However, the definitions about economics can be classified into the following Schools of Thoughts.
- Classical School of Thought or Adam Smith and his follower's view.
- New-Classical School of Thought or Alfred Marshall and his follower's view.
- Modern School of Thought or Robbin's view.
CLASSICAL SCHOOL OF THOUGHT
"Economics is the Science of wealth"
The founder of the Classical School of Thought, Prof. Adam Smith has described economics as "a science of wealth" in his book "And Inquiry into the nature and Causes of Wealth of Nations" in 1776.
According to Adam Smith
"Economics is a subject which studies the nature of wealth and laws which governs its production, consumption, distribution and exchange."
Hence, Adam Smith has described following four aspects of wealth in his definition.
1. Production of Wealth:
- How wealth is produced?
- What are the factors of production-i.e., land, labour, capital, and organization.
- What are the difficulties in production of wealth?
- How individuals spend their money income on consumer goods, capital goods, and services.
- How consumers maximize their satisfaction level by using goods and services.
- How produced wealth is distributed among the factors of production in the form of reward like rent, wages, interest and profit.
- How the reward of the factors of production are determined according to their contribution in the process of production.
- How wealth shifts from one hand to another or from one country to another?
- How international trade takes place-i.e., how different countries export and import goods and services?
- How the currency of a country exchanged with the currency of another country
Following are the main points, which are described in the definitions of ecnomics given by the Classical School of Thought.
Economics treats only material goods like furniture, electronics, house etc. Whereas, immaterial goods like sunlight, moonlight, air, rain and unpaid services are not included in it.
2. Science of Wealth:
Economics is the science of wealth. The term wealth in economics means all the goods and sercices, which directly or indirectly satisfy man's want. Thus, wealth does not mean money.
3. Aspects of Wealth:
Economics treats ith the four main aspects of wealth-i.e., production, distribution, consumption, and exchange.
People work only for their self-interest. They adopt such ways to collect wealth so that they their standard of living.