Adam Smith's Definition (Wealth Definition)

Definitions of Economics

We can have a good idea about the nature and scope of economics by studying some of the important definitions of economics. Some of the important definitions of economics are those of leading economists like Adam Smith, Alfred Marshall, Lionel Robbins and Samuelson.

Adam Smith's Definition (Wealth Definition)

Adam Smith (1723 -90) defined economics as follows : 'Economics is the science of wealth'. He is the author of the famous book 'Wealth of Nations' (1776). He is known as the Father of Political Economy because he was the first person who put all the economic ideas in a systematic way. It is only after Adam Smith, we study economics as a systematic science.

The term 'wealth' has a special meaning in Economics. In the ordinary language, by 'wealth', we mean money, but in economics, wealth refers to those goods which satisfy human wants. But we should remember all goods which satisfy human wants are not wealth. For example, air and sunlight are essential for us. We cannot live without them. But they are not regarded as wealth because they are available in abundance and unlimited in supply. We consider only those goods which are relatively scarce and have money value as wealth.

We study about consumption, production, exchange and distribution of wealth. J.S. Mill defined economics as 'the practical science of the production and distribution of wealth'. Adam smith was of the view that economics was concerned with the problems arising from wealth-getting and wealth-using activities of people. He was interested mainly in studying the ways by which the wealth of all nations could be increased.

Criticism

There is a lot of criticism against Adam Smith's definition of economics. It has got a bad name for economics. Some social scientists like Ruskin and Carlyle called it 'a dismal science', 'a dark science'. But this criticism is unfair, because it is based on a misunderstanding about the nature and scope of economics. As this definition emphasized 'wealth', they thought it is all about money. They concluded that economics taught men and women how to make money. So they called it a selfish science as in their opinion it emphasized on 'the means to get rich'.

The above charge against economics is a false one. In economics, wealth does not refer to money. It refers to the scarce goods which satisfy our wants. Moreover, early economists used the term 'wealth' in the sense of welfare.

A great demerit of Adam Smith's definition is that there is over-emphasis on wealth. There is no doubt that we have to study about wealth in economics. But it can be only a part of the study. There is the other side. In fact, it is a more important side and that is the study of man. Economics is a social science. Hence the proper study of mankind should be man and not wealth alone.

When we discuss Adam Smith's definition of economics, we have to keep in mind the time in which he lived. He was writing his book at a time when England was on the eve of Industrial Revolution. The large investments of capital and use of largescale machinery enabled England to produce wealth on a large scale. So it is only natural that Adam Smith emphasized on wealth and considered economics as 'an enquiry into the nature and causes of the wealth of nations'.