Lionel Robbins' definition (Scarcity Definition)
Lionel Robbins has defined economics as follows : 'Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses'.
Robbins has given the above definition in his book 'An Essay on the Nature and significance of Economic Science'.
The definition of Robbins is based on the following basic assumptions
i Ends are various. The term 'ends' mean wants. Human wants are unlimited.
ii Means are limited. Means like time, money and resources are limited.
iii We can put time and money to alternative uses. For example, though time is limited, we can use it for different purposes. We can use time for earning money or we may enjoy it as leisure, and
iv All wants are not of equal importance.
We have to note certain things here. The fact that we have many wants is not of interest to an economist by itself. For example if you want to do two things and you have enough time and means with which to do them, and you do not want the time or means for anything else, then you need not economize anything. Though your means are limited, if they do not have alternative uses, you cannot economize anything. Further, if all wants are of equal importance, you cannot economize anything. We know time is limited. There are only 24 hours in a day. If a worker wants only money he has to work for long hours and forgo leisure. If he wants leisure, he has to forgo his income. He cannot have both at the same time.
We may, however, note that all means which satisfy human wants are not limited. For example, air and sunshine are available in abundance. They are free goods. But many things we want are scarce in relation to our wants. So economics studies human behaviour as a relationship between unlimited wants and scarce means. As means are limited, we have to pay a price for them. We study in economics how the prices of scarce goods are determined. We have to choose among different wants. That is why we say that scarcity and choice are central problems in economics. Economics is the science of choice.
Choice between alternatives is the basic principle underlying all economic activity. This is applicable to all economic systems - capitalism, socialism and mixed economy.
The capitalist economy is also known as market economy. There, the consumer will have a wider choice than in a socialist economy which is also known as command economy. A socialist economy is a planned economy. As all basic decisions are taken by the government, the consumer will have limited choice. And we have mixed economy. India is a good example of mixed economy where public sector and private sector play important roles in different economic fields. In some fields, the consumer has more choice and in other areas where the State has greater control, he has limited choice. But under all these systems, there is some kind of planning, it is a question of degree. And all economic life involves planning. As Robbins puts it. 'To plan is to act with a purpose, to choose, and choice is the essence of economic activity'. Lionel Robbins' definition is also known as scarcity definition of economics.
The definition of Marshall classified human behaviour into economic activity and non-economic activity. It considered only those activities which promoted material welfare as economic activity. But Robbins' definition covers the whole field. If there is scarcity of a thing in relation to the demand for it, it becomes the subject - matter of economics. That way, even the labour of those who provide services (eg. lawyers, doctors, actors) are taken for study in economics.
Another merit of Robbins' definition is it makes economics a scientific study. Ethical aspects of economic problems are not taken into account in discussions. In other words, the moral aspects are not considered. And it does not try to establish a link between economics and welfare. But some economists criticize this view. They say that as economics is a social science, its aim should be promotion of human welfare. That is why some economists say Robbins' definition has no human touch about it. It looks at economics only as the science of pricing process. But economics is more than a theory of value or resource allocation.
According to Robbins, an economic problem will arise only when there is scarcity, but it may arise during times of abundance as well. For example, the great depression of 1930s was caused not so much by scarcity but by plenty. That is why the world depression was described as poverty in the midst of plenty.
In spite of the above criticisms, we have to note that most of the economists have accepted the definition of Robbins because it emphasizes scarcity and choice which are two important facts of life under all economic, political and legal systems.
It is true that there have been improvements in the methods of production because of technological advancements. But scarcities are always with us. That is why we say economics is the science of scarcity.