Introduction Economics



Economics was formerly called political economy. The term Political economy means the management of the wealth of the state. “Adam Smith, the father of modem Economics, in his book entitled ‘An Enquiry into the Nature and Causes of the Wealth of Nations’ (Published in 1776) defined Economics as a study of wealth. Smith considered the acquisition of wealth as the main objective of human activity. According to him the subject matter of Economics is the study of how wealth is produced and consumed. Smith’s definition is known as wealth definition.


This definition was too materialistic. It gave more importance to wealth than to man for whose use wealth is produced. The emphasis on wealth was severely criticised by many others.


Cailyle, Ruskin and other philosophers called it the Gospel of Mammon. They even called it a dismal science as it was supposed to teach selfishness. Later economists held that apart from man the said study of wealth has no meaning Economics is concerned not only with the production and use of wealth but also with man.

It deals with wealth as serving the purpose of man. Wealth is only a means to the end of human welfare. We cannot consider the desire to acquire wealth as the inspiring factor behind every human endeavor. Nor can it be expected to be the sole cause of human happiness. The emphasis has now shifted from wealth to man. Man occupies the primary place and wealth only a secondary place.



Several definitions of Economics have been given. For the sake of convenience let us classify the various definitions into four groups:

1. Science of wealth

2. Science of material well-being

3. Science of choice making and

4. Science of dynamic growth and development


We shall examine each one of these briefly.

Science of wealth. Some earlier economists defined Economics as follows: “An inquiry into the nature and causes of the wealth of the nations’’

Science of material well-being. Under this group of definitions the emphasis is on welfare as compared with wealth in the earlier group. Two important definitions are as follows:

“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, it is on the one side a study of wealth and on the other and more important side a part of the study of the man”, Alfred Marshall

“The range of our inquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money” A.C. Pigou.


Science of choice making. Robbins gave a more scientific definition of Economics. His definition is as follows: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”.

Science of dynamic growth and development. Although the fundamental economic problem of scarcity in relation to needs is undisputed it would not be proper to think that economic resources – physical, human, financial are fixed and cannot be  increased by human ingenuity, exploration, exploitation and development. A modern and somewhat modified definition is as follows:

“Economics is the study of how men 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 amongst various people and groups of society”. Paul A. Samuelson





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