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[Note for bibliographic reference: Melberg, Hans O. (1998), Definitions
of economics: A short and uncritical introduction, www.oocities.com/hmelberg/papers/981123.htm]
Definitions of economics
A short and uncritical draft of an introduction
by Hans O.
"The Age of Chivalry is gone; that of
sophisters, economists, and calculators has succeeded." - Edmund Burke
How should we define economics and what is the point of doing so? To answer this
question I shall first present some proposed definitions. The next section reflects
briefly on the use (if any) of searching for definitions. Finally, I expand on the
criteria a definition should satisfy. I should mention that this is only a draft. I would
very much welcome suggestion for further reading and quotations.
A relatively random set of definitions
Lionel Robbins once gave the following definition of economics, which has been widely
used ever since: "Economics is the science which studies human behavior as a
relationship between ends and scarce means that have alternative uses" (quoted in
Stigler (1984, 301). Mark Skousen criticizes this definition it the introduction to his
book Economics on Trial (but his misquotes Robbins slightly, writing "the
relationship" instead of "a relationship." See p. 14.). Robbins
definition is, of course, not entirely original. Even non-economists like George
Bernhard Shaw has written that "Economy is the art of making the most of
life" (quoted in Becker 1986).
Along the same lines as Robbins and Shaw, but with some further extensions, Gary Becker
and Richard Posner have defined economics as a method in the following terms:
"The combined assumptions of
maximizing behavior, market equilibrium, and stable preferences, used relentlessly and
unflinchingly, form the heart of the economic approach." (Quoted in Hirschleifer
1985, 301. Originally in Becker 1976, p. 4)
"Economics ... explores and tests the implications of assuming that man is a rational
maximizer of his ends in life, his satisfactions - what we shall call his
self-interest." (Quoted in Hirschleifer 1985, 55. Originally in Posner 1977, 3)
The question is still one of scarce means and ends which we want to satisfy, but this
time economics is more a method of study. As Robert Solow writes in Deleadus,
economics becomes the study of the consequences of greed, rationality and equilibrium.
Explaining unemployment, economic fluctuations and so on in terms of non-rational and even
irrational motivations is no longer accepted as economics. Moreover, the focus moves away
from the study or processes and towards comparative statistics on equilibrium outcomes.
Although the focus on self-interest need not be limited to material self-interest, actual
practice has often done so. An exception to this is Karl Polanyi who argues that:
"Though human society is naturally conditioned by economic factors, the motives of
human individuals are only exceptionally determined by the needs of material
want-satisfaction" (according to an e-mail from Dr S M Ghazanfar, College of Business
and Economics, University of Idaho in a HES discussion about the definition of economics).
John M. Keynes is not usually associated with the economics of Posner and his
rational expectation colleagues. He did, however, also define economics as a method. He
wrote "The theory of economics does not furnish a body of settled conclusions
immediately applicable to policy. It is a method rather than a doctrine, an apparatus of
the mind, a technique of thinking, which helps it possessors to draw correct
conclusions" (unknown source). This should, however, not be taken as his only or
definite definition of economics.
Another classic, is Alfred Marshall's definition: "Economics is a study of
mankind in the ordinary business of life; it examines that part of individual and social
action which is most closely connected with the attainment and with the use of the
material requisites of wellbeing" (cited in Hirschleifer 1985, 53. Originally in
Alfred Marshall (1920, 1). In contrast to Posner, Becker and Keynes, this definition
focuses on economics as a topic, not a method. Marshall always argued that economics
should have psychological foundations. It was a question of finding out how people
actually made their choices, not the consequences of assuming that their choice was
Faced with the disagreement on whether economics is a set of questions or a method, we may
introduce a third, somewhat informal definition, by Jacob Viner: "Economics is
what economists do" (cited in William J. Barber, p. 88.). While economist do many
different things, they certainly deal with three topics: production, consumption and
distribution. This, in fact, is how the WWWebster Dictionary defines economics:
"a social science concerned chiefly with description and analysis of the production,
distribution, and consumption of goods and services."
Another entertaining definition, is Duesenberry's quotation that "Economics is
all about how people make choices. Sociology is about why there isn't any choice to be
made" (cited in Dale 1994, 31). In the same entertaining category we may include John
Maurice Clark's: "An economist is a man with an irrational passion for
dispassionate rationality" (The source is the mentioned Dr S M Ghazanfar).
Why discuss definitions?
Do we really need to define economics? Tony Brewer (University of Bristol) has
suggested that making up definitions simply "reflect some idea of what you wish your
colleagues were doing" (e-mail discussion at HES about the definition of economics
available on the Net). This may not be a very fruitful activity. On the other hand, the
process of reflecting on what we are trying to do may be important. In short, while I tend
to agree that it is pointless to argue about who gives the "correct"
definition of economics, I can still argue that it is fruitful to discuss the assumptions
and implications of the various definitions. In the end, however, I would agree that what
counts as good social science is simply reliable and non-obvious explanations of empirical
phenomena. As Popper once wrote: We are students of problems, not a subject matter (quoted
from memory. The quotation is in M. Hechter's book: Principles of Group Solidarity).
In other words, faced with empirical phenomena we want answers to "why"
questions. Whether the answer involves or is defined as economic reasoning, psychology,
sociological reasoning or political analysis (or all) is not interesting. All that matters
is whether the answer is correct.
The criteria for a definition
I believe a good definition should satisfy at least two general criteria. First, it
must be wide enough to cover many of the existing uses of the term. Second, it must be
narrow enough to distinguish economics from non-economics. Here is one example: Some
people include "behaviour" in the definition of "political culture",
while others want to include only subjective attitudes. Hence, the first would agree that
an increase in electoral participation is a change in political culture, while the second
would argue that this is wrong. My argument is that by including behaviour the definition
becomes so wide that it can no longer be distinguished from what it is supposed to
explain: An increase in the electoral participation is something we want to explain using
culture or alternative variables. I have expanded on this topic in the paper "The
Cultural Approach to Russian Politics" (see Papers by Hans O. Melberg).
Barber, William J. (19??): Reconfigurations in American Academic Economics, Deleadus,
Becker, Gary (1986): The Economic Approach to Human Behaviour", ch. 4 in Jon Elster: Rational
Choice, Cambridge: Cambridge University Press.
Kristin Dale (1994): Bokanmeldelse, Sosialøkonomen nr. 4, 30-32.
Hirschleifer (1985): The Expanding Domain of Economics, American Economic Review
75(6): pp. 53-68.
Stigler, George (1984): Economics - The Imperial Science, Scandinavian Journal of
Economics 86 (3), 301-313.
A note on very relevant sources
For those who really want to go into the subject matter, the following books can be
- M. Blaug: The methodology of economics: or How economists explain
- D. Hausmann: the Inexact and Separate Science of Economics
- R. Coase: One chapter in the book "Essays on Economics and Economists"
- T. Schelling: The first chapters in the book "Micromotives and Macrobehaviour"
- Israel Kirzner's Ph.D.: The Economic Point of View
- R. Backhouse: Various books reflecting on the nature of economics.
- See also the classics:
- L. Robbins (1932): An essay on the nature and significane of economics - T.W. Hutchison
(1937): The significance of basic postulates of economic theory
A list of various sources (not sorted)
Becker, Gary S. (199?), The Economic Approach to Human Behaviour, Journal of Political
Coase, R. H. (1994), Essays on Economics and Economists, Chicago/London: The University of
(Especially ch. 3: Economics and contageous disciplines and ch. 2 How should economist
choose? (arguing against Friedman's methodology))
Elster, Jon. (Most of his papers and books!, Especially: Sour Grapes, "Explaining
Technical Change and Ulysses and the Sirens. See the Jon Elster Page at
Friedman, M. (1953) The methodology of positive economics. In Friedman, M. (ed.), Essays
in Positive Economics. Chicago: University of Chicago Press
Hausman, Daniel M. (1992), The Inexact and Separate Science of Economics, Cambridge:
Cambridge University Press
Landsburg, Steven E. (1993), The Armchair Economist, New York: The Free Press
Mason, Roger S. (1988), The Psychological Economics of Conspicuos Consumption (ch. 10) in
Peter E. Earl (ed.), Psychological Economics, Kluwer Academic Publishers, Boston, pp.
Sen, A. K. (1982), Rational Fools: a critique of the behavioural foundations of economic
theory, in Sen A. K. (ed.), Choice, Welfare and Measurement, Ocford: Blackwell
Solow, Robert M. (1980), On theories of unemployment, American Economic Review, vol. 70,
Blaug, M. (1980), The methodology of economics: or How Economists Explain,
Boland, L. A. (1981) On the futility of criticizing the neoclassical maximization
hypothesis. American Economic Review, vol. 71, pp. 1031-6
Dow, A.and Dow, S. C. (1985) Animal Spirits and Rationality. In Lawson, T. and Pesaran, H.
(eds) Keynes' Economics: methodological Issues. Armonk: NY: M. E. Sharpe Inc.
Hamermesh, Daniel S. and Soos, Neal M (1974) An economic theory of suicide, Journal of
Political Economy (January-February)
Hirschman, A. O. (1984), Against Parsimony: three ways of complicating some categories of
economic discourse, American Economic Review, vol. 74 (papers and proceedings), pp. 89-96
Hirschleifer, J. (1985), The expanding domain of economics, American Economic Review, vol.
75, pp. 53-68
Hounthakker, H. S. (1961), The present state of consumption theory, Econometrica, vol. 29,
Marr, W. and Raj, B. (eds.) (1983) How Economists Explain. Lanham: University Press of
Rosenberg, A. (1979), Can economics explain everything?, Philosophy of the Social
Sciences, vol. 9, pp. 509-529
Stigler, G. J. (1984), Economics: the imperial science?, Scandinavian Journal of
Economics, vol. 86, pp. 301-313
[Note for bibliographic reference: Melberg, Hans O. (1998), Definitions of
economics: A short and uncritical introduction, www.oocities.com/hmelberg/papers/981123.htm]