The word economics was derived from Greek words ‘Oeconomicus’ in 431 B.C. by Xenophone.
It means household management and agriculture with limited wealth.
The economics science was born with the publication of Adam Smith’s book ‘An Enquiry into the Nature and Causes of Wealth of Nations’ in 1776 AD.
Adam Smith is also known as father of economics.
Before the publication of this book economics was study in Political Economics.
In the view of Adam Smith ‘Economics is the science of wealth.’
According to Marshall, “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”.
According to Robbins, “Economics is the science which studies the human behaviour as a relationship between ends and scarce means which have alternative uses.”
From these definitions, economics is social science which studies the economic behavior of the people that concern on proper and rational utilization of limited resources to obtain maximum satisfaction.
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Adam Smith’s Wealth Definition of Economics
Adam Smith’s definition of economics is also known as the classical definition of economics.
He had published a book named ‘An Inquiry into the Nature and Causes of the Wealth of Nation’ in 1776 AD.
This book is popularly known as ‘Wealth of the Nations’.
At first Adam Smith gave one of the distinct definitions of economics and separated economics from political economy; so, he is also known as father of economics.
He has defined economics as the science of the wealth.
According to Adam Smith, “Economics is study of the nature and cause of wealth of Nation.”
Smith has defined economics as the science of wealth.
He has distinguishes man into two groups: economic man and non-economic man.
An economic man is a person whose activities concentrate around the wealth and entire aim is to earn more and more wealth.
Thus, this definition related to economic man but not with non-economic man.
Therefore, Economics is a science which deals with wealth.
Several other classical economists such as J.B. Say, David Ricardo, J. S. Mill, F.A Walker etc supported and followed Adam Smith’s definition.
According to J.B. Say, “Economics is the body of knowledge which relates to wealth.”
According to J.S. Mill, “Economics is practical science of production and distribution of wealth.”
Courtesy: The Muir portrait at the Scottish National Gallery
By Unknown author – http://www.nationalgalleries.org/object/PG 1472, Public Domain,
Keep in mind
Adam Smith (1723 – 1790) was a British.
He was born in Scotland (UK). He was an economist, philosopher and author.
He is also known as The Father of Economics.
He got his education at the University of Glasgow and at Balliol College, Oxford.
Features of Wealth Definition of Economics
The wealth definition of economics has the following features:
Primary place to wealth
Adam Smith has given primary place to the wealth.
It is the central point of study of economics.
It concerns on how to earn the wealth and use it.
It deals with production, consumption, distribution and exchange of the wealth.
Study of economic-man
Economics is related with those activities which governed by the economic man but not a non-economic man.
The person involved in the production activities is defined as the economic-man.
Main goal of man is to earn wealth
The main goal of human being is to earn wealth.
They live for the wealth and run different activities to earn wealth.
It is only a means for happiness of human beings which can satisfy human wants.
Employed labor is the source of wealth
The single source of Wealth of a Nations is employed labor who involved in production activities.
Labour division helps to increase the productivity of the worker as a result increase the national wealth.
Criticisms of the Adam Smith’s Definition of Economics
Ruskin and Carlyle criticized wealth definition of economics as a dismal science, science of bread and butter or the science of selfishness.
Neo classical economist Alfred Marshall and his followers criticized this definition on the following ways:
Adam Smith considered that economics is the science that deals only with wealth.
The critics pointed out the economics studies are not only wealth but also some other services like the services of doctors, teachers, engineers which fulfill human needs and wants.
It does not cover all of the scope of economics.
Unnecessary emphasis on wealth
Adam Smith’s definition has given more importance to the wealth in economics rather than human beings.
He gave primary role to the wealth and only secondary place to mankind.
But the critics pointed out that human life cannot be sacrificed for wealth rather wealth should be used for the betterment of mankind.
Wrong assumption of economic-man
Adam Smith assumed that every human being who wants to earn money by hook or by crook (at any rate) is known as an economic man.
The critics of the definition has pointed out that almost all human beings has the qualities of human life such as feelings of love, respect, self-esteem, sympathy, co-operation, friendship, trust which might provide greater satisfaction rather than wealth in their lives.
Wrong concept single source of wealth
According to Adam Smith employed labor is only a single of the source of wealth of a nation but critics point out that nature resources, human resources, capital resources and physical resources are source of wealth.
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