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The scope of economics is the area or boundary of the study of economics. In scope of economics, we answer and analyze the following three main questions:

  • What is the subject matter of economics?
  • What is the nature of economics?
  • What are the limitations of economics?

(i) Subject Matter of Economics:

There is a difference of opinion among economists regarding the subject-matter of economics:

Adam Smith, the father of modern economic theory, defined economics as a subject, which is mainly concerned with the study of nature and causes of generation of wealth of nation.

Marshall introduced the concept of welfare in the study of economics. According to Marshall; economics is a study of mankind in the ordinary business of life. It examines that part of individual and social actions which is closely connected with the material requisites of well being. In this definition, Marshall has shifted the emphasis from wealth to man. He gives primary importance to man and secondary importance to wealth.

The Robbinsian’s concept of the subject-matter of economics is that: “economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses”. According to Robbins:

(a) Human wants are unlimited (b) means at his disposal to satisfy these wants are not only limited, (c) but have alternative uses. Man is always busy in adjusting his limited resources for the satisfaction of unlimited ends. The problems that centre round such activities constitute the subject-matters of economics.

Paul and Samuelson, however, includes the dynamic aspects of economics in the subject matter. According to them, “economics is the study of how man and society choose with or without money, to employ productive uses to produce various commodities over time and distribute them for consumption now and in future among various people and groups of society”.

(ii) Nature of Economics:

The economists are also divided regarding the nature of economics. The following questions are generally covered in the nature of economics.

  • Is economics a science or an art?
  • Is it a positive science or a normative science?

Economics as a Science or an Art:

Economics is both a science and an art. Economics is considered as a science because it is a systematic knowledge derived from observation, study and experimentation. However, the degree of perfection of economics laws is less compared with the laws of pure sciences.

An art is the practical application of knowledge for achieving definite ends. A science teaches us to know a phenomenon and an art teaches us to do a thing. For example, there is inflation in Russia. This information is derived from positive science. The government takes certain fiscal and monetary measures to bring down the general level of prices in the country. The study of these fiscal and monetary measures to bring down inflation makes the subject of economics as an art.

After arriving at a conclusion that economics is both a science as well as an art. Here arises another controversy. Is economics a positive science or a normative science?

Economics is Positive or Normative Science:

There again difference of opinions among economists whether economics is a positive or normative science. Lionel Robbins, Senior and Friedman have described economics as a positive science. They opined that economics is based on logic. It is a value theory only. It is, therefore, neutral between ends.

Marshall, Pigou, Hawtrey, Keynes and many other economists regard economics as a normative science. According to them, the real function of the science is to increase the well-being of man. They have given suggestions in their works for promotion of human welfare.

For example, Malthus has given suggestions of checking the rising population. M. Keynes has suggested measures to remove unemployment.

We agree with Mr. Frazer, that an economist who is only an economist is a poor pretty fish. An economist must come forward to give advice to the problems facing the human being like depression, unemployment, high prices, etc., for increasing his welfare.

Economics, to conclude, has both theoretical as well as practical side. In other words, it is both a positive and a normative science.

(iii) Limitations of Economics:

There are following limitations of the subject economics:

(a) One basic limitation in the subject of economics is the number of assumptions are being made from lot of concepts.

(b) Economics is difficult because it don’t give perfect results or forecasts. In Maths, 3 + 3 = 6 always. But in economics, it depends on infinite variables or numbers, almost too difficult to take into account.

(c) It’s difficult to predict the future economic conditions, while making a policy.

(d) Economic laws have the lack of generality. For example, the laws created to explain the nature and functioning of capitalist economies do not have any relevance for socialist countries. For example, Marshall described the laws of demand and supply which is applicable only in a free market where there is no government intervention. Such laws do not apply in those countries and societies like the former USSR where the price (market) system yielded place to the planning system.