Thursday, November 4, 2010

   NEO-CLASSICAL SCHOOL OF THOUGHT                                   
             "Economics is the Science of Material welfare"

The founder of the Neo-Classical School of Thought, Prof. Dr. Alfred Marshall has described economics "as a science of material welfare" in his book "Principles of Economics" in 1890.

According to Prof. Dr. Alfred Marshall
"Economics is the study of mankind in the ordinary business of life. It inquires how he gets his income and how he uses it. It examines that part of individual and social action, which is most closely connected with the attainment and with the use of material requisites of well-being. It is on the one side, a study of wealth and on the other and more important side is a part of the study of man."
Following are the main points of Marshall's definition:

  1. Science of Material Welfare: 
          Economics does not regard wealth as the be-all and end-all of economic activities. Wealth is a means of promoting human welfare. Hence, wealth has secondary position.
  1. Economics is a Social Science:  
          Economics is a social science. It does not study the behaviour of isolated individuals. It studies only the actions of those people who are living in a society and whose behaviour influencing other people and being influenced by them.
  1. Study of Material Welfare:  
          Economics is the study of material requisites of well-being only. It ignores the immaterial requisites of life. That is, it does not consider the services of teachers, doctors, bankers etc.
  1. Study of Ordinary Business of Life: 
          Economics is the study of day-to-day life matters of the people. Its subject matter is an ordinary person's earning and spending.

    Following are the merits of Marshall's definition about economics:

    1. Social Science:
              In economics, actions of those people are being taken into the study who live in the society and cooperate with one another in various activities, thus it is a social science.

         2. Science of Material Welfare:
             Economics is the science of society's material welfare. Which explains the wealth is the only resource that fulfils bitterly our material requisites.

         3. Science of Ordinary Business of Life:
             In economics, those actions of people are being studied which are related to ordinary or day-to-day life matters. It means that economics is not the study of those who are living far away in jungles or deserts.

         4. Analysis of Individual and Social Actions:
             Economics does not study production, consumption and distribution only at individual level; rather it also studies average behaviour of the people living in the society.

         5. Marshall and Modern View:
             Marshall's and his followers' view about material welfare of the society is quite matching with the today's economists' view about the economic development. Both emphasize on raising prosperity level in the society.

         6. Simple and Solid Arguments:
             The concept of human welfare described in Marshall's definition about economics is very simple, straight and solid argument which made the definition more comprehensive. Moreover, this definition is similar to the modern theories and preferences of the society.

         7. Wealth - A Source of Material Welfare:
             Marshall does not consider wealth itself as a source of material welfare but as a means to acquire material requisites of life.

         8. Importance of Human Being:
             According to Dr. Alfred Marshall, "man occupies a primary place and wealth only secondary one. That is, man is important while wealth is just a resource to get necessities comforts and luxuries of life. Therefore, wealth is not as important as man."

    Prof. Lionel Robbins and other economists have criticized Alfred Marshall's definition about economics under the following points:

         1. Narrow Down the Scope of Economics:
             Robbins criticized Marshall's view that economics is the science of material welfare only. While in the actual study of economic principles, both material welfare only. While in the actual study of economic principles, both material and immaterial are taken into account. Services of lawyers, teacher, doctors, bankers, etc. are immaterial economic activities that result into the welfare of the other people. Hence, Marshall has narrowed down the scope of economics.

        2. Welfare - a Vague Concept:
            According to Prof. Lionel Robbins, Marshall's concept of welfare is not clear. It is entirely an internal phenomenon. That is, welfare varies from person to person, time to time and place to place.

        3. Welfare is Immeasurable:
            Prof. Lionel Robbins criticized Marshall's concept of welfare that it is not measurable in numbers like 1, 2, 3, ..., n. because it is entirely a subjective phenomenon.
        4. Theoretical Nature of Definition:
            Alfred Marshall's definition about economics is theoretical in nature. In practical life it is not possible to divide human activities into material and immaterial parts because are interdependent and also cause creation of one another.

       5. Problem of Liking and Disliking:
           If material welfare is considered as basic aspect then problem of liking and disliking appears. An economist cannot remain neutral between good or bad. It is not supposed to be his function to pass moral judgements and say what is good and what is bad.

       6. Economics - Only a Social Science?
           Dr. Alfred Marshall says that economics is a social science. It deals only with the behaviour of those people who are living a society. It ignores all others who are living far away in jungle, deserts or caves while they also may have economic problems i.e., of using scarce means for the satisfaction of unlimited ends.

       7. Ignoring the Traditions:
           Alfred Marshall explains material welfare and material requisites of life while he ignores moral values, customs and traditions etc.,, which have great influence on human';s and social life.

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