Marshall’s definition of economics remained an article of faith with all economists from 1830 to 1932. However, with the publication of Robbins book ‘Nature and Significance of Economic Science’ (1932), there developed a fresh controversy in regard to the definition of economics. Lionel Robbins, after criticizing the definitions given by the classical and neo-classical economists, gave his own definition of economics. According to Robbins’ definition of economics:
“A science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”.
Explanation (Economics as a Science of Scarcity and Choice):
Firstly, the definition of economics given by him is superior to that of others because it does not contain any reference of the term material or welfare. Secondly, it applies as much to the case of an isolated individual as to the complicated net working of society. Thirdly, it raises the status of economics to that of science. Fourthly, it makes economics, a positive science which deals only with facts. It forbids the economists to pass any value judgement of what is good or bad, right or wrong, etc.
Lionel Robbins claiming his definition of economics more precise, scientific and superior.
Pillars or Characteristics or Features:
Robbins’ definition of economics is based on the following pillars:
(i) The human wants or ends are unlimited: Human wants referred to as ends by Robbins are unlimited. They increase in quantity and quality over a period of time. They vary among individuals and overtime for the same individual. It is not possible to find a person who will say that his wants for goods and services have been completely satisfied. This is because of the fact that when one want is satisfied, it is replaced by another and there is then no end to it.
(ii) The ends or wants vary in importance: The ends or wants are of varying importance. They are ranked in order of importance as: (a) necessaries (b) comforts and (c) luxuries. Man generally satisfies his urgent wants first and less urgent afterwards in order of their importance.
(iii) Scarcity of resources: Resources are the inputs used in the production of things which we need. The resources (Land, labor, capital and entrepreneurship) at the disposal of man are scarce. They are not found in as much quantity as we need them. Scarcity means that we do not and cannot have enough income or wealth to satisfy our every desire. Scarcity exists because human wants always exceed what can be produced with limited resources and time that Nature makes available to man at any one time. Scarcity is a fact of life. It occurs among the poor and among the rich. The richest person on earth faces scarcity because he too cannot satisfy all his wants with the limited time available to him.
According to Robbins, the unlimited ends and the scarce resources provide a foundation to the field of economics. Since the human wants are innumerable and the means to satisfy them are scarce or limited in supply, therefore, an economic problem arises. If all the things were freely available to satisfy the unlimited human wants, there would not have arisen any scarcity, hence no economic goods, no need to economic and no economic problem. Scarcity, thus, can be defined as the excess of human wants over what can be actually produced in the economy.
(iv) Economic resources have alternative uses: The fourth important proposition of Robbins definition is that the scarce resources available to satisfy human wants have alternative uses. They can be put to one use at one time. For instance, if a piece of land is used for the production of sugarcane, it cannot be utilized for the growth of another crop at the same time. Man, therefore, has to choose the best way of utilizing the scarce resources which have alternative uses. The scarcity resources and choices are the key problems confronting every society.
The choices to be made by it are:
What goods shall be produced and in what quantity?
How should the various goods and services be produced?
How should the goods and services be distributed?
Summing up the foundation of economic science according to Robbins, is based on satisfaction of human wants with scare resources which have alternative uses.
Merits or Advantages:
There are many admirers of Robbins definition of economics. It has the following merits:
(i) Status of a positive science: Robbins tries to make economics a more exact science. According to him, economics has nothing to do with ends. They may be noble or ignoble, material or non-material. Economics is not concerned with them as such.
(ii) An analytical definition: Robbins definition makes study of economics analytical. It studies the particular aspect of human behavior which is imposed by the influence of scarcity.
(iii) A universal definition: Robbins definition is applicable everywhere. It is concerned with unlimited wants and limited resources which is the problem facing every economy socialistic or capitalistic.
(iv) Clear on the nature and scope of economics: Robbins definition serves to specify the nature, scope and subject matter of economics. According to him, an economic problem is characterized by the possibility of exercising choice between ends an which have alternative uses.
(v) Valuation is the central problem: According to Robbins, valuation is the central problem of economics. Wherever the ends are unlimited and the resources scare, they give rise to an economic problem Marshall’s definition does not identity this valuation process.
Criticism or Demerits:
Robbins definition of economics has been bitterly criticized by eminent writers Hicks, Longe, Durbin, Frazer, etc., on the following grounds:
(i) Reduced economics merely to a theory of value: Robbins’s definition restricts the scope of economics by treating it as a positive Science only while in reality it is both a positive and a normative science.
(ii) Scope of economic has been widened: Robbins’s definition has widened the scope of economics by covering the whole of economic life, while it is concerned with that part of human life which is connected with the market price.
(iii) Economics has become a colorless science: Robbins’s made economics colorless, impersonal and abstract. It is in fact a definition of economics for economist only.
(iv) Study of economic growth: The study of economic growth process remains outside the scope of economics while it is through economic growth that living standards improve.