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The neo-classical school of economics led by Dr. Alfred Marshall gave economics a respectable place among social sciences. He was the first neo-classical economist who lifted economics from the bad repute, it had fallen.

Economics as a Science of Material Welfare:

Dr. Alfred Marshall (1842-1924) defined economics, in his book, ‘Principles of Economics’, as:

“Study of mankind in the ordinary business of life; it examines that part of individual and social actions which is closely connected with the attainment and with the use of material requisites of well being”.

Neo-classical definition of economics clearly states that economics is on the one side a study of wealth and on the other and more important side a part of the study of man.

Best Neo-classical Definitions of Economics by Pigou, Cannon and Beveridge:

Marshall’s followers like Pigou, Cannon and Beveridge (the Neo-classical writers) have also defined economics as:

“Study of causes of material welfare”.

For example, according to Cannon, the aim of Political Economy is the explanation of the general cause’s en which the material welfare of the human being depends.

Explanation and Characteristics:

The neo-classical definition of economics given by Welfare School of Economics (neo-classical economists) have the following main characteristics or features:

(i) Wealth is not be all and the end of all human activities: Economics does not regard wealth as be all and the end of all the human activities. It is only a mean to the fulfilment of an end which is human welfare. Welfare and not wealth is; therefore, of primary importance to man.

(ii) Study of an ordinary man: Economics is a study of an ordinary man who lives in free society. A person who is cut away from the society is not the subject of study of economics.

(iii) It does not study all activities of man: Economics does not study all the activities of man. It is concerned with those actions which can be brought directly or indirectly with the measuring road of money.

(iv) Study of material welfare: Economics is concerned with the ways in which man applies his knowledge, skill to the gifts of nature for the satisfaction of his material welfare.

For a long time, the definition of economics given by Alfred Marshall was generally accepted. It enlarged the scope of economics by taking emphasis that its studies wealth and man rather than wealth alone.

Robbins’s Criticism on Marshall’s Definition – Demerits:

Marshall’s definition was criticized by Lionel Robbins. He in his book “Essay on the Nature and Significance of Economic Science”, gave a critical review of the welfare definitions of economics. These criticisms are summed as under:

(i) Narrows down the scope of economics: According to Robbins, the use of the word “Material” in the definition of economics considerably narrows down the scope of economics. There are many things in the world which are not material but they are very useful for promoting human welfare. For example, the services of doctors, lawyers, teachers, dancers, engineers, professors, etc., satisfy our wants and are scarce in supply. If we exclude these services and include only material goods, then the sphere of economics study will be very much restricted.

(ii) Relation between economics and welfare: The second objection raised by Robbins on welfare definition is on the establishment of relation between Economics and Welfare. According to him, there are many activities which do not promote human welfare, but they are regarded economic activities, e.g., the manufacturing and sale of alcohol goods or opium, etc. Here Robbins says, “Why talk of welfare at all? Why not throw away the mask altogether”?

(iii) Welfare is a vague concept: The third objection levied by him was on the concept of ‘welfare’. In his opinion welfare is a vague concept. It is purely subjective. It varies from man to man, from place to place and from age to age. Moreover, he says what is the use of a concept which cannot be quantitatively measured and on which two persons cannot agree as to what is conducive to welfare and what is not. For example, the manufacturing and sale of guns, tanks and other war heads, production of opium, liquor etc., are not conducive to welfare but these are all economic activities. Hence, these cannot be excluded from the study of economics.

(iv) Impractical: The definition of welfare is of theoretical nature. It is not possible in practice to divide man’s activities into material and non-material.

(v) It involves value judgement: Finally, the word ‘Welfare’ in the definition involves value judgement and according to Robbins, the economists are forbidden to pass any verdict.