Welfare definition of economics
Encyclopedia
The welfare definition of economics is an attempt by Alfred Marshall
, a pioneer neoclassical economist
, to redefine his field of study. This definition expands the field of economic science to a larger study of humanity. Specifically, Marshall's view is that economics studies all the actions that people take in order to achieve economic welfare
. In the words of Marshall, "man earns money to get material welfare." This is why economists since Marshall have described his definition as the welfare definition of economics. This definition enlarged the scope of economic science by emphasizing the study of wealth and humanity together, rather than wealth alone.
In his widely read textbook, Principles of Economics
, published in 1890, Marshall defines economics as follows:
"Political Economy or Economics is a study of men as they think and move and life 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".
According to Edwin Cannan, "the aim of political economy or Economics is the explanation of the general causes on which the material welfare of human beings depend".
Marshall clearly explains that economic activity is different from other activity. For example,
Marshall defines economic activity as separate from the above activities. A farmer who toils in the field, or a worker on an assembly, are performing an economic activity: they work to increase their material welfare (primarily by earning money
). Money buys goods or services that satisfy wants. In other words, economics deals with effort, wants, and the satisfaction of those wants.
and Arthur Pigou have continued to define economics in terms of material welfare
. According to Pigou, "the range of enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod
of money
".
(1) Narrows down the scope of economics. Marshall distinguishes between material and non-material welfare, and confines economics to the study of material welfare. Robbins feels that economists should not limit their attention to material welfare. There are things that are "non-material" but they promote human welfare
. Robbins cites “the services of doctors, lawyers, teachers, dancers, engineers, professors". These goods "satisfy our wants and are scarce in supply”. Some economists feel that Marhsall's definition of "material" includes both goods and services, and that Robbins is either misreading Marshall's text, or creating a straw man
argument.
(2) Assumes equivalency between welfare to economic activity. For Robbins, there are economic activities which do not promote human welfare. For example, the sale of cocaine
or heroin. Here Robbins says, “Why talk of welfare at all? Why not throw away the mask altogether”.
(3) It is a vague concept. According to Robbins, “welfare” is a vague concept to use to define economics because it is subjective. Economics is a quantitative science; but welfare cannot be quantitatively measured, and two persons cannot agree on what creates or improves welfare.
(4) It involves value judgment. Finally, the word “welfare” in Marshall’s definition brings economics
to the realm of ethics. Robbins would prefer that economics remain neutral in assessing the results of economic transactions.
Alfred Marshall
Alfred Marshall was an Englishman and one of the most influential economists of his time. His book, Principles of Economics , was the dominant economic textbook in England for many years...
, a pioneer neoclassical economist
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
, to redefine his field of study. This definition expands the field of economic science to a larger study of humanity. Specifically, Marshall's view is that economics studies all the actions that people take in order to achieve economic welfare
Economic welfare
Economic welfare broadly refers to the level of prosperity and living standards in an individual or group of persons. In the field of economics, it specifically refers to utility gained through the achievement of material goods and services...
. In the words of Marshall, "man earns money to get material welfare." This is why economists since Marshall have described his definition as the welfare definition of economics. This definition enlarged the scope of economic science by emphasizing the study of wealth and humanity together, rather than wealth alone.
In his widely read textbook, Principles of Economics
Principles of Economics (Marshall)
Principles of Economics was a leading political economy or economics textbook of Alfred Marshall , first published in 1890. It ran into many editions and was the standard text for generations of economics students.-Writing:...
, published in 1890, Marshall defines economics as follows:
"Political Economy or Economics is a study of men as they think and move and life 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".
Implications
The following are the implications of this definition:- EconomicsEconomicsEconomics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
is a study of mankind. - Human life has several aspects: social, religious, economic and political—but economics is concerned only with the economic aspect of life.
- Promotion of welfare is the ultimate goal, but the term welfare is used in a narrow sense to meet material welfare only.
According to Edwin Cannan, "the aim of political economy or Economics is the explanation of the general causes on which the material welfare of human beings depend".
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 socialSocialThe term social refers to a characteristic of living organisms...
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 defines economic activity as separate from the above activities. A farmer who toils in the field, or a worker on an assembly, are performing an economic activity: they work to increase their material welfare (primarily by earning money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
). Money buys goods or services that satisfy wants. In other words, economics deals with effort, wants, and the satisfaction of those wants.
Impact on economics
Followers in the neoclassical tradition, such as William BeveridgeWilliam Beveridge
William Henry Beveridge, 1st Baron Beveridge KCB was a British economist and social reformer. He is best known for his 1942 report Social Insurance and Allied Services which served as the basis for the post-World War II welfare state put in place by the Labour government elected in 1945.Lord...
and Arthur Pigou have continued to define economics in terms of material welfare
Economic welfare
Economic welfare broadly refers to the level of prosperity and living standards in an individual or group of persons. In the field of economics, it specifically refers to utility gained through the achievement of material goods and services...
. According to Pigou, "the range of enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod
Measuring rod
A measuring rod is a tool used to physically measure lengths and survey areas of various sizes. Most measuring rods are round or square sectioned, however they can be flat boards. Some have markings at regular intervals...
of money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
".
Criticism
Marshall’s definition has been criticized by more recent economists, including Lionel Robbins. Robbins' criticisms include:(1) Narrows down the scope of economics. Marshall distinguishes between material and non-material welfare, and confines economics to the study of material welfare. Robbins feels that economists should not limit their attention to material welfare. There are things that are "non-material" but they promote human welfare
Economic welfare
Economic welfare broadly refers to the level of prosperity and living standards in an individual or group of persons. In the field of economics, it specifically refers to utility gained through the achievement of material goods and services...
. Robbins cites “the services of doctors, lawyers, teachers, dancers, engineers, professors". These goods "satisfy our wants and are scarce in supply”. Some economists feel that Marhsall's definition of "material" includes both goods and services, and that Robbins is either misreading Marshall's text, or creating a straw man
Straw man
A straw man is a component of an argument and is an informal fallacy based on misrepresentation of an opponent's position, twisting his words or by means of [false] assumptions...
argument.
(2) Assumes equivalency between welfare to economic activity. For Robbins, there are economic activities which do not promote human welfare. For example, the sale of cocaine
Cocaine
Cocaine is a crystalline tropane alkaloid that is obtained from the leaves of the coca plant. The name comes from "coca" in addition to the alkaloid suffix -ine, forming cocaine. It is a stimulant of the central nervous system, an appetite suppressant, and a topical anesthetic...
or heroin. Here Robbins says, “Why talk of welfare at all? Why not throw away the mask altogether”.
(3) It is a vague concept. According to Robbins, “welfare” is a vague concept to use to define economics because it is subjective. Economics is a quantitative science; but welfare cannot be quantitatively measured, and two persons cannot agree on what creates or improves welfare.
(4) It involves value judgment. Finally, the word “welfare” in Marshall’s definition brings economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
to the realm of ethics. Robbins would prefer that economics remain neutral in assessing the results of economic transactions.