Class 10 economics note

 Nature of Economics

Why to Study Economics?

Economic goads are scarce or insufficient. Society must choose the best one among the limited goods that are produced with its available resources. The essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources. It is the study of how society uses scarce resources to produce valuable goods and services and distribute them among different individuals. If the resources to produce goods and services are not scarce then we should not worry about how to use resources efficiently, and this limits the use of economics. But due to the scarce resources we have to make wise use of them. Economics teaches us to make the best use of our scarce resources.

Introduction

The word 'ECONOMICS' is derived from Greek word 'OEKONOMICUS'. In Greek 'OEKO' means household activities and 'NOMICUS' means study. In Nepali, it means "Arthasaastra". So literally it is the study of household affairs. Many Greek philosophers have defined economics in a variety of ways:

•  According to Xenophone, "Economics is the science of household management." 
•  Similarly, Aristotle defines, "Economics is not only the science of household affairs but also the science of exchange or science of acquiring wealth." 

Until the medieval age, Economics was considered as a subsidiary science of Christian ethics. Philosophers of the then time considered wealth as the means of salvation and fulfilling divine order. They regarded religious activities more important than wealth.

Definition of Economics  

• It becomes necessary to study the definitions defined by various economist in order to know what economics is about. But some economists do oppose the very concept of definitions. This group includes modern economist such as Jacob, Viner, Mourice Dobb and G. Mydral. According to them, it is a difficult task to determine the scope of any natural and social science. 
•  As time changes, new things are included and old things are removed in the science. Therefore it is not possible to give a fix definition of any science, and even if it is defined, it will only be temporary. 
•  Barbara Wooten writes, "Whenever six economists are gathered there are seven opinions”. 
•  Due to these different concepts, economics may not be perfectly defined. Even these economists, who accept the concept of definition, have defined economics differently. For convenience, the definition of economics can be classified into three parts as: 
•  Wealth definition/Classical definition: Adam Smith

• Welfare definition/Neo-classical definition: Alfred Marshall 
•  Scarcity definition/Modern definition: Lionel Robbins 

Wealth Definition/Classical Definition

• Adam Smith, the father of economics and the leader of classical economists, published his famous book, 
•  "An Enquiry into the Nature and the Causes of Wealth of Nations" in 1776. This book is popularly known as 'Wealth of Nation'. It is considered as the 'Bible of Economics'.  The name of the book itself gives his definition of economics. So According to him, "Economics is defined as a science which inquires about the nature and causes of wealth of nation." 
•  Adam Smith defines economics as the science of wealth. The definition of economics as the ' science of wealth' has been supported by classical economists like F.A. Walker, JS Mill, J. B. Say and David Ricardo

Characteristics of Wealth Definition

1. Study of wealth: 

2. Secondary place to the study of man: 

 3. Meaning of wealth: 

 4. Study of economic man: 

 5. Investigation of the causes of wealth:

Characteristics of Wealth Definition

•As per this definition, economics is concerned only to the study of wealth. It deals with the production, consumption, exchange and distribution of wealth. 2. Secondary place to the study of man: 

• This definition has given primary place to study of wealth and secondary place to the study of man. This shows that the classical economists have regarded man as a means and wealth as an ends. 3. Meaning of wealth:

 •This definition has included only material goods in the definition of wealth. Material goods are those goods, which are tangible or visible such as a pen, book, pencil, gold, etc. The non-material goods like teacher's service, doctor's service, etc. have been excluded from the definition of wealth. These non-material goods are also important to promote human welfare.

This definition has imagined such a man who is always guided by self-interest and concerned with his own material welfare. Such a man is called economic man, who always thinks of earning more and more wealth at any cost and by any means. 5. Investigation of the causes of wealth: 

• Classical economists are of the opinion that economics is to investigate the causes of the wealth, i.e., how wealth can be increased. In order to increase the wealth of a nation, production of material goods has to be increased by increasing the scale of production, which is possible with the division of labour

Many writers such as John Ruskin, Thomas Carlyle, William Morris and Mathew Arnold have criticized the wealth definition. They have criticized it as the 'Bastard Science' or 'Dismal Science' or 'Bread and Butter Science' or 'Gospel of Mammon'. The main criticisms are as follows:

1. Narrow meaning of wealth

 2. Undue Importance to wealth

 3. Unrealistic concept of economic man 

4. Narrow subject matter of economics 

5. Neglect of economic welfare