Adam Smith definition of economics. Its features and criticism

                                      

Adam Smith's Definition of Economics, it's features and criticism

The classical view: Wealth Definition: The early economists like J.E. Cairnes, J.B.Say, and F.A.Walker have defined economics as a science of wealth. Adam Smith, the father of economics, in his book in 1776, “An Enquiry into the Nature and Causes of Wealth of Nations”, stated that “Economics is the science of wealth.” He defined economics as “A science which enquires into the nature and causes of wealth of nations.”

According to him, wealth may be defined as those goods and services which command value-in- exchange [Value-In-Exchange means the amount of money or goods that is actually paid for a product or service.] and economics is concerned with the problems arising from wealth-getting and wealth-using activities of people. Thus, we study, in economics, about consumption, production, exchange and distribution of wealth.  His focus was mainly in studying the ways by which the wealth of all nations could be increased.

He considered that the individual in the society wants to promote only his own gain and in this, he is led by an “invisible hand” to promote the interests of the society though he has no real intention to promote the society’s interests. [The invisible hand is a metaphor which is used to describes the unseen forces of self-interest that impact the free market. People act in their own interest, which ultimately gives benefits to the economy as a whole.  It favors a free market without government intervention. The prices of goods and services are self-adjusted and the market forces of supply and demand stabilize the economic system.]

J.S.Mill opinioned, “Economics is the practical science dealing with the production and distribution of wealth.”

The American economist F.A.Walker says, “Economics is that body of knowledge, which relates to wealth.”

Features of the Wealth Definition of Economics: 

This definition gives too much importance to the creation of wealth in an economy. As per this definition, the motive of Economics is only increasing the amount of wealth in a nation and it can be increased by raising the level of production and distribution.

Wealth includes only material goods which can be seen or touched only such as manufactured items. It does not include non-material goods or services such as service of a doctor or a lawyer or a teacher etc.

This definition imagines the economic man who is self-centered and self-interested in nature. His focus is all the time on his own well-being and has only one motive how to earn money.

Criticism: This conception of economics as a science of wealth laid exclusive stress on material wealth, that’s why these definitions were criticized badly. Ruskin and Carlyle condemned economics as a ‘dismal science’ [the science of bread and butter] as it taught selfishness which was against ethics. According to them, making economics as a science of wealth would make the people worshipers and greedy for wealth.

• The main drawback in the wealth definition of economics had been its excessive emphasis on wealth-producing activities. Wealth was regarded to be the end in itself. But we should remember that wealth should only be considered as the mean to satisfy human wants. It means that wealth is not end as it cannot satisfy any human needs directly. Goods and services are purchased with the help of wealth.

• This definition has an imaginary outlook of the economic man whose motive is to acquire wealth only and other motives of a man like love, affection, feelings and emotions are neglected. Thus, it neglects human welfare.

• This definition only studies about wealth and does not study the concept of welfare. That’s why, it is considered as incomplete and narrow definition.

• Classical economists gave more stress on the word ‘material wealth’ and thus narrowed the scope of economics by excluded all economic activities which are related to the production of non-material goods and services.

• This definition ignores scarcity and choice, which are the fundamental concepts of Economics. In reality, economic activities occur because of unlimited human wants and limited resources which have alternative uses.

Dr. Swati Gupta

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