Adam Smith’s Definition of Economics: The set of definitions given by various economists falls into three broad classes, that viewed economics (i) as a science of wealth (ii) the science concerning the material welfare of man, and (iii) a science dealing with the problem of allocation of scarce resources among competing ends. In this article, let’s explain Adam Smith’s Definition of Economics as the Science of Wealth.
Adam Smith’s Definition of Economics
The first view is associated with the name of Adam Smith and his disciples. They regard Economics as the science that studied the process of production and consumption of wealth. The emphasis on wealth is contained in the very title of Smith’s book “An Inquiry into the Nature and Cause of the Wealth of Nations”. In this book, he wrote, “The great object of the political economy of every country is to increase the riches and power of that country.
Adam Smith, therefore, thought of Economics as the Science of Wealth. The followers of Smith like J.S.Mill, J.B.Say, David Ricardo, and Prof. Walker supported Adam Smith’s definition of economics by saying, Economics is also a Science of Wealth. The main points of this definition of Economics are:
- Economics is the study of wealth only. It deals with consumption, production, exchange, and distribution.
- Only material goods are wealth: Non-material goods like services are not wealth.
- Economics studies the cause of wealth changes which means economic development. To increase wealth, the production of material goods will have to be stepped up. In other words, production is an important factor to increase wealth. For this purpose, investment is to be maximized.
Criticism of Definition
Adam Smith’s definition was severely criticized by social reformers and writers like Carlyle and Ruskin. Ruskin called Economics a bastard science. In Carlyle’s view, Economics is a dismal science because it encouraged money-making. The main criticisms of the “Science of Wealth” definition are as under:
1. Too much importance to wealth: This definition gave more importance to wealth than man. Wealth has been given. the primary and man only the second place. But this is not true According to Marshall, “Economics on the one side is wealth and on the other and important side a part of the study of man.
2. Restricted meaning of wealth: By restricting wealth to material goods only, this definition narrowed the scope of Economics. According to Marshall wealth refers to material goods like tea, butter, biscuits, etc. Non-material goods like the services of Doctors, engineers, and dancers are not regarded as wealth. But Modern Economists use the word wealth both for goods and services.
3. No mention of man’s welfare: Adam Smith’s definition gives no importance to the economic welfare of society. It gives importance to the accumulation of wealth only. It pays no attention to the equitable distribution of wealth and its use for the welfare of society. But Economics does not concern itself with only the obtains of wealth, its aim is also the welfare of man.
4. Concept of economic man: The ‘science of wealth’ definition is based on the assumption that (1) every man works more to satisfy his self-interest and (2) there is much difference between personal and social interest. But this statement is not correct. Because Economics studies a common man rather than a selfish economic man.
5. No study of means: This definition of economics makes the earning of wealth an end in itself. It does not tell us the way of earning wealth. As we know means are scarce and different ends compete for attracting means for their satisfaction. This definition is silent over the real economic question.
6. Defective logic: This definition is not acceptable from a logical point of view also. According to the science of logic, a word whose meaning is not clear in itself should not be used to define another. The meaning of wealth is not clear. Hence, a definition using the word ‘wealth’ is also not clear.
7. The narrow view of the subject matter: This definition led to an extremely narrow view of the subject matter, According to Robin’s Economics studies both material and non-material resources are available to mankind.
Thus, it may be concluded the definition of economics as a science of wealth is narrow, controversial, and unscientific. Economics does not study the earning of material wealth only. It studies all the activities of man which are concerned with the scarcity of means and the ultimate ends.