First definition ever given for economics
The first systematic definition given for economics was by Adam smith.
It was named as
He states economics, as a study of how man earns and how he spends it.It deals with production,distribution and consumption of wealth.
Production of wealth means the production of goods and services by combining four factors of production.
- Land : It is the natural resources such as sea,minerals,live stock and forest.
- Labour: It is the mental or physical work,which is done for the sake of reward.
- Capital: It means man made resources,which help to produce goods and services.
- Organization: It is the act of organizing factors of production to produce goods and services for the sake of profit.
Classical economists stated that wealth as the subject matter of economics.
In this definition, smith says that economics enquires about nature and causes of wealth.
Other classical economists agreed to this definition as this was the first systematic definition given for economics.But as time moved, severe criticisms rised against this definition.The main criticisms raised were:
- More importance was given to wealth than man.
- Non-material wealth like service or charity was not considered.
- Wealth making is considered as the only motive of humans.
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