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Concept and Meaning of Economic Laws (Generalizations):

Economics, like all other sciences, has drawn its own set of generalizations or laws. Economic laws (generalizations) are nothing more than careful conclusions and inferences drawn with the help of reasoning or by the aid of observation of human and physical-nature. In everyday life, we see man is always busy in satisfying his unlimited wants with limited means. In doing so, it acts upon certain principles. These principles or generalizations which an average man usually follows when he is engaged in economic activity are named “Economic Laws”.

Economic laws are the statements of general tendencies. In the words of Marshall:

“Economic laws are those social laws which relate to branches of conduct, which the strength of motive chiefly concerned can be measured by money prices”.

Nature or Characteristic of Economic Laws:

There are following fundamental features or characteristics of economic laws:

(1) Laws of economics are less exact. The nature of economic laws is that they are less exact as compared to the laws of natural sciences like Physics, Chemistry, Astronomy, etc. An economist cannot predict with surety as to what will happen in future in the economic domain. He can only say as to what is likely to happen in the near future. The reasons as to why economic laws are not as exact as that of natural sciences are as follows:

First, natural sciences deal its matter which lifeless. While economics, we are concerned with man who is endowed with a freedom of or he may act in whatever manner he likes. Nobody can predict with certainty his future actions. This element of uncertainty in human behavior results in making the laws of economics less exact than the laws of natural sciences.

Secondly, in economics it is very difficult to collect factual data on which economic laws are to be based. Even if the data is collected it may change at any moment due to sudden changes in the tastes of the people or their attitudes.

Thirdly, there are many unknown factors which its affect the expected course of action and thus can easily falsify the economic predictions. Dr. Marshall has devoted one chapter in his famous book “Principles of Economies” in discussing the nature of economic laws. He writes, that laws of economics are to be compared with the laws of tides rather than with the simple and the exact law of gravitation.

The reason for comparing the laws of economics with the laws of tides by Marshall is that the laws of tides are also not exact. The rise of tides cannot be accurately predicted. It can only be said that the tide is expected to rise at a certain time. It may or may not rise. Strong wind may change its direction to opposite side. They instead of rising may fall. So is the case with the laws of economics.

(2) Economic laws are essentially hypothetical. Economic laws, writes Seligman, are essentially hypothetical. They are true under certain given conditions. If these conditions are fulfilled, the conclusions drawn from them will be true and exact as those of the laws of physical sciences. From this statement that laws of economics are hypothetical, we should not conclude that, they are useless or unreal.

The hypothetical element is also there in the laws of physical sciences. Take for instance, the law of gravitation. It states that bodies tend to fall to the ground but the bodies may not fall immediately. Their fall may be retarded by atmospheric pressure. So is the case with the laws of Economics. Take for instance, the law of diminishing marginal utility. It states, other things beings equal, the additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has, but this may not happen.

The utility of an additional unit may increase due to a sudden change in fashions, tastes, etc. The only difference between the laws of economics and the laws of physical sciences is that the hypothetical element in the former is more permanent as compared to the later. In the words of Samuelson writes “Despite the approximate character of economics laws, it is blessed with many valid principles”.

(3) Economic laws qualitative or quantitative. Laws of economics are qualitative in nature. They are not exactly stated in quantitative terms. They tell the direction of change which is expected rather than the amount of change. For example, according to the law of demand, the quantity demanded varies inversely with price. We do not say that 10% rise in price will lead to 30% fall m the quantity demanded.

(4) Applies on the average in normal conditions. Economic laws do not deal with any particular individual, firm, commodity etc. It takes an average economic unit and lays down its economic behavior.

(5) Laws of economics are more exact than the laws of other social sciences. We do admit that the laws of economics are not 100% exact. They are, however, more exact than the laws of any other social science.

Comparison or Difference between Economic Laws and other Science Laws:

(1) Economic Laws and Physical Laws. The laws of economics are different from the laws of physical sciences. The economist deals with the activities or behaviors of men in society. The activities of men are various and uncertain and no definite conclusion can be drawn from them. We can only say what is likely by happen and riot what must happen. On the other hand, natural sciences deal with matter and atoms which are constant units. They always confirm to certain behavior. So the law derived from them are more definite, certain and universal.

(2) Moral Laws and Economic Laws. Moral laws are laws of human conduct. They emanate from public opinions. They guide us as to how we should live in society. The examples of moral laws are. “Thou shall not tell a lie” or “Treat your fellowmen with courtesy”. If you disobey these laws, you can be hated or at the most ex-communicated by the society. There is no punishment by a government.

An economic law, on the other hand, tells us as to how a man should behave when he is engaged in an economic activity. If any body violates an economic law, be can suffer financial loss. For example, output should be produced at minimum cost. If any body breaks this law, it is then he who suffers. There is no public censure or punishment by a government.

(3) Statutory Laws and Economic Laws. Statutory laws are the laws issued by a state. It is the duty of the citizens of a country to obey these Laws. They disobey, and then they are punished. For example, government issues a law that “Theft is a crime”. Whosoever breaks this law will be put behind the bar. Economic laws are quite different from that of statutory laws. An economic law is a statement of a scientific truth about human behavior in the matter of the allocation of scarce resources into unlimited ends. You are at liberty to violate an economic law but that is not the case with statutory laws.