Definitions of economics

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Various definitions of economics have been proposed, including the description of it as "what economists do." [1]

The term 'economics' was previously known as political 'economy'. This term evolved from the French Mercantilist usage of économie politique, which expanded the notion of economy from the ancient Greek concept of household management to the national level as the public administration of state affairs. James Stuart (1767) authored the first book in English with 'political economy' in its title, explaining that just as:

Economy in general [is] the art of providing for all the wants of a family, so the science of political economy seeks to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious; to provide every thing necessary for supplying the wants of the society, and to employ the inhabitants ... in such manners naturally to create reciprocal relations and dependencies between hem, so as to supply one another with reciprocal wants.

The title page listed subjects including "population, agriculture, trade, industry, money, coins, interest, circulation, banks, exchange, public credit, and taxes."

In 1803, J.B. Say distinguished the subject from its public-policy uses, defining it as the science of the production, distribution, and consumption of wealth. [2] On the satirical side, Thomas Carlyle (1849) coined 'the dismal science' as an epithet for classical economics, a term often linked to the pessimistic analysis of Malthus (1798). [3] John Stuart Mill (1844) defined the subject in a social context as:

The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object. [4]

The shift from the social to the individual level appears within the main works of the Marginal Revolution. Carl Menger's definition reflects the focus on the economizing man:

For economic theory is concerned, not with practical rules for economic activity, but with the conditions under which men engage in provident activity directed to the satisfaction of their needs. [5]

William Stanley Jevons, another very influential author of the Marginal Revolution defines economics highlighting the hedonic and quantitative aspects of the science:

In this work I have attempted to treat Economy as a Calculus of Pleasure and Pain, and have sketched out, almost irrespective of previous opinions, the form which the science, as it seems to me, must ultimately take. I have long thought that as it deals throughout with quantities, it must be a mathematical science in matter if not in language. [6]

Marshall provides a still widely cited definition in his textbook Principles of Economics (1890) that extends analysis beyond wealth and from the societal to the microeconomic level, creating a certain synthesis of the views of those still more sympathetic with the classical political economy (with social wealth focus) and those early adopters of the views expressed in the Marginal Revolution (with individual needs focus). Alfred Marshall's inclusion of the expression wellbeing was also very significant to the discussion on the nature of economics:

Political Economy or 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 wellbeing. 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. [7]

Lionel Robbins (1932) developed implications of what has been termed "[p]erhaps the most commonly accepted current definition of the subject": [8]

Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. [9]

Robbins describes the definition as not classificatory in "pick[ing] out certain kinds of behaviour" but rather analytical in "focus[ing] attention on a particular aspect of behaviour, the form imposed by the influence of scarcity." [10]

Some subsequent comments criticized the definition as overly broad in failing to limit its subject matter to analysis of markets. From the 1960s, however, such comments abated as the economic theory of maximizing behavior and rational-choice modeling expanded the domain of the subject to areas previously treated in other fields. [11] There are other criticisms as well, such as in scarcity not accounting for the macroeconomics of high unemployment. [12]

Gary Becker, a contributor to the expansion of economics into new areas, describes the approach he favors as "combining the assumptions of maximizing behavior, stable preferences, and market equilibrium, used relentlessly and unflinchingly." [13] One commentary characterizes the remark as making economics an approach rather than a subject matter but with great specificity as to the "choice process and the type of social interaction that such analysis involves." [14]

John Neville Keynes regarded the discussion leading up to the definition of economics more important than the definition itself. [15] It would be a way to reveal the scope, direction and troubles the science faces.

A recent review of economics definitions includes a range of those in principles textbooks, such as descriptions of the subject as the study of:

It concludes that the lack of agreement need not affect the subject-matter that the texts treat. Among economists more generally, it argues that a particular definition presented may reflect the direction toward which the author believes economics is evolving, or should evolve. [16]

Related Research Articles

The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals and their self interest. Austrian school theorists hold that economic theory should be exclusively derived from basic principles of human action.

<span class="mw-page-title-main">Carl Menger</span> Founder of the Austrian School of economics (1840–1921)

Carl Menger von Wolfensgrün was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theories of marginalism and marginal utility, which rejected cost-of-production theory of value, such as developed by the classical economists such as Adam Smith and David Ricardo. As a departure from such, he would go on to call his resultant perspective, the subjective theory of value.

Economics is a social science that studies the production, distribution, and consumption of goods and services.

Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good or service is determined through a hypothetical maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production. This approach has often been justified by appealing to rational choice theory.

<span class="mw-page-title-main">Thomas Robert Malthus</span> British political economist (1766–1834)

Thomas Robert Malthus was an English economist, cleric, and scholar influential in the fields of political economy and demography.

The term Homo economicus, or economic man, is the portrayal of humans as agents who are consistently rational and narrowly self-interested, and who pursue their subjectively defined ends optimally. It is a wordplay on Homo sapiens, used in some economic theories and in pedagogy.

The subjective theory of value (STV) is an economic theory for explaining how the value of goods and services are not only set but also how they can fluctuate over time. The contrasting system is typically known as labor theory of value.

The dismal science is a derogatory term for the discipline of economics. Thomas Carlyle used the phrase in his 1849 essay "Occasional Discourse on the Negro Question" in contrast with the then-familiar phrase "gay science" used to refer to the art of troubadours.

Positive economics is the part of economics that deals with positive statements. Positive economics, was originated from positivism and got introduced to economics by John Stuart Mill in his book Auguste Comte and Positivism in 1860's, reflecting upon Comte's positivism. Then, it was developed by John Neville Keynes in the 1890's and it became popular economical thought by elaborations of Lionel Robbins in the 1930's. In essence, positive economics studies what is rather than what ought to be. While economics can be filled with subjective statements such as value and allocation, it is vital to distinguish that what be is not objectively permanent or desirable.

Philosophy and economics studies topics such as public economics, behavioural economics, rationality, justice, history of economic thought, rational choice, the appraisal of economic outcomes, institutions and processes, the status of highly idealized economic models, the ontology of economic phenomena and the possibilities of acquiring knowledge of them.

The welfare definition of economics is an attempt by Alfred Marshall, a pioneer of neoclassical economics, to redefine his field of study. This definition expands the field of economic science to a larger study of humanity. Specifically, Marshall's view is that economics studies all the actions that people take in order to achieve economic welfare. In the words of Marshall, "man earns money to get material welfare." Others since Marshall have described his remark as the "welfare definition" of economics. This definition enlarged the scope of economic science by emphasizing the study of wealth and humanity together, rather than wealth alone. In his widely read textbook, Principles of Economics, published in 1890, Marshall defines economics as follows:

Political Economy or 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 well-being.

<span class="mw-page-title-main">Heterodox economics</span> Economic theories that contrast with orthodox schools of economic thought

Heterodox economics is any economic thought or theory that contrasts with orthodox schools of economic thought, or that may be beyond neoclassical economics. These include institutional, evolutionary, feminist, social, post-Keynesian, ecological, Austrian, humanistic, complexity, Marxian, socialist, anarchist and modern monetary theory economics.

Economic methodology is the study of methods, especially the scientific method, in relation to economics, including principles underlying economic reasoning. In contemporary English, 'methodology' may reference theoretical or systematic aspects of a method. Philosophy and economics also takes up methodology at the intersection of the two subjects.

Applied economics is the study as regards the application of economic theory and econometrics in specific settings. As one of the two sets of fields of economics, it is typically characterized by the application of the core, i.e. economic theory and econometrics to address practical issues in a range of fields including demographic economics, labour economics, business economics, industrial organization, agricultural economics, development economics, education economics, engineering economics, financial economics, health economics, monetary economics, public economics, and economic history. From the perspective of economic development, the purpose of applied economics is to enhance the quality of business practices and national policy making.

Lionel Robbins' Essay sought to define more precisely economics as a science and to derive substantive implications. Analysis is relative to "accepted solutions of particular problems" based on best modern practice as referenced, especially including the works of Philip Wicksteed, Ludwig von Mises, and other Continental European economists. Robbins disclaims originality but expresses hope to have given expository force on a very few points to some principles "not always clearly stated"

In the history of economic thought, a school of economic thought is a group of economic thinkers who share or shared a common perspective on the way economies work. While economists do not always fit into particular schools, particularly in modern times, classifying economists into schools of thought is common. Economic thought may be roughly divided into three phases: premodern, early modern and modern. Systematic economic theory has been developed mainly since the beginning of what is termed the modern era.

Economics imperialism is the economic analysis of non-economic aspects of life, such as crime, law, the family, prejudice, tastes, irrational behavior, politics, sociology, culture, religion, war, science, and research. Related usage of the term goes back as far as the 1930s.

An economic ideology is a set of views forming the basis of an ideology on how the economy should run. It differentiates itself from economic theory in being normative rather than just explanatory in its approach, whereas the aim of economic theories is to create accurate explanatory models to describe how an economy currently functions. However, the two are closely interrelated, as underlying economic ideology influences the methodology and theory employed in analysis. The diverse ideology and methodology of the 74 Nobel laureates in economics speaks to such interrelation.

<span class="mw-page-title-main">Scarcity</span> Concept in economics

In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good." If the conditions of scarcity didn't exist and an "infinite amount of every good could be produced or human wants fully satisfied ... there would be no economic goods, i.e. goods that are relatively scarce..." Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons. Scarcity also includes an individual's lack of resources to buy commodities. The opposite of scarcity is abundance. Scarcity plays a key role in economic theory, and it is essential for a "proper definition of economics itself".

"The best example is perhaps Walras' definition of social wealth, i.e., economic goods. 'By social wealth', says Walras, 'I mean all things, material or immaterial, that are scarce, that is to say, on the one hand, useful to us and, on the other hand, only available to us in limited quantity'."

Roger Edward Backhouse, is a British economist, economic historian and academic. Since 1996, he has been Professor of the History and Philosophy of Economics at the University of Birmingham.

References

  1. ↑ Attributed to Jacob Viner, per Backhouse, Roger E., and Medema, Steve G. (2009) "Defining Economics: The Long Road to Acceptance of the Robbins Definition," Economica, 76(1) pp. 805–882.
  2. ↑ Say, Jean-Baptiste (1803 ). A Treatise on Political Economy; or the Production, Distribution, and Consumption of Wealth, trans. 1834, C. C. Biddle, ed., Grigg and Elliot.
  3. ↑ • [Carlyle, Thomas] (1849). "Occasional Discourse on the N[egro] Question," Fraser's Magazine, republished in Works of Thomas Carlyle, 1904, v. 29, Charles Scribner's Sons, pp. 348–383.
       • Malthus, Thomas (1798). An Essay on the Principle of Population.
       • Persky, Joseph (1990). "Retrospectives: A Dismal Romantic," Journal of Economic Perspectives, 4(4), pp. 166–169 [pp. 165–172].
  4. ↑ Mill, John Stuart (1844). "On the Definition of Political Economy; and on the Method of Investigation Proper to It", Essay V, in Essays on Some Unsettled Questions of Political Economy (V39). (Accessed Nov 2011)
  5. ↑ Menger, Carl (1871). Principles of Economics, p. 48. .
  6. ↑ Jevons, W. Stanley (1871). The Theory of Political Economy, Preface, pp. vi–vii.
  7. ↑ Marshall, Alfred (1890 [1920]). Principles of Political Economy, v. 1, pp. 1–2 [8th ed.]. London: Macmillan.
  8. ↑ Backhouse, Roger E., and Steven Medema (2009). "Retrospectives: On the Definition of Economics," Journal of Economic Perspectives, 23(1), p. 225. 221–233.
  9. ↑ Robbins, Lionel (1932). An Essay on the Nature and Significance of Economic Science , p. 15. London: Macmillan. Links for 1932 HTML and 2nd ed., 1935 facsimile.
  10. ↑ Robbins, Lionel (1932). An Essay on the Nature and Significance of Economic Science, p. 16.
  11. ↑ • Backhouse, Roger E., and Steven G. Medema (2009). "Defining Economics: The Long Road to Acceptance of the Robbins Definition," Economica, 76(302), V. Economics Spreads Its Wings. [pp. 805–820.]
       • Stigler, George J. (1984). "Economics—The Imperial Science?" Scandinavian Journal of Economics, 86(3), pp. 301–313.
  12. ↑ Blaug, Mark (2007). "The Social Sciences: Economics," The New Encyclopædia Britannica, v. 27, p. 343 [pp. 343–352].
  13. ↑ Becker, Gary S. (1976). The Economic Approach to Human Behavior, Chicago, p. 5.
  14. ↑ Backhouse, Roger E., and Steven Medema (2009). "Retrospectives: On the Definition of Economics," Journal of Economic Perspectives, 23(1), p. 229 [pp. 221–33.
  15. ↑ John Neville Keynes, The Scope and Method of Political Economy, p. 51.
  16. ↑ Backhouse, Roger E., and Steven Medema (2009). "Retrospectives: On the Definition of Economics," Journal of Economic Perspectives, 23(1), Introduction and Conclusion [pp. 221–233.

Further references

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