Meaning of Economics

The modern word “Economics” has its origin in the Greek word “Oikonomos” meaning a steward. The two parts of this word “Oikos”, a house and “nomos”, a manager sum up what economics is all about. How do we manage our house, what account of stewardship can we render to our families, to the nation, to all our descendants? There is an economic aspect to almost any topic we care to mention – education, employment, housing, transport, defence etc. Economics is a comprehensive theory of how the society works. But as such, it is difficult to define. The great classical economist Alfred Marshal defined economics as the “Study of man in the ordinary business of life”. This, however, is rather too vague a definition. This is because any definition should take account of the guiding idea in economics which is scarcity. The great American economist Paul Samuelson thus defined it as: “The study of how people and society choose to employ scarce resources that could have alternative uses in order to produce various commodities and to distribute them for consumption, now or in future amongst various persons and groups in society. Virtually everything is scarce; not just diamonds and oil but also bread and water. The word scarcity as used in economics means that; All resources are scarce in the sense that there are not enough to fill everyone’s wants to the point of satiety. We therefore have limited resources, both in rich countries and in poor countries. The economist’s job is to evaluate the choices that exist for the use of these resources. Thus we have another characteristic of economics; it is concerned with choice. Another aspect of the problem is people themselves; they do not just want more food or more clothing they want particular types of food, specific items of clothing and so on. By want we mean; “A materialistic desire for an activity or an item. Human wants are infinite. We have now assembled the three vital ingredients in our definition, People (human wants), Scarcity and choice. Thus for our purpose we could define economics as: “The social science which is concerned with the allocation of scarce resources to provide goods and services which meet the needs and wants of the consumers”