DEFINITION OF ECONOMICS BY SEVERAL SCHOOL OF THOUGHTS

DEFINITION OF ECONOMICS BY VARIOUS SCHOOLS OF THOUGHTS

A school of economic thought is a group of economic analyzers and thinkers who share a common perspective, intuition and conception on the way economies function.

There are three main schools of thoughts that dominate the way the economies work; they are;

1.     The Classical School

2.     The Neo-Classical School

3.     The modern economics.

1.3.1The Classical School

The classical school is the first school of economic thought and is associated with the 18th century Scottish economist Adam smith and others followed by him, such as the British economists Robert Malthus and David Ricardo, non British also are John Stuart Mill, Karl Marx, J.B Say, Jeremy Bentham, etc.

Ø Adam Smith described economics as a “science of wealth in his book, “an inquiry into the nature and causes of wealth of Nations” in 1776.

Ø J.B Say described economics as “the science which treats wealth”.

Ø J.S Mill described it is the practical science of production and distribution of wealth.

Ø Malthus, Man is motivated by self-interest only. The desire to collect wealth never leaves him till he goes into his grave.

According to the classical school of thoughts, economics is a subject which studies the nature of wealth and laws which governs its production, distribution, exchange and consumption.

1.3.2 MAIN POINTS;

Highlighted below are some main points, which are described in the definitions of economics, given by the classical school of thought.

1.     Nature

They treat only material goods like house; books, clothes, furniture etc whereas non-material goods like services of barbers, plumbers, accountants, economists etc are ignored.

2.     Science of wealth

The term wealth in economics means the goods and services, which satisfies human wants. Hence wealth does not mean money.

1.3.3 Neo-classical School

Welfare definition of economics by Alfred Marshall led the Neo-Classical school. In his book “Principles of Economics” which was published in 1890, he has defined economics as;

The 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 use of material requisite of well being

The definition of economics above clearly connotes that economics is on one part the study of wealth and on the part the study of human beings (well fare).Remember I said earlier on that wealth denotes goods. Before human welfare can be attained, wealth has to be achieved. So we can deduce that wealth is a means to achieving human welfare.

From the welfare definition of economics by Alfred Marshall, we can deduce that economics is the;

1.     Study of Human Beings

2.     Economics is a Social Science

3.     Study of Material welfare

Ø Study of Human beings: According to Alfred Marshall, its subject matter is the aspect of human behavior e.g. spending of money for the attainment of material needs of human beings irrespective of the social status of the concerned individual.

Ø Economics is a social science: It does not focus on the behavior of human beings, but rather their actions, reaction and also their interaction in the society. It focus here is how people react to certain conditions when they occur in terms of economic activities.

Ø Study of Material Welfare: According to Alfred Marshall, economics studies only the material requisite and ignores the non-material aspect.

Point to Note:

Limitations to the definition of the classicalist and the neo-classicalist are that they narrow down the scope of economics, which according to them the use of only Material requisite and welfare. There are many things in the world, which are non-material but rather they are very key in promoting human welfare,

i.e. the services of barbers, accountants, lawyers, electrician and other professions. These things that satisfy our needs and wants are limited in supply. So if we eliminate these services, then the aspect of economics concerning human being welfare and requisite will be vague and restricted. Therefore both the material and Non material things have to be taken into considerations.

1.3.4 The Modern economics

The definition of economics by both the classical and neo-classical school of thoughts has been strongly criticized by Professor Lionel Charles Robbins in his book “Nature and significance of Economic Science”. He said that the concept of material welfare does not explain the subject matter on economics. The word material is subject to certain limitations. He defined economics as;

A social science which studies human behavior as a relationship between ends and scare means which have alternative uses.

In the definition illustrated above, the word ends refers to human wants which denotes available but limited goods and services. The word means refers to productive resources (input), otherwise known as factors of production required to attain/achieve the limited goods and services.

Economics is described as a Social Science; because it examines the way in which individual optimally utilize his resources to get maximum satisfaction. It follows the scientific process of observations, hypothesis, facts, proof, and theories on Human behavior. The economists adopt scientific method in which theories of human behavior and developed and tested against the facts in a way similar to the practice in the pure sciences like physics and chemistry.