Alfred Marshall changed the meaning of economics and its studies. He was a great advocate of the neo-classic school of thought. Marshall was the first to state that economics is not linked directly to the wealth and material things. It has its foremost connection with the people that use the money. By Marshall declaring Economics as the study of mankind instead of wealth in both of his books, “Principles of Economics and “Economics of Industry”, he divided the economists’ view of how to define money and its connection with people. As of now, there are people who advocate the Theory of Marshall and some strongly oppose it.
Alfred Marshall Definition of Economics
Alfred Marshall defined Economics as “It is the study of mankind in the ordinary business of life. It examines that part of the individual and social activities that are closely related to the attainment of material resources, to welfare, and its utilization”.
Marshal detained his lifelong professional experience to few words of wisdom; what does it mean? The definition could be divided into three chunks i.e. Economics is the study of mankind in the day-to-day business of life; it is linked to human welfare; its utilization is supposed to create opportunities for mankind.
In all the three main parts, it links to humans as they are the direct beneficiaries of the wealth accumulated and distributed under the principles of economics. The definition states that the human’s control wealth, it’s not the money that controls humans. When there was no concept of bills, mankind thrived under the basic laws of economics in one form or the other. The basics of the theory say that economics is the study of people interacting and mutually cooperating to meet their needs, the political economy is interacting generally for personal interest.
Economics by Alfred Marshall
Marshall introduced a completely different perspective of the economy in the late 1800s. The definition of economy, for the first time, was meant to describe mankind as its focal point; money comes second in personal and industrial economics. He opposed the notion that Money is everything, rather money is only a source to balance the order and meant for the welfare of mankind.
Here is a step-by-step breakdown of Marshall’s definition of wealth, mankind, and the economy.
The Study of Mankind
Wealth is accumulated by humans, spent by and for humans. If there’s no mankind, wealth and economics is of no use. The great imbalance is caused by the unequal distribution of wealth and ignorance of mankind in spending and acquisition of wealth. By ordinary business, Alfred imposed on the fact that humans use economics in minimal spending and earning; wealth is not always the baseline for economics.
The next major point was that it is the study of mankind for the welfare of its beneficiaries. If it had not been for the welfare, the world would have crumbled in the chaos with the major portion for rich and nothing for underprivileged. Economics is purely a social science that only applied when it works for the welfare of mankind. In a society, the gap must not widen between the two extremes, the economy plays a vital role in reducing the financial gap between the two. It works for the material welfare and development of humans and to contribute to getting a proper share for everyone in society. In social life, people interact and share thoughts, expertise, mental and physical skills, and wealth to keep the society in balance; the economy is the social science meant to create a balance between all the groups and set of skills, giving the deserved amount of share to everyone who is contributing in the society.
Utilization of Wealth
The third chunk is all-important in economics, the utilization or spending part. When there’s no utilization, there’s no need to produce or to sell anything. In economics, utilization completes the loop; it tempts masses to work, learn skills, and to produce in order to help mankind fulfill its requirements. Economics is a social science made by humans for humans; it deals with all the day-to-day businesses in a civilization. If the wealth is not circulated among masses in the society, the laws of economics can’t work and humanity may topple in the result of it.
Drawbacks of Alfred Marshall’s Definition of Economics
Alfred beautifully created a theory of economics for human welfare, distribution of wealth, and its utilization. Yet, there are few limitations and flaws in the theory that convinced modern economists to limit the scope of Marshall’s theory or to completely abandon it. Professor Lionel Robbins comes on top in criticizing Marshall’s definition of economics.
The first criticism was defining economy meant for human welfare. Robbins stated that the economy is not limited to human welfare alone; there are basic needs of mankind that are satisfied through the accumulation of wealth; there are many aspects of wealth and its spending. The wealth is always not used for welfare; people spend on luxuries and unnecessary needs that do not promote human welfare. Still, all the actions are termed as “Economic activities”. The term, “welfare” is considered elusive in modern economics; it differs with each human.
The scope of economics is narrowed down to materialistic spending and receiving services and other economic activities. What about the non-material economics that involves the mental expenditure of thoughts and ideas and material benefits in the form of wealth in return. Economics of the modern world deals with the material and immaterial spending and utilization instead of focusing on the former part.
The strongest point against Alfred’s neoclassical definition of Economics is its theoretical nature. The theory looks good but cannot be implemented in modern economics and the current Capitalist economic structure. If humans somehow manage to implement Alfred’s theory of Economics, it will create anarchy between the opposite economic classes.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.