing this, government draws a scale of preference which helps them to choose or select the most important want to be satisfied. The foregone wants are the opportunity cost or real cost of the selected alternative.
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