ADAM SMITH ‘S DEFINITION OF ECONOMICS

ADAM SMITH ‘S DEFINITION OF ECONOMICS

         Adam smith wrote a book in 1776 entitle “The wealth of Nation” in this book he discussed the word “WEALTH” through its four aspects  i.e.  production of wealth.exchange of wealth, distribution of  and consumption of wealth. This clearly means that, according to Adam smith, Economics is a science of wealth.

          To analyze this definition we will diacuss the word “Wealth” and its four aspects. Wealth means goods and services transacted with the help of money, it is a matter of common observation that the transaction of goods and services  (wealth) takes place in our day-to-day life. But the question is : Why and how is the transaction of goods and services taking place?  To know the answer of this question we are require d to look into four aspect of wealth.

(1) PRODUCTION OF WEALTH: This means the production of goods and services by combining four factors of production  i.e. land, labour, capital, organization or entrepreneurship. Land is the natural resource such as soil, sea, minerals, livestock, forests etc  labour is a mental or physical work which is done for  the sake of reward . capital means manmade resources which help to produce goods and services. Whereas organization is the act of combining four factors of production to producing and marketing of the goods and services for the  sake of profit hence. Production of wealth means production of goods and services.

(2) EXCHANGE OF WEALTH: Entrepreneurs usually produce more goods and services than their own requirement s. Why do they do so?  Simply to get  their surplus produce exchanged in the market with the surplus goods and services produced by others. The process of exchanging of wealth continues throughout the year and as a result people get the goods and  services produced for each other. This enables everyone in the society to satisfy his multiple wants.

(3) DISTRIBUTION OF WEALTH: As a result of exchange of wealth in a country whatever falls to the lot of each individual or a section of society is called his or its share in the national wealth produced in a year. If the share of certain section of a society in the national wealth is bigger than that of other this will be the unequal distribution of wealth in a country. If all section of the society are enjoying  all goods and services being  produced in the country it will be fair and equal distribution of wealth.

(4) CONSUMPTION OF WEALTH: The ultimate objective of production, exchange and distribution is the consumption of wealth.  When people get their share from the national product they use it to satisfy their wants hence , the using up of the utility of goods and services for the satisfaction of wants  is known as the consumption of wealth .

     Thus, from the above explanation of wealth and its four aspect, it becomes clear that services available to the society. Beside this he also explain as to why and how wealth is produced, exchanged, distributed and consumed.

CRITISM ON THE DEFINITION

              During the late 18^th  century religious sentiments of the people were very strong and spiritual values held sway over man’s mind therefore. It was difficult for them to accept economies as a science which teaches materialism. They raised hue and cry against it. Especially the two men of letter. Carlyle and Ruskin , condemned it. They said that economics as a science of materialism is just  “a science of bread and butter”. They also termed economics as a” dismal science” as, according to them it promotes selfishness and greed. They thought that if economics was thought. The science of materialism will take mankind away from spiritualism. Hence, Carlyle even went to the extent of saying that economics is “a pig philosophy “   the  two literary figures therefore held that spiritual values as love. Sincerity , sacrifice, friendship, brotherhood, etc,  be promoted through religious in place of materialism being taught in economics.

             Regardless of what critics had been saying about Economics, the criticism was not justifiable at all. The reason is that they saw only the negative side of the picture, since everything has its pro’s and con’s and economics is no exception to it. However, gradually people discovered through observation and experiments that economics helps them to eliminate poverty. Raises their standard of living and turns them human beings. Hence , they soon realized material that wealth plays a vital role in their life.