DEFINITION OF ECONOMICS BY ADAM SMITH

DEFINITION OF ECONOMICS BY ADAM SMITH



Brief History of Adam Smith

Adam Smith was British Economist. He  was the founder of Classical School of Thought. He was the first man who started writing on economic problems. His book, "An Inquiry into the Nature and Causes of Wealth of Nations" was published in 1776. this was the first ever hook on Economics. In his book, Adam Smith defined Economics in the follow ing words:

 "ECONOMICS IS THE SCIENCE OF WEALTH

This is the first-ever definition of economics. Adam Smith discussed four aspects of wealth in his hook, which is as follows: 

A. PRODUCTION OF WEALTH

In this part of the book, he discussed that how. goods & services are produced with the help of four factors of production i.e., Land, Labor, Capital & Enterprise. So according to Adam Smith, production of goods &. services is the production of wealth. 

B. DISTRIBUTION OF WEALTH

 This part of the book is related to the distribution of goods & services produced. Adam Smith discussed various theories about the determination of remunerations for the four factors of production. He also talked about the evenness & unevenness of distribution of wealth. 

C. EXCHANGE OF WEALTH 

This part of the book is about an exchange of goods & services. Producers produce goods & services in excess of their needs. So they want to exchange their excess production with one an other. Adam Smith discussed the rules of Domestic & International Trade. 

D. CONSUMPTION OF WEALTH

This segment of the book is about consumption of wealth. Adam Smith discussed that how an individual should spend his wealth to get maximum utility or satisfaction.

 Economists like Chapp Man, Franscis A. Walker, Alley, N.W. Senior, J.S.Mill, Ricardo, Malthus, and J.B.Say etc. followed Adam Smith in his ideas about this subject. All these economists are called the Followers' of Adam Smith. So the Classical Economists, Adam Smith & Followers, defined Economics more or less in the following words:

 "Economics is a science in which the Nature of Wealth and all those laws are studied which are related to the Production, Distribution, Exchange & Consumption of Wealth


 CRITICISM

 The Social Reformers like RUSKIN, CARLYLE & ARNOLD criticized this definition.  Philosophyg". The main criticisms on this definition are as follows:


1. IMPORTANCE TO WEALTH

 According to this definition, basic importance is given to wealth rather than to man. The fact is that man is more important than wealth.

 2. CONCEPT OF ECONOMIC MAN 

According to this definition, a man works for self-interest while the social interest is ignored. The fact • that Economics does not study the selfish man but a common man.


3. CONTROVERSIAL

The word 'Wealth' did not have clear meanings, so the definition became controversial.

 4. MAN'S WELFARE

 This definition ignores the importance of man's welfare. Wealth cannot be the solution of all human problems.

 5. NO STUDY OF MEANS

 This definition gives importance to the earning of wealth but it ignores the means for the earning of wealth.


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