Explain the Adam Smith’s definition of Economics. How Marshall improved on it?
Explain the Adam Smith’s definition of Economics. How Marshall improved on it?
Or
How is Marshall’s definition of Economics different from Adam Smith’s definition ?
Ans.
Adam Smith, the father of economics, defined economics as “An inquiry into the nature and causes of wealth of nations”. Adam Smith insisted that economics deals with the aquisition, accumulation and expenditure of wealth. Since his definition gives prominence to the wealth aspect, therefore it is called ‘wealth definition’. The definition of economics, as a science of wealth has some merits. the important ones are:
(1) Stress on Wealth: The definition of Adam Smith identifies wealth as an important means of ensuring growth and development of a country.
(2) Addressing the problems of economic growth: The wealth definition appropriately addresses the problem of economic growth through earning and accumulation of wealth.
(3) Attention to important economic issues : The definition of economics as given by Adam Smith gives due importance to important economic issues such as nature and causes of wealth of nations.
However, the study of economics as a ‘Science of Wealth’ has been criticised on several grounds, the important among them are:
(i) It is too materialistic: This definition is criticised on the grounds that it is too materialistic and gives undue importance to accumulation of wealth. This definition propagates economics as merely a science of bread and butter.
(ii) Neglect of welfare: This definition is also criticised on the grounds that it neglects welfare. It stresses that wealth is the end and not a means to an end.
Because of the above criticisms the definition of material welfare as given by Marshall envolved.
Alfred Marshall, in his definition of economics emphasised on welfare as compared with wealth. He raised Economics from its ignoble position to a noble one.
According to him, “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 man.”
Prof. Marshall in his definition has clearly pointed out that Economics is the study of wealth, but more importantly it is the study of man. Thus, man gets precedence over wealth. There is also emphasis on material requisites of well-being. Obviously, the material things like food, clothing and shelter are very important economic objectives. The definition of Economics as given by Marshall is wider and more comprehensive as compared to the definition given by Adam Smith as it takes into account the aspect of social welfare.
However, Marshall’s definition is criticised on the following grounds:
(1) Neglect of immaterial things: Marshall’s definition totally neglects the importance of immaterial things such as services of doctors, teachers etc. This definition incorrectly lays importance to accumulation of material things as a means of welfare.
(ii) The concept of welfare is vague: Marshall’s definition of economics lays stress of are. But the concept of welfare is vague in itself. What is welfare for one may not be welfare for someone else. Therefore this definition creates confusion.
Improvement by Marshall : Alfred Marshall defined economics as, “Economics is a study of mankind in the ordinary business of life. It examines that part of social action which is most closely connected with the attainment and with the use of material requisites of well-being. Thus, it is on one side a study of wealth and on the other and more important side a part of study of man”.
Marshall’s definition is no doubt an improvement over Adam Smith’s definition, as is brought forward through the following points:
(1) Marshall agrees that economics studies about wealth, but he does not accept the view that it is the study of wealth alone. According to Marshall, Economics is on the one side a study of wealth and on the other and more important side, a part of the study of man. According to him, man is more important than wealth.
(ii) Marshall’s definition emphasises on material welfare and tells us about the link between wealth and welfare.
(iii) Marshall’s definition is a great improvement over the definition of Adam Smith for its emphasis on social problems. And economics, no doubt, is a social science.
(iv) Marshall has widened the scope of economics by establishing a link between wealth, man and welfare.
