3. INTRODUCTION
• Economics is a study of ‘Choices’ or ‘Choice-
Making’
• Choice-making is relevant for every individuals,
families, societies, institutions, areas, state and
nations and for the whole world.
• Hence, Economics has wide applications and
relevance to all individuals and institutions.
4. Meaning of the word ‘Economics’
• The word ‘Economics’ originates from a
Greek word ‘Oikonomikos’
• This Greek word has two parts:
– ‘Oikos’ meaning ‘Home’
– ‘Nomos’ meaning ‘Management’
Hence, Economics means ‘Home
Management’
5. • Economics emerged as a subject with
high level of applications in all other
disciplines due to its basic principle of
‘Choice making for optimization with
the given resources of scarcity and
surplus’.
• To arrive at this phenomenon in the
definition of economics, it has taken
almost 235 years.
6. Evolution in the Definitions of
Economics
• A. Wealth Definition (1776) Adam Smith
• B. Welfare Definition (1890) Alfred Marshall
• C. Scarcity Definition (1932) Lionel Robbins
• D. Growth Definition (1948) P.A. Samuelson
• E. Modern Definition (2011) A.C. Dhas
7. Wealth Definition (1776)
• Adam Smith, who is regarded as Father of
Economics, published a book titled ‘An
Inquiry into the Nature and Causes of the
Wealth of Nations’ in 1776.
• He defined economics as “a science which
inquires into the nature and cause of
wealth of nations”.
• He emphasized the production and growth
of wealth as the subject matter of
economics.
9. Features of Wealth Definition
• Characteristics:
It takes into account only material goods
Exaggerated the emphasis on wealth
It inquires the caused behind creation of wealth
• Criticisms:
It considered economics as a dismal or selfish
science.
It defined wealth in a very narrow and restricted
sense.
It considered only material and tangible goods.
It gave emphasis only to wealth and reduced man to
secondary place.
10. Welfare Definition (1890):
• In 1890, Alfred Marshall stated that
“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 material requisites of
wellbeing”.
• It is on one side a study of wealth; and on
the other side, a study of human welfare
based on wealth.
12. Features of Welfare Definition
• Characteristics:
It is primarily the study of mankind.
It is on one side a study of wealth; and on other side the study of
man.
It takes into account ordinary business of life – It is not concerned
with social, religious and political aspects of man’s life.
It emphasises on material welfare i.e., human welfare which is
related to wealth.
It limits the scope to activities amenable to measurement in terms
of money
• Criticisms:
It considers economics as a social science rather than a human
science.
It restricts the scope of economics to the study of persons living in
organized communities only.
Welfare in itself has a wide meaning which is not made clear in
definition.
13. Scarcity Definition (1932
• According to Lionel Robbins: “Economics
is the science which studies human
behavior as a relationship between ends
and scarce means which have alternative
uses.”
• He emphasized on ‘choice under scarcity’.
In his own words, “Economics ,,, is
concerned with that aspect of behaviour
which arises from the scarcity of means to
achieve given ends.”
15. Features of Scarcity Definition
• Characteristics:
Economics is a positive science.
New concepts: Unlimited ends, scarce means, and
alternate uses of means.
It emphases on Choice – A study of human behavior
It tried to bring the economic problem which forms the
foundation of economics as a social science.
It takes into account all human activities.
• Criticisms:
It does not focus on many important economic issues of
cyclical instability, unemployment, income
determination and economic growth and development.
It did not take into account the possibility of increase in
resources over time.
It has treated economics as a science of scarcity only.
16. Growth Definition (1948)
• According to Prof. Paul A Samuelson
“Economics is the study of how men and
society choose with or without the use of
money, to employ the scarce productive
resources which have alternative uses, to
produce various commodities over time and
distribute them for consumption now and in
future among various people and groups of
society. It analyses the costs and benefits of
improving pattern of resource allocation”.
• This definition introduced the dimension of
growth under scarce situation.
18. Features of Scarcity Definition
• Characteristics:
It is not merely concerned with the allocation of
resources but also with the expansion of resources.
It analysed how the expansion and growth of resources to
be used to cope with increasing human wants.
It is a more dynamic approach.
It considers the problem of resource allocation as a
universal problem.
It focused on both production and consumption activities.
It is comprehensive in nature as it is both growth-oriented
as well as future-oriented.
It incorporated the features of all the earlier definitions
• Criticisms:
It assumes that economics is relevant for scarcity
situations and it ignored surplus resource conditions.
19. Modern Definition of Economics (2011)
• According to Prof.A.C.Dhas, “Economics is
the study of choice making by individuals,
institutions, societies, nations and globe
under conditions of scarcity and surplus
towards maximizing benefits and satisfying
their unlimited needs at present and
future”.
• In short, the subject Economics is defined as
the “Study of choices by all in maximizing
production and consumption benefits with
the given resources of scarce and surplus,
21. Features of Modern Definition
• Characteristics:
• It takes into account all the earlier definitions – wealth,
welfare, scarcity and growth.
• It covers both micro and macro aspects of economics.
• It considers both production and consumption activities.
• It emphasises Choice Making dimension as crucial in
economics.
• It aims at obtaining maximum benefits with given
resources
• It is suitable in conditions of both scarcity and surplus.
• It takes in to account the present and future –Time
dimension – Growth dimension.
• It is relevant in the context of globalisation and
sustainable development.
22. In Sum
• A review of all these definitions and their
evolution indicate that the core of the subject
economics is ‘choice making’.
• It is a subject concerned about achieving growth
by optimizing the given resources, based on
choices.
• The evolution of the definition of economics has
taken 235 years, with the origin of Adam Smith
in 1776.
23. – Adam Smith (1776) emphasized on wealth
(Production Activity),
– Alfred Marshall (1890) focused on (Production
and Consumption Activities),
– Lionel Robbins(1932) highlighted the problem of
scarcity (Choices under scarcity),
– Paul A Samuelson(1948) focused on production
and consumption activities and achieving growth
under scarcity (choices under scarcity and growth),
– A.C.Dhas(2011) gave emphasis on choice making
in maximizing production and consumption
benefits under scarce and surplus, and achieving
growth (choices under scarcity and surplus, and
growth).
24. • The core of economics is ‘Choices’
• The fundamental economic activities are
production and consumption
• The aim of economics is optimizing
given resources (both scarce and
surplus) and achieving growth
