ABM-Module: A- FUNDAMENTAL OF ECONOMICS
Economics is a social science. It is one of the most important branches of knowledge at present. In this
branch of knowledge we try to understand how the economy of a particular region, a country or the global
economy works. The term 'Economics' owes its origin to the Greek Word 'Oikonomia' meaning
household. The ancient Greeks applied this to the management of a city state, which they called 'Polis'. Thus
political economy came into existence. It emerged as a full- fledged social science in the latter half
of the 18th Century with the publication of Adam Smith's master piece,
Economists have given different definitions of Economics from time to time as per their understanding of
different situations needing attention for economic solutions.
Few of the definitions given by renowned economist are discussed below for understanding of the subject matter.
A) WEALTH DEFINITIONS: This definition of economics is propagated by Adam Smith, David Ricardo, J.B.Say and J.S.Mill. They have assumed Economics as a science of wealth.
"Economic is a subject concerned with an enquiry into the nature and causes of wealth of nations"- Adam Smith
"Economic is a science which treats of wealth" - J.B. Say.
"Economics is the name of that part of knowledge which relates to wealth" — Walker.
The Science which treats of nature, production and distribution of wealth is economics" — Daven
Port.
"Economics is a science of wealth in relation to man" — J.S. Mill.
B) WELFARE DEFINITIONS: Alfred Marshall was the first economist who shifted emphasis of economics from wealth to welfare. Other economists who joined this thought of stream are Prof. Cannon, Prof. A.C. Pigou and Prof. Penson.
"Political economy or economics is a study of mankind in the ordinarily business of life, it examine that part of individual and social actions which most closely connected with the attainment and with the use of material requisites of well being" — Alfred Marshall.
Aim of political economy is the explanation of general causes on which the material welfare of the human beings depends" — Prof. Cannon.
"Economics is the study of Economics welfare, economic welfare being that part of social welfare which can be brought directly or indirectly into relation with the measuring rod of money" — Prof. A.C. Pigou.
"Economics is a science of material welfare" — Prof. Penson.
The important features of Marshall's definition are as follows:
Economics studies only the ordinary business of life. Ordinary business of life relates to what a normal human being ordinarily does for his living. In other words, it includes the income earning and incomespending activities of the human beings.
Economics is a social science. It studies the economic problems of those individuals who live in an organized society. Men like Robinson Crusoe living aloof from the society do not fall under the purview of economics. Economics studies only the material requisites of well-being. There may be other, viz, political, social, and religious activities of human beings. But these activities cannot be measured through the measuring rod of money. Therefore, Marshall restricted the scope of economics to the study of only those economic activities which can have a money measure.
C) SCARCITY DEFINITIONS: Prof. Robin developed this definition of economics, According to Robin, "Economics is a science which studies human behaviour as a relationship between ends and scarce means, which have alternative uses".
The definition of Robbins brings home the following fundamental conditions:
Economics is a science a positive science. As a science it studies how the human beings adjust their multiple wants to scarce mean. Economics is, therefore, not related to the welfare 6- 6 such. Economics studies human behaviour. It is the choice-making behaviour not related to welfare as such, but to ends and scarce means. Ends: Ends. refer to the human wants which are unlimited. Man has multiple wants. As one particular want is satisfied, another want emerges. Therefore, all wants can never be satisfied in their totality.
Scarce Means: Human wants are unlimited, while the means (material resources, time, etc.) to satisfy them are scarce. Man is confronted with the economic problem when the supply of resourses is short as compared to their demand. Most of goods satisfying human want have limited supply. When resources are scarce, certain wants go unsatisfied.
Alternative uses of scarce means: There would have been no problem of allocation, had the scarce means only single use. But, the real difficulty arises because the means have alternative uses and all uses do not have the same intensity. Choice is to be made between the different uses. When we opt for one thing we have to forgo the other.
D) WANTLESSNESS DEFINITIONS: This definition is given by Prof. J.K. Mehta.
According to the definition, "Economics is a Science that studies human behavior as a means to the end of wantlessness". Wantlessness means a process of reducing number of wants to "zero - wants" level. According to Prof. Mehta our ultimate goal should be to reach at a stage of wantlessness.
E) GROWTH-ORIENTED DEFINITIONS: Growth oriented definitions are based on the concept of economic development. Some of the important growth oriented definitions are given below:
"Economics is a study of how, in a civilized society" one obtains a share in what other people have produced and of how the total product of society changes and is determined" - Henry Smith.
"Economics studies human behaviour which is concerned with changes and growth in means in relation to growth" K.G. Seth
"Economics is a study of the factors affecting employment and standard of living" - Benham
"Economic is the study of how men and society choose with or without the use of money to employee scarce productive resources which could 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" - P.A. Samuelson.
"Economics is a study of the Economic allocation of scares physical and human being among competing and, an allocation that achieves a stipulated opiiiiiizing or maximising objectives". - C.E. Feruguson
Economic as a Positive Science
According to Classical, the science of economics should be concerned only with "what is" and not "what ought to be". In other words they maintained, economics is only a positive science. According to Classical school of thought, "Economics should not explain rightness and wrongness of things and economists should not pass moral judgements".
Economics as a Normative Science
Marshall, Pigou. and Historical School, challenged the classical school, according to them economic is a normative science because it has norms, viz., more practical, more realistic, useful science, maximum welfare from limited resources and growth oriented.
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ADVANCED BANK MANAGEMENT
Few of the definitions given by renowned economist are discussed below for understanding of the subject matter.
A) WEALTH DEFINITIONS: This definition of economics is propagated by Adam Smith, David Ricardo, J.B.Say and J.S.Mill. They have assumed Economics as a science of wealth.
"Economic is a subject concerned with an enquiry into the nature and causes of wealth of nations"- Adam Smith
"Economic is a science which treats of wealth" - J.B. Say.
"Economics is the name of that part of knowledge which relates to wealth" — Walker.
The Science which treats of nature, production and distribution of wealth is economics" — Daven
Port.
"Economics is a science of wealth in relation to man" — J.S. Mill.
B) WELFARE DEFINITIONS: Alfred Marshall was the first economist who shifted emphasis of economics from wealth to welfare. Other economists who joined this thought of stream are Prof. Cannon, Prof. A.C. Pigou and Prof. Penson.
"Political economy or economics is a study of mankind in the ordinarily business of life, it examine that part of individual and social actions which most closely connected with the attainment and with the use of material requisites of well being" — Alfred Marshall.
Aim of political economy is the explanation of general causes on which the material welfare of the human beings depends" — Prof. Cannon.
"Economics is the study of Economics welfare, economic welfare being that part of social welfare which can be brought directly or indirectly into relation with the measuring rod of money" — Prof. A.C. Pigou.
"Economics is a science of material welfare" — Prof. Penson.
The important features of Marshall's definition are as follows:
Economics studies only the ordinary business of life. Ordinary business of life relates to what a normal human being ordinarily does for his living. In other words, it includes the income earning and incomespending activities of the human beings.
Economics is a social science. It studies the economic problems of those individuals who live in an organized society. Men like Robinson Crusoe living aloof from the society do not fall under the purview of economics. Economics studies only the material requisites of well-being. There may be other, viz, political, social, and religious activities of human beings. But these activities cannot be measured through the measuring rod of money. Therefore, Marshall restricted the scope of economics to the study of only those economic activities which can have a money measure.
C) SCARCITY DEFINITIONS: Prof. Robin developed this definition of economics, According to Robin, "Economics is a science which studies human behaviour as a relationship between ends and scarce means, which have alternative uses".
The definition of Robbins brings home the following fundamental conditions:
Economics is a science a positive science. As a science it studies how the human beings adjust their multiple wants to scarce mean. Economics is, therefore, not related to the welfare 6- 6 such. Economics studies human behaviour. It is the choice-making behaviour not related to welfare as such, but to ends and scarce means. Ends: Ends. refer to the human wants which are unlimited. Man has multiple wants. As one particular want is satisfied, another want emerges. Therefore, all wants can never be satisfied in their totality.
Scarce Means: Human wants are unlimited, while the means (material resources, time, etc.) to satisfy them are scarce. Man is confronted with the economic problem when the supply of resourses is short as compared to their demand. Most of goods satisfying human want have limited supply. When resources are scarce, certain wants go unsatisfied.
Alternative uses of scarce means: There would have been no problem of allocation, had the scarce means only single use. But, the real difficulty arises because the means have alternative uses and all uses do not have the same intensity. Choice is to be made between the different uses. When we opt for one thing we have to forgo the other.
D) WANTLESSNESS DEFINITIONS: This definition is given by Prof. J.K. Mehta.
According to the definition, "Economics is a Science that studies human behavior as a means to the end of wantlessness". Wantlessness means a process of reducing number of wants to "zero - wants" level. According to Prof. Mehta our ultimate goal should be to reach at a stage of wantlessness.
E) GROWTH-ORIENTED DEFINITIONS: Growth oriented definitions are based on the concept of economic development. Some of the important growth oriented definitions are given below:
"Economics is a study of how, in a civilized society" one obtains a share in what other people have produced and of how the total product of society changes and is determined" - Henry Smith.
"Economics studies human behaviour which is concerned with changes and growth in means in relation to growth" K.G. Seth
"Economics is a study of the factors affecting employment and standard of living" - Benham
"Economic is the study of how men and society choose with or without the use of money to employee scarce productive resources which could 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" - P.A. Samuelson.
"Economics is a study of the Economic allocation of scares physical and human being among competing and, an allocation that achieves a stipulated opiiiiiizing or maximising objectives". - C.E. Feruguson
Economic as a Positive Science
According to Classical, the science of economics should be concerned only with "what is" and not "what ought to be". In other words they maintained, economics is only a positive science. According to Classical school of thought, "Economics should not explain rightness and wrongness of things and economists should not pass moral judgements".
Economics as a Normative Science
Marshall, Pigou. and Historical School, challenged the classical school, according to them economic is a normative science because it has norms, viz., more practical, more realistic, useful science, maximum welfare from limited resources and growth oriented.
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ADVANCED BANK MANAGEMENT
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