The scope of Economics has widened in the last century and is still being explored and modernized based on a mix of classical, neo-classical, and modern theories of accounts and social sciences. The nature of economics has taken an overturn since the inception of Marshall’s, Smith, and Robbin’s theories.
Economics is not pure science, yet it is purely a social science. It deals with the day-to-day social and business dealings related to welfare, wealth, and scarcity.
What is the Scope of Economics
The scope of economics is defined as the boundary in which the field of study is contained. It is a science of human activities in day-to-day businesses; it is considered an art of persuasion and dealings to buy or sell anything; the only subject that’s considered a science and art altogether.
Economics as Social Sciences
Economics is a social science that deals with the production, growth, inflation, employment activities, and exchange of goods and services in a culture or nation. Robbins and other classical economists argued that Economics is purely a science of wealth and material things. It has nothing to do with non-material things such as services.
Economic matters are easily calculated by profit/loss ratio through the science of calculations and decision-making; the science of economics determines business matters on a scale of money. Economics is purely a social science if there are no humans to make goods that are unknown to consumers yet they produce and assemble goods for mankind creates a strong argument for it being a social science. Men work in groups to produce and sell on a large scale.
Economics as an Art of teaching
Economics is an art that teaches us how to practically implement the laws of nature for the economic well-being of humans and its dependents. Economics tells us how to get out of the problem by implementing the science of Economics. Economics is purely a problem-based subject, be it personal or collective problems.
The financial insecurity and joblessness is a personal problem, while inflation, economic growth, and poverty are a collective problem. People work individually and in groups to indirectly eradicate both the problems; teaching them the art to decipher problems is essential actually to resolve it.
Economics as a base to Identify Problems
Economics is based on identifying the problem and means to solve it; it can be positive or normative science of business. The normative science deals with human emotions and welfare. It deals with ethical norms and emotions rather than facts and calculations.
Positive science is free of emotional decisions; it is neutral in each aspect. Contrary to that, the scope of economics is narrowed down according to Robbins’ definition; the economic choices are a mix of positive and normative to achieve the desired targets.
Famous Definitions of Economics
Robbins called it a human science thus declaring anything not attached to humans as not an economic activity; that’s false because Economics is a social science, it only works when humans interact and deal with other humans. The problem of choice rises in an unsocial and isolated style of living according to Robin’s theory; hence it completely neglects the social impact on Economics.
Economics deals with the effect of decisions on social life keeping in view of Robbins Scarcity’s definition of Economics. The resources of living to humans are limited, so mankind has to ensure the scarcity principle and use the resources accordingly keeping in view the demand and available supplies and future planning before distributing the resources.
According to Marshall and other neo-classical economists, Economics is a social science that deals with the welfare of mankind and have a great impact on the social and individual lives of mankind. The main aspect of Marshall’s views is the use of economy and resources for the welfare and equal distribution of resources and money.
The idea seems contradictory to the present-day Capitalism mode of the economics of the modern world. The social and individual achievements and wealth must be spent to meet the needs of mankind rather than keeping it to him/her. Marshall was of the view not to keep riches to one.
It has a disadvantage that the wealth must be distributed to the ones who do not contribute to the economy, creating an economic imbalance; hence it was rejected by Europeans.
Adam Smith presented the Classical definition of Economics as the science of wealth alone; he was of the view that the Economy, all-in-all, is a science of acquiring assets and creating opportunities to create wealth. Smith is considered the Father of Modern Economy, he stated in his book, “Wealth of Nations” that Economy is the study and wealth and material goods.
He completely ignored an important aspect i.e. humans and immaterial things, services. If the economy is built on material things and wealth alone, the services that make up a huge proportion of the Economy of any nation such as Engineers, accountants, doctors, etc. are of no use in Adam Smith’s definition of Economy.
Problem-Solving Approaches towards Economy
Economics is studied by two problem-solving approaches i.e. traditional and modern approaches. The traditional approach is carried through the five basic principles of Consumption, production, exchange, distribution and public finance. The traditional approach is carried out by small to medium businesses and is still viable in world economics.
The modern approach is sub-divided into microeconomics and macroeconomics. In the former, the economic activities are carried as two-way traffic either from household to business firms or vice versa. It comprises micro-economical activities to or from the smaller consumer. The price and supply vary with the demand factor. It is also known as price theory in economics.
Macroeconomics is categorized as a study of making economic decisions based on summing up all the individual units for a joint economic policy. It aggregates the production, distribution, and consumption activities on a larger scale and making decisions as a whole.
Employment and taxation decisions on a national or multinational level or a nation’s Gross National Product falls under the macroeconomics category. It is also called income theory. Contrary to microeconomics, it affects thousands or millions of people instead of a household or locality.
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.
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