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Economic Theory

 Economics deals with ordinary men who are influenced by all
natural instincts such as love, affection and fellow feelings and not merely
motivated by the desire of acquiring maximum wealth for its own sake.

Wealth in itself is meaningless unless it is utilized for obtaining material
things of life.
 Economics is a social science. It does not study isolated individuals

but all individuals living in a society. Its aim is to contribute solutions to
many social problems.
 Economics only studies ‘material requisites of well being. That is, it

studies the causes of material gain or welfare. It ignores non-material
aspects of human life.
This definition has also been criticized on the ground that it only

confines its study to the material welfare. Non-material aspects of human
life are not taken into consideration. Further, as Robbins said the science
of economics studies several activities, that hardly promotes welfare.

The activities of producing intoxicants, for instance, do not promote
welfare; but it is an economic activity. Lionel Robbins challenged the
traditional view of the nature of economic science. His book, “Nature and

Significance of Economic Science”, published in 1932 gave a new idea of
thinking about what economics is. He called all the earlier definitions as
classificatory and unscientific. According to him, “Economics is the
science which studies human behavior as a relationship between ends and

scarce means which have alternative uses”. This definition focused its
attention on a particular aspect of human behavior, that is, behavior
associated with the utilization of scarce resources to achieve unlimited

ends (wants). Robbins definition, thus, laid emphasis on the following
points:
1. ‘Ends’ are the wants, which every human being desires to satisfy.
Want is an effective desire for a thing, which can be satisfied by making

an effort for obtaining it. We have unlimited wants and as one want gets
satisfied another arises. For instance, one may have the desire to buy a car
or a flat. Once the car or the flat is purchased, the person wishes to buy a

more spacious and designable car and the list of his wants does not stop
here but goes on one after another. As human wants are unlimited, we
have to make a choice between the most urgent want and less urgent

wants. Thus the problem of choice arises. That is why economics is also
called as a science of choice. If wants had been limited, they would have
been satisfied and there would have been no economic problem.

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