Scope of Economics

Scope of Economics

The scope of the subject of Economics refers to on the subject -matter of Economics. It throws light on whether it is an art or a science and if science, whether it is a positive science or a normative science.

1. Economics: Its Subject- Matter

·           Economics focuses on the behaviour and interactions among economic agents, individuals and groups belonging to an economic system. It deals with the activities such as the consumption and production of goods and services and the distribution of income among the factors of production. The activities of the rational human beings in the ordinary business of life under the existing social, legal and institutional arrangement are included in the Science of Economics; the abnormal persons and the socially unacceptable and unethical activities are excluded.

·           Economics studies the ways in which people use the available resources to satisfy their multiplicity of wants. Scarcity is a problem indicating the gap between what people want and what they are able to get. This scarcity can be eliminated either by limiting the human wants or by increasing the supply of the goods that satisfy the human wants. The method of getting more is resorted to, rather than the method of wanting less.

·           Economics is concerned with activities of human being only. Human beings are related to one another and the actions of one member affect those of the other members in the society. Hence, Economics is called a Human Science or Social Science.

·           The activities of rational or normal human beings are the subject-matter of Economics.

·           All human activities related to wealth constitute the subject-matter of Economics. Thus, human activities not related to wealth (non-economic activities) are not treated in Economics. For example, playing cricket for pleasure, mother’s child care.

It is customary to clarify whether Economics is an art or a science; and if it is a science, to observe its specific features.

2. Economics is an Art and Science

i. Economics as an Art

Art is the practical application of knowledge for achieving particular goals.

Economics provides guidance to the solutions to all the economic problems.

A. C. Pigou, Alfred Marshall and others regard Economics as an art.

ii. Economics as a Science

Science is a systematic study of knowledge. All its relevant facts are collected, classified and analyzed with its scale of measurement. Using these facts, science develops the co-relationship between cause and effect. Scientific laws derived are tested through experiments; and future predictions are made. These laws are universally applicable and accepted. Economists like Robbins, Jordon and Robertson argue that Economics is a science like Physics, Chemistry etc., since, it has several similar characteristics. Economics examines the relationships between the causes and the effects of the problems. Hence, it is rightly considered as both an art and a science. In fact, art and science are complementary to each other.

3. Economics: Positive Science and Normative Science

Positive science deals with what it is, means, it analyses a problem on the basis of facts and examines its causes. For example, at the time of a price increase, its causes are analysed.

On the other hand, normative science responds to a question like what ought to be. Here, the conclusions and results are not based on facts, but on different considerations belonging to social, cultural, political, religious realms. They are basically subjective in nature.

In short, positive science is concerned with ‘how? and why?’ and normative science with ‘what ought to be’. The distinction between the two can be explained. An increase in the rate of interest, under positive science, would be looked into as to why and how can it be reduced, whereas under normative science, it would be seen as to whether it is good or bad.

Three statements about each type are given below:

Positive Economics

a.        An increase in money supply implies a price-rise in an economy.

b.        As the irrigation facilities and application of chemical fertilizers expand, the production of food-grains increases.

c.         An increase in the birth rate and a decrease in the death rate reflect the rate of growth of population.

Normative Economics

a.        Inflation is better than deflation.

b.        More production of luxury goods is not good for a less-developed country.

c.         Inequalities in the distribution of wealth and incomes should be reduced.