Alfred Marshall’s Definition of Economics (The Neo-classical view)
“Economics is the Science of Material welfare”
The neo-classical school led by Dr. Alfred Marshall gave economics a respectable place among social sciences. Marshall was the first economist who lifted economics from the bad repute it had fallen. Dr. Alfred Marshall (1842-1924) defined Economics as “a science of material welfare” in his book “Principles of Economics” in 1890.
According to Prof. Dr. Alfred Marshall
“Economics is the study of mankind in the ordinary business of life. It inquires how he gets his income and how he uses it. It examines that part of individual and social action, which is most closely connected with the attainment and with the use of material requisites of well-being. It is on the one side, a study of wealth and on the other and more important side is a part of the study of man.”
Marshall’s followers like A.C. Pigou, Pareto, Clark, Canon, and Beveridge (the Neo-classical writers) have also defined Economics as “a study of causes of material welfare”. For example,
According to Pigou:
“Economics is the study of economic welfare and economic welfare is that part of material welfare that can be brought directly or indirectly into relation with the measuring rod of money”.
According to Cannon
“The aim of Political Economy is the explanation of the general causes on which the material welfare of the human being depends”.
Important Points of the Definition:
1. Useful Science:
Economics is related with the daily life of man, therefore, it is an important and useful science.
2. The Study of People Living in Society:
In economics, the efforts of the people who take part in economic activities living in the society are studied. Therefore, economics is not concerned with the activities of saints, hermits and mads.
3. The Study of Efforts Concerned with Material Requisites:
In economics, the individual and collective efforts, which are concerned with material welfare, are discussed.
4. Not the Study of Wealth for the Sake of Wealth:
Economics does not study wealth for the sake of wealth rather it studies wealth so that the basic necessities which increase human welfare, may be purchased.
Merits of Marshall’s Definition:
Marshall’s definition contains the following merits:
1. Better than the Former Definitions:
Marshall’s definition is better and comprehensive than those of classical economists. In this definition, the word wealth” is not used just as wealth rather it is used as a mean to achieve human welfare.
2. Comprehensive and Clear:
Marshall’s definition is very simple, clear and comprehensive. It has no doubt or ambiguity. The study of the definition clarifies the subject matter of economics. Man wants to lead a prosperous life. To attain this objective, he needs material requisites and he struggles to attain and use them. This struggle of man for the attainment of material requisites is discussed in economics.
3. Social Science:
According to Marshall’s definition, economics is a social science in which man’s Economic problems occupy distinct position. This science stresses on man’s welfare and man’s welfare is the main objective of this science. In economics, actions of those people are being taken into the study who live in the society and cooperate with one another in various activities, thus it is a social science.
4. Ordinary Business of Life:
Marshall’s definition is not related with the tendencies of a particular community only. In fact, it discusses the general behaviour of ordinary people, this thing makes the subject important for a common man.
5. Study of Individual and Collective Efforts:
According to Marshall’s definition, economics studies both the individual and collective efforts to make human life prosperous provided that these efforts are made living in the society. Because Marshall does not include in economics the efforts of the people who do not lead a normal life living in the society.
6. Importance of Human Being:
According to Dr. Alfred Marshall, “man occupies a primary place and wealth only secondary one. That is, man is important while wealth is just a resource to get necessities comforts and luxuries of life. Therefore, wealth is not as important as man.”
7. Importance of Wealth:
Marshall’s definition explains the importance of wealth. Man struggles to get wealth because wealth helps to attain material welfare and prosperity. So we can say that man desires to get wealth to make his life prosperous.
8. No Charge of Selfishness:
As Marshall has given primary importance to human wellbeing and secondary to wealth, therefore, the charge of selfishness cannot be leveled against his definition.
9. Science of Material Welfare:
Economics is the science of society’s material welfare. Which explains the wealth is the only resource that fulfils bitterly our material requisites.
10. Science of Ordinary Business of Life:
In economics, those actions of people are being studied which are related to ordinary or day-to-day life matters. It means that economics is not the study of those who are living far away in jungles or deserts.
11. Analysis of Individual and Social Actions:
Economics does not study production, consumption and distribution only at individual level; rather it also studies average behaviour of the people living in the society.
12. Marshall and Modern View:
Marshall’s and his followers’ view about material welfare of the society is quite matching with the today’s economists’ view about the economic development. Both emphasize on raising prosperity level in the society.
13. Simple and Solid Arguments:
The concept of human welfare described in Marshall’s definition about economics is very simple, straight and solid argument which made the definition more comprehensive. Moreover, this definition is similar to the modern theories and preferences of the society.
14. Wealth – A Source of Material Welfare:
Marshall does not consider wealth itself as a source of material welfare but as a means to acquire material requisites of life.
Demerits of Marshall’s Definition:
In his book “Nature and significance of economic science” Prof. Lionel Robbins has criticized Marshall’s definition declaring it incomplete and unscientific. His objections are as follows:
1. It does not cover all Economic Problems:
Dr. Marshall includes in his definition of economics only those efforts which attain material requisites. For example, efforts of farmer, carpenter and laborer etc. He excludes the efforts of those people who work and serve for the satisfaction of non- material needs. These efforts are made by teachers, doctors and lawyers etc. It is not right. Every effort, which is made for reward, must be included in economics whether it is material or non-material. So, Marshall’s definition covers some problems and ignores the others.
2. Immeasurable Concept of Material Welfare:
The concept of material welfare which Prof. Marshall presented is related with mental state of man and its measurement is impossible. We cannot say anything definitely about this, how much benefit a person got from one apple and how much benefit some other person got with the same thing. welfare varies from person to person, time to time and place to place. So, this immeasurable concept cannot be considered the basis of any science.
3. Limited Concept of Consumption of Wealth:
Some part of the income craned by man is spent on material requisites such as food, dress and residence and some part is spent on non-material needs such as education, recreation and visiting. But Prof. Marshall’s definition covers only those problems which take place because of fulfilling material requisites. The reality is that economics covers all those problems which are faced to meet material as well as non-material requisites.
4. The Problem of Likes and Dislikes:
According to Robbins, Marshall’s definition has created the problem of likes and dislikes because this definition indicates that purpose of economics is to increase material welfare. That is why, it becomes necessary for every individual to take those steps which cause an increase in material welfare and avoid taking those steps which cause decrease in material welfare.
5. Narrow Down the Scope of Economics:
Robbins criticized Marshall’s view that economics is the science of material welfare only. While in the actual study of economic principles, both material welfare only. While in the actual study of economic principles, both material and immaterial are taken into account.
Services of lawyers, teacher, doctors, bankers, etc. are immaterial economic activities that result into the welfare of the other people. Hence, Marshall has narrowed down the scope of economics.
6. Theoretical Nature of Definition:
Alfred Marshall’s definition about economics is theoretical in nature. In practical life it is not possible to divide human activities into material and immaterial parts because are interdependent and also cause creation of one another.
7. Economics – Only a Social Science?
Dr. Alfred Marshall says that economics is a social science. It deals only with the behaviour of those people who are living a society. It ignores all others who are living far away in jungle, deserts or caves while they also may have economic problems i.e., of using scarce means for the satisfaction of unlimited ends.
8. Ignoring the Traditions:
Alfred Marshall explains material welfare and material requisites of life while he ignores moral values, customs and traditions etc., which have great influence on human and social life.
Paper Question for above material:
“Economics is a study of mankind in the ordinary business of life”. (OR)
Explain the definition of Economics given by Alfred Marshall. Also explain its merits and demerits. (OR)
Economics is a study of mankind in the ordinary business of life. Critically examine the statement. (OR)
“Economics is a science of material welfare”. Do you agree with the statement?