Definition of economic according to Adam smith(Wealth definition)

Adam smith is a Scotland economist. He born in 1723A.D and died into 1790A.D. He published a book
named An inquiry into the nature and causes of the wealth of nation in 1776A.D. Later he published
another book Wealth of the nation which became popular among people. After publication of this book
economics got its independence identify. Thats why Adam smith is known as Father of economics.

He has defined economics as the science of the wealth in his book .According to him, Prosperity of the
individuals constitutes the prosperity of the nation. Gain of wealth or after acquiring the man can achieve
his satisfaction

Therefore, Economics is a science which deals with wealth. Economics provides the guide lines to the
individuals and society or nation.

Several great economists such as J.B.Say, David Ricardo, J.S. Mill etc. supported and followed Adam
smith definition. So, they are called classical economists.

Criticism of the Adam smith definition

Narrow definition

Adam smith considered that economics is the science that deals only with wealth and material goods.
Contrary to this concept, the critics pointed out the economics studies not only material goods and wealth
but also some non-material things such as services of doctors, teachers, engineers which also fulfill
human needs and wants. Therefore, services produced by professional human resources also constitute
important aspects of wealth. Therefore, services rendered by people should also regarded as a part of
wealth.

Unnecessary emphasis on wealth

Adam smith highly emphasized the importance of wealth in economic life rather than human beings. He
assigned primary role to wealth and only secondary place to mankind. On the contrary, the critics pointed
out that human life cannot be sacrificed for wealth rather wealth should be used for the betterment of
mankind.

Single source of wealth

In the view of Adam smith, the amount of wages that is earned by employed labourers could be the only
one sources of wealth of a nation. The critics of the definition are however of the view that natural
resources, human resources, capital resources and physical resources also as sources of wealth. All these
resources put together can be utilized to earn maximum wealth by nation.

Assumption of economic-man is wrong

Adam smith assumed that every human being who wants to earn money by hook or crook is known as an
economic man. The critics of the definition instead point out that almost all human beings also own 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.

In 1776 A.D., Adam Smith published a book entitled "An Inquiry into the Nature and Causes of Wealth of
Nation". In short, this book is also called "Wealth of Nation". The name of book itself defined what
economics is and the study area or subject matter of economics that it covers. This is also considered as
the Bible of the science of economics. The meaning of wealth as used by A. Smith refers to abundance of
money. Smith was among the first to describe how a free, competitive economy can function without
central planning or government intervention to allocate resources efficiently. He recognizes that the
virtues of the 'invisible hand' that leads the people's private interest of firm and he was popularly
suspicious of firms that are sheltered from competition. Since, he recognized the potentially undesirable
effects on resources allocation.

Logical Explanation:

Significance of Wealth:

A.Smith assumed that wealth is the only important factor in human society. It can fulfill all the desires of
human being in society. He also assumed that the entire efforts of human society is found to be directed
towards earning more and more wealth.

Role of Economic Man:

Smith claims that economics studies behavior of those human beings who have only one objective. That
objective is the earning of more and more wealth at any cost by any means. Human being of such nature
in the words of Smith is an "Economic Man".

Priority Given in Definition:

In the definition of economics first priority is given to wealth and the second priority to mankind. He
assumes that mankind is for wealth but wealth is not for mankind. He also believed and argued that
wealth and only wealth can give higher satisfaction to all mankind. Therefore, wealth is of a primary
importance in his definition.

Sources of Wealth:

A. Smith in his definition of economics assumed that, wages earned by active human resources is to be
the only one and most important source of income of a nation. He also suggested that the active labors
can earn high amount of wages only through the division of labor in production and distribution of goods
and services.He conclude that apart from wages, there is nothing else which can be regarded as sources of
wealth of a nation.
Criticisms
The wealth definition of economics given by Adam Smith has been criticized on several grounds. It is
strongly criticized by eminent scholars like Carlyle Ruskin, Alfred Marshall, etc. In short, the critics
dubbed economics as the "Bread and Butter Science", "the Gospel of Mammon" and " a Dismal Science".
The major points of criticisms of wealth definition are discussed below:

Narrow Definition

A.Smith considered that economics is the science that deals only with wealth and material goods.
Contrary, to this definitions concept the critics pointed out that economics studies not only material goods
and wealth but also some non-material such as services of doctor, teacher, lecturer also fulfill the human
wants. Therefore, services provided by professional human resources also constitute aspects of wealth.
Therefore, services regarded by people should also be regarded as a part of wealth.

Unnecessary Emphasis on Wealth

A. Smith highly emphasized the importance of wealth in economic life rather than human beings. He
assigned primary role to wealth and only secondary place to mankind. On the contrary, the critics pointed
out that human life cannot be sacrificed for wealth rather wealth should be used for the betterment of
mankind.

Single Source of Wealth

In the view of A. Smith, the amount of wages that is earned by employed labors could be the only one
source of wealth of nation. The critics of the definition are however of the view that natural resources,
human resources, physical resources and capital resources also as sources of wealth. All these resources
put together can be utilized to earn maximum wealth by a nation.

Assumption of Economic Man is wrong

Smith assumed that every human being who wants to earn money by hook or crook is known as economic
man. The critics of the definition instead pointed out that almost all human beings also own the qualities
of human life such as feelings of love, respect, self-esteem, sympathy, c0-operation, friendship, trust
which might provide greater satisfaction rather than wealth in their lives.

Conclusion

In conclusion, A. Smith considered human wants as unlimited. It is important that these wants be fulfilled
and wealth is the only thing that can fulfill human needs or wants.
The definition of economics as the 'science of wealth' has been supported by classical economists such as:
F.A. Walker, J. B. Say, J.S. Mill and David Ricardo. According to F.A. Walker, "Economics is that body of
knowledge which relates to wealth." Similarly, J.B. Say defines,"Economics is that science which treats
of wealth."
In conclusion, each and every classical economist defines economics in similar view as Adam Smith that
economics is the body of knowledge which relates to wealth.
Adam Smiths Definition
Classical economists like Adam smith and his distinguished followers J.S. Mill, F.A. Walker, David
Ricardo, etc. define economics as a science of wealth. Adam smith is the leader of classical school of
economic thought. There were many economists before the emergence of classical school of economic
thought. However, the first definition was given by Adam smith. He categorized economics as a separate
science which was link with other subjects. For this great contribution of smith in economic science, he is
respected with the honor of father of economics.

After the publication of Adam smiths book (An enquiry into nature and cause of wealth of nation) in
1776 A.D, economics got its independent identity. He defined economics as the science which studies
about the nature and causes of wealth of nation.

According to him economics maintain the relationship between consumption and production of wealth. It
is concerned with the knowledge of earning money. Every individual of the society has a desire to earn
wealth. So, economics provides guidelines to the individual in earning more wealth. The main points or
ideas in the definition of Adam smith are:

Study of wealth of nation: Economics is the study of wealth of nation. It deals with consumption,
production, exchange and distribution of wealth.

Study of economic activities: Economics is only concerned with the activities of economic man, who is
involved in earning more wealth. But it is not a study of non-economic man, who is not involved in
earning wealth.

Main goal is to earn wealth: The main goal of human beings is to earn wealth because wealth is only the
means for satisfying human wants.

First place to wealth: Adam smith gave the first place to wealth and secondary place for man in the study
of economics. In other words, the subject matter of economics is wealth. He advocated that man is made
for wealth.

Only material goods constitute wealth: The definition has given emphasize only material goods constitute
wealth in society and there is no concern of economics with non-material goods or like free goods: air,
water, sunlight, water, etc. which do not play any role in creation of wealth in society.

Employed labour is the source of wealth: The source of wealth of nation is employed labour whose
productivity would be increased through the division of labour in production and distribution of goods
and services.

Criticism of Adam Smiths Definition

Adam smiths definition of economics as a science of wealth has been criticized bitterly because it
assumed wealth as an end of human activities. If it is accepted in life, there will be no place for love,
sympathy, and patriotism and it had made the man selfish. Economists like Ruskin, Carlyle, Maris,
Marshall, etc. have criticized Adam smiths definition as a science of bread and butter, a science of getting
rich, a dismal science, a science of devil, etc. The major weakness or criticism points of this definition are
as follows:

Narrow meaning of wealth: Adam smith considered that economics is the science of wealth and wealth
includes only material goods. This is the narrow sense of defining wealth. In practice, wealth includes
both material and non- material goods. The human wants can be fulfilled by using non material goods of
services also.

Too much importance to wealth: Adam smith gave more importance to wealth than man. He had given
first place for wealth and secondary place for human beings. But according to Marshall, wealth is only a
means of satisfying human needs. Thus, economics must emphasize the study of man much more than the
study of wealth.

No meaning of human welfare: This definition gave no importance to the welfare of society. According to
Marshall, the main aim of economics is to increase the welfare of human beings not to obtain wealth only.

Wrong assumption of economic man: According to Adam smith, Economic man is one who is involved in
earning wealth and this economic man is only the subject matter of economics. But no man can be limited
only with earning wealth. Because man is equally influenced by moral and spiritual thoughts like love,
self-esteem, sympathy, friendship, etc.

Labour is not only the source of wealth: According to Adam smith, main source of wealth is employed
labour. In real, labour alone cannot produce anything. In production process, there are other factors of
production like land, capital, and organization including labour. Adam smith has ignored these aspects.

Thus, his definition provided an independent identity to the economics and separated economics which
was linked with other subjects. Hence, he is known as the father of economics.

Economics is a Science of Material Welfare!

Marshall is one of the economists who contributed a good deal too economic theory. Even his definition
of economics occupies an important place in the literature of economics. Marshall was the first economist
who lifted the science of economics from the disrepute it had fallen into due to its being associated with
the study of wealth.

Marshall pointed out that, for economics, wealth is not an end in itself but it is only a means to an end; the
end being the promotion of human welfare. Thus, according to Marshall, wealth is only a secondary thing,
it is man and his ordinary business of life which is the primary object of economic study. In fact, Marshall
tried to make the study of economics an engine of social betterment.
With this end in view, Marshall gave the following definition of economics; Political Economy or
economics is 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 with the use of the material
requisites of well-being.

Three things are worth noting in the above definition provided by Marshall. First, it is a study of man as
such and not of wealth. No doubt, according to this definition, economics is concerned with wealth but it
is concerned with wealth in the sense that it studies mans action regarding how he earns wealth and how
he spends it. It is thus clear that it is the study of man which occupies the prominent place in the
economic study.

Thus Marshall writes Economics on the one side is study of wealth and, on the other and more important
side, a part of the study of man. Secondly, Marshalls definition implies that economics is concerned
with a particular aspect of mans life. There are many aspects of mans lifesocial, religious, political,
etc.

Economics studies mans life in the ordinary business of life. The ordinary business of life means how a
man gets his living and how he spends it. Thus Marshall says Economics is a study of mankind in the
ordinary business of life.

At another place he says, Economics is study of mans action in the ordinary business of life. It enquires
how He gets his income and how he uses it. Thirdly, according to the above Marshalls definition, the
primary object and end of economics is the promotion of material welfare. It should be noted that
economics is not concerned with the totality of human welfare but only a part of it.

Economists are concerned with only one aspect of human welfare which is connected with the
achievement and the use of the material means of welfare. Thus Marshall incorporated in his definition
that economics examines that part of individual and social action which is most closely connected with
attainment and with the use of the material requisites of well-being. It is the phrase material requisites of
well- being that stands for material welfare. It is thus clear that Marshall laid emphasis on material
welfare as the primary concern of the science of economics.

There are other economists who have also defined economics in terms of economic welfare. Thus Cannan
defines economics in the following words: The aim of Political Economy is the explanation of the
general causes on which the material welfare of human beings depends.

Thus in this definition also emphasis has been laid on material welfare of man and; according to Cannan,
economics enquires into the factors which determine the material welfare of human beings. Likewise,
Pigou describes that the range of our enquiry becomes restricted to that part of social welfare which can
be brought directly or indirectly into relationship with the measuring rod of money.
It should be noted that in the above Pigous definition the part of social welfare which can be related
directly or indirectly with the measuring rod of money means the material welfare of human beings
because it is material welfare which can be measured by the measuring rod of money.

Non- material welfare cannot be measured with the aid of money. The total human welfare also cannot be
measured with the help of money. It is only a part of the human welfare, that is, material welfare which is
measurable in terms of money.

Critical Evaluation of Marshalls Definition and other Welfare Definitions:

After Marshall had given the definition of economics it began to be thought that the problem of defining
economics had ended because it was considered that Marshalls definition provided a correct scope and
objective of economics.

Many economists accepted it and even now many modem economists would express agreement with
Marshall. But Marshall has also not been without its critics His definition and other welfare definitions
have been severely criticized by Lionel Robbins, a prominent English economist.

Marshalls definition has been criticized by Robbins on the following grounds:

1. Firstly, Robbins is of the view that economics should not have any connection with material welfare.
Robbins points out that in economics we study not only material things but also immaterial things.
Therefore, according to him, it is incorrect to say that economics is concerned with material things alone.

He points out that in economics we also enquire how the prices of immaterial services such as
professional singers, actors, and actresses, dancers, etc., are determined and they are important topics of
price theory.

He thus says: A theory of wages which ignored all those sums which were paid for immaterial services
or were spent on immaterial ends would be intolerable. Moreover it is very difficult to separate the
material welfare from the other types of welfare.

The welfare is entity as such and we cannot divide it into various parts. Even with the measuring rod of
money we cannot precisely and exactly segregate the material welfare from the total welfare.

2. Robbins has also objected to the word welfare in the above welfare definitions. According to Robbins,
the concept of welfare is not fixed and definite one; it differs in different countries and at different times.
Welfare is a subjective thing and it varies from person to person.

Therefore, according to Robbins, it cannot be said in objective terms which things would promote welfare
and which will not. Moreover, according to Robbins, economics is concerned with many goods and
activities which are generally thought to be harmful to human welfare but they are studied in eco nomics
Goods like liquor, cigarettes, opium are hardly conducive to human welfare but their pac ing problem is
studied in economics.

In fact, according to him, economics is not concerned with welfare at all. He explains that economics
studies the problems which have arisen because of the scarcity of resources. Goods and services which
are scarce in relation to demand for them would carry price in the market. Therefore, we should study all
those goods whether they promote welfare or not.

Goods like liquor, cigarettes and opium though harmful to human welfare, are studied in economics
because some people in the society want them and they are scarce in relation to demand for them
Therefore, economists have to study the pricing problem and other aspects of such goods whether they
promote welfare or not. Robbins remarks, Why talk of welfare at all? Why not throw away the mask
altogether.

Thus, according to Robbins, if economics is thought to be concerned with the causes of material welfare,
then we have to give decision regarding what will promote welfare and what will reduce welfare.
Therefore, we would be entering into the question of ethics, namely, what ought to be and what ought not
to be.

But Robbins is of the view that economics is neutral between ends and it cannot prescribe what should be
done and what should not be done, what promotes welfare and what not, what is good and what is bad.
Therefore, Robbins remarks whatever economics is concerned with it is not concerned with causes of
material welfare as such.