Alfred Marshall, a pioneer neoclassical economist, reoriented Economics towards the study of mankind and provided economic science with a more comprehensive definition. Marshall, in his famous book ‘Principle of Economics’ published in 1890, defines economics as follows:
"Political Economy or Economics is a study of mankind in the ordinary business of life. It examines that part of individual & social action which is most closely connected with the attainment & with the use of material requisites of well-being".
This definition clearly states that Economics is on the one side a study of wealth and on the other and more important side “a part of the study of man”. Marshall’s followers like Pigou, Cannon and Baveridge have also defined Economics in terms of material welfare.
Features of Marshall’s Definition:
The Marshall’s definition of Economics has the following main features:
(1) Wealth is not the be-all and end-all of economic activities: Economics does not regard wealth as the be-all and the end-all of economic activities. Wealth is sought for promoting human welfare. Hence, wealth is only a means to the fulfillment of an end which is human welfare. Thus, wealth is relegated to a secondary place.
(2) Study of an ordinary man: Economics is not concerned with what is called in Economics ‘economic man’, i.e., a man whose only motive is to acquire wealth for its own sake and who is not influenced by human considerations in the pursuit of wealth. Rather, Economics deals with ordinary men and women who are swayed by love, affection and fellow-feelings and not merely motivated by the desire to get maximum monetary advantage.
(3) Economics is a social science: Economics is a social science and not one which studies isolated individuals or Robinson Crusoes. Economics study people living in society influencing other people and being influence by them.
(4) Economics does not study all activities of man: Economics does not study all the activities of man. It is concerned with those actions which can be brought directly or indirectly with the measuring-rod of money. Marshall clearly explains that economic activity is different from other activity. For example,
If a student visits a friend who is ill, it is a social activity,
If a person give his vote in an election, it is a political activity.
If a person goes to church/temple it is a religious activity.
Marshall says that economic activity is different from the above mentioned activities. A farmer going to the field or a worker going to the factory to work is an economic activity—they are working to earn money. With that money they will buy things to satisfy their wants. In other words, economics deals with wants, efforts and satisfaction.
In the words of Marshall, "man earns money to get material welfare." Marshall gives importance to welfare and man. As such this definition came to be called the welfare definition.
(5) Study of material welfare: Economics is concerned with the ways in which man applies his knowledge and skill to the gifts of nature for the satisfaction of his material welfare. Economics studies only ‘material requisites of well-being’ or causes of material welfare.
For a long time, the definition of economics given by Alfred Marshall was generally accepted. It enlarge the scope of economics by emphasizing the study of wealth and man rather than wealth alone. However, Marshall’s definition was criticized by Lionel Robbins. In his book “Nature and Significance of Economics Science” Robbins gave a critical review of the welfare definitions of economics. These criticisms are discussed below.
(1) Classificatory and Impractical: Robbins rejected Marshall’s definition as being classificatory because it makes a distinction between material and non-material welfare and says that Economics is concerned only with material welfare. Robbins does not think it right for the economists to confine their attention to the study of material welfare, because in the actual study of economic principles, both the ‘material’ and ‘immaterial’ are taken into account.
(2) Narrow down the scope of economics. According to Robbins, the use of the word “material” in the definition of economics considerably narrows down the scope of economics. There are many things in the world which are not material but they are very useful for promoting human welfare. For example, “the services of doctors, lawyers, teachers, dancers, engineers, professors etc., satisfy our wants and are scarce in supply”. If we exclude these services and include only material goods, then the sphere of economics study will be very much restricted.
(3) Relation between economics and welfare. The second objection raised by Robbins on welfare definition is on the establishment of the relation between economics and welfare. According to him, there are many activities which do not promote human welfare, but they are regarded economic activities, e.g., the manufacture and sale of alcohol or opium, etc. Here Robbins says, “Why talk of welfare at all? Why not throw away the mask altogether”.
(4) Welfare is a vague concept. The third criticism raised by Robbins was on the concept of “welfare”. In his opinion welfare is a vague concept. It is purely subjective. It varies from man to man, from place to place and from age to age. Moreover, Robbins questioned the use of a concept which cannot be quantitatively measured and on which two persons cannot agree as to what is conductive to welfare and what is not. For example, the manufacturing and sale of guns, tanks and other warheads, the production of opium, liquor etc. are not conducive to welfare but these are all economics activities. Hence, these cannot be excluded from the study of economics.
(5) It involves value judgment. Finally, the word “welfare” in Marshall’s definition involves value judgment and brought Economics to the realm of ethics. Whereas, according to Robbins economics is neutral as regards ends. It is not supposed to be its function to pass moral judgments and say what is good and what is bad.