Meaning of Economics

Economics is a vast subject. So it is not easy to give a precise definition or meaning of economics as its scope and the area it covers are very large. Ever since, it emerged as a separate branch of study in social science, various scholars and authors have tried to give its meaning and objectives. With development of time and civilisation the definition of economics has undergone modification and change.

1. Science of Wealth

Many scholars and authors in the late eighteenth and early nineteenth century believed that economics is the science of wealth. These scholars are called the classical thinkers. They viewed that economics deals with the phenomenon of wealth which includes nature and causes of wealth, creation of wealth by individuals and nations.

2. Science of Welfare

The problem with wealth definition was that it did not talk about people who had no wealth. Having wealth and not having wealth divided the society into rich and poor. So many scholars in the early nineteenth century thought that economics should address the issue of welfare of the society and not just wealth. Accordingly economics was seen as science of welfare.

Welfare is both quantitative and qualitative in nature. Consumption of goods and services, increase in per capita income are quantitative aspects of welfare. Living in peace, enjoying leisure, acquiring knowledge are qualitative aspects of welfare. As science of welfare, economics was said to be concerned with the quantitative welfare only because it can be measured in terms of money.

3. Science of Scarcity and Choice

The welfare definition of economics explained only the material aspects of welfare. But people want both material goods and non-material services. Since resources available with every individual or society are scarce, people try to achieve their goals by alternative use of these resources which they do by making appropriate choice. So economics was treated as science of scarcity and choice. As science of scarcity and choice, economics studies human behavior as relationship between ends and means which are scarce (limited resources) and have alternative uses.

According to the scarcity definition, limited resources can be used alternatively. For example, consider the production of two goods - Cloth and Wheat. We cannot produce unlimited amount of cloth and wheat with limited amount of resources. The resources have to be divided to produce these goods. Let demand for one of the goods say wheat increases so it has to be produced in larger quantity for which we need more resources. But given that, resources are limited, we can produce more wheat only by withdrawing some resources from the production of cloth and putting them in production of wheat. As a result, cloth production will fall and wheat production will increase.

In this example, there are two alternatives: (i) Keep producing the same amount of cloth and wheat. (ii) Produce more wheat due to increase in its demand thereby decreasing some amount of cloth. Since the economy wants more wheat, the study of economics tells how this problem can be solved with limited resources.

4. Science of Growth and Development

In the twentieth century, the objective of achieving growth and development of the entire economy gained momentum. Role of the government in economic growth and development became increasingly important. So economics, no longer, remained limited to individual decision making and use of resources only. Its scope has been expanded to include production and consumption of commodities overtime so that the economy achieves growth and development. So economics is treated as the science of growth and development.

Performance of the economy is very important in terms of use of its resources and production and distribution of goods and services. The economy must allocate its resources among various alternative activities, ensure the efficient use and find ways as to how they would grow for future development of the economy.

On this basis, many economies in the world have performed well. For example the USA, European countries, Japan, etc. are called developed economies because they have achieved higher level of income for their citizens. Indian economy is a developing economy because many of its citizens are still poor.

5. Science of Sustainable Development

Economists of late twentieth century have also started talking about welfare of future generation and protection of natural environment. Hence economics is also treated as science of Sustainable Development. To achieve higher level of growth and development, economies around the world have been exploiting natural resources and polluting the environment.

Consumption of goods and services have even resulted in lots of wastage. Some resources like minerals, mineral oil, forests are depleting fast because of their rising consumption by present generation. So future generation may be left with little or no resources. It is our moral duty to use the available scarce resources judiciously, efficiently and ensure welfare of our future generation.