“When time and means for achieving ends are limited and capable of alternative application and the ends are capable of being distinguished in order of importance, then behavior necessarily assumes the form of choice.”-Robbins.
Robbins not only criticised Marshall’s definition and other welfare definitions of economics but also provided a new definition which he considered to be more scientific and correct. He has given this definition in his famous book “Nature and Significance of Economic Science” which he brought out in the year 1932. According to Robbins, economics studies the problems which arise because of the scarcity of resources. Nature has not provided mankind sufficient resources to satisfy all its wants.
Therefore, the people have to choose for satisfaction of which wants the resources are to be utilised. Thus, according to Robbins, economics is the science of scarcity and it studies how the scarce resources are allocated among their different uses. Thus, he has defined economics in the following words: “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”
This definition is based upon the following three facts:
1. Unlimited Wants:
The first fact on which Robbins’ definition is based is that man’s wants are unlimited. In this definition ends imply wants for which the man uses resources. That man’s wants are unlimited is a very important and fundamental fact of economic life of the people.
If man’s wants were limited, then no economic problem would have arisen. But in the real life of the people there is no end and limit to their wants; when one want is satisfied another crops up. An important thing to know about wants is that all are not of equal intensity; some are more intense than others. It is because of the different intensities of the wants for goods and services that people are able to allocate the scarce resources to satisfy some of their wants.
2. Scarce Means:
The second element which gives rise to economic problem is that resources are scarce in relation to wants. If the resources like wants were unlimited no economic problem would have arisen because in that case all wants could have been satisfied and there would have been no problem of choosing between the wants and allocating the resources between them. Because the resources are in a fact scarce all wants cannot be satisfied.
Therefore, human beings have to decide for the satisfaction of which wants the resources should be used and which wants should be left unfulfilled. It should be noted that means or resources here refer to natural productive resources, financial resources, man-made capital goods, consumer goods, time available with man, etc.
If the means or resources were unlimited then we would have obtained goods in the desired quantity because, in that state of affairs, goods would have been free goods. But in actual life we cannot obtain goods free of cost or without price; we have to pay price for them and do labour to obtain them.
3. Alternative Uses of Means:
The third fact on which Robbins’ definition is based is that resources or means have various alternative uses. In other words, the resources can be put into various uses. For instance, coal can be used as a fuel for the production of industrial goods, it can be used for running trains, it can be used for domestic cooking purposes and for so many other purposes. Likewise, financial resources can be utilised for the production of consumer goods, for the production of capital goods and for so many other goods.
It has to be decided for which uses the resources have to be allocated. The man or society has therefore to choose the uses for which resources have to be employed. If the resources would have one use only, then the question of choice would not have arisen at all. In the case of single uses of different resources. They will be employed for the uses for which they are meant. It is because of the various alternative uses of the resources that we have to decide which would be the best allocation of resources.
We thus see that Robbins’ definition stands on the above mentioned three facts, namely, unlimited wants, scarce resources and alternative uses of them. According to him, economics studies human behaviour in regard to how he satisfies his wants with the scarce resources. According to him, economics is a human science and not a social science; it studies man in a society as well as without a society when he is confronted with the problem of allocating scarce resources to satisfy his wants.
An important thing to note about Robbins’ definition is that he does not draw distinction between material and non-material commodities, between welfare and non-welfare activities. According to Robbins, economics studies man’s activities in regard to all goods and services, whether they are material or immaterial, provided they satisfy the wants of the people.
Besides, whether the goods and services are conducive to human welfare or not, economics would study them if they satisfy the wants of some men. It is also worth noting that in view of Robbins economics does not deal with the question as to what ends should be achieved i.e., what wants should be satisfied and what not because in this regard man himself has to decide. Economics itself does not make a choice.
Economist only tells in what ways the given ends or wants can be achieved with the minimum possible resources. What ends or wants have been selected for satisfaction is no concern of economics. Whether the ends chosen by man are good or bad, noble or ignoble, economics would study them because the task of economist is not to praise or condeon but only to analyse and explain. To decide about the desirability or otherwise of a thing is beyond the scope of economics. Therefore, according to Robbins, economics is neutral between ends.
It follows from the definition of Robbins that economics is a science of choice. It deals with how the resources of society should be allocated to the satisfaction of different wants. Whenever the resources are scarce and the wants are many the question of choice arises. The man has to choose between the wants to which resources are to be allocated.
Thus Robbins remarks, “When time and means for achieving ends are limited and capable of alternative application and the ends are capable of being distinguished in order of importance, then behaviour necessarily assumes the form of choice.” It is thus clear that economics is the science of choice.
Like Robbins many other economists have also defined economics in terms of scarcity of resources and choice. Thus Wicksteed says that economics is a “study of those principles on which the resources of a community should be so regulated and administered as to secure communal ends without waste. Likewise, G.J. Stigler defines economics in the following words “Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of allocation is to maximise the attainment of the ends.
Similarly, Scitovosky says, “Economics is a social science concerned with the administration of scarce resources” Professor Erich Roll has also defined economics in terms of scarcity of resources and choice. Thus according to him, “The economic problem is essentially a problem arising from the necessity of choice; choice of the manner in which limited resources with the alternative uses are disposed of. It is the problem of the husbandry of resources ….economics studies the activity of husbandry.”
It is thus clear that after Robbins economics has assumed character of the science which is concerned with the scarcity of resources and the problem of choice which arises because of the scarcity. Robbins’ definition has been claimed to be more scientific. It has broadened the scope of economics whereas the material-welfare definition had narrowed down the scope of economic study.
Moreover, with this definition which lays stress on scarcity of resources and the problem of choice, economics can no longer be called dismal science. Economics has no responsibility about the choice of ends. Ends may be good or bad, economics has no concern with it. When the ends are many and resources scarce the science of economics is required to study this problem.
A Critical Appraisal:
No doubt Robbins has made economics a scientific study and his definition has become very popular among the economists. This definition brings to light the basic economic problem which confronts the society. But Robbins’ definition has also been criticised on several grounds. The main charge against Robbins is that he has made economics quite impersonal, colourless and devoid of any normative element. He says, equilibrium is just an equilibrium.
He does not seek to make economics a study of welfare. Therefore, many economists like Durbin, Eraser, Beveridge and Wootton have tried to defend Marshall’s idea about the true scope of economics and its objective of promoting social welfare. Thus, Wootton has said that “It is very difficult for economists to divest their discussions completely of all normative significance.”
Economics is an instrument of Promoting Social Welfare:
It is not justified on the part of Robbins to oppose making economics an engine of social welfare. In fact, it has been contended that even in Robbins’ definition itself the idea of welfare is present. If we closely analyse the Robbins’ definition we would come to the conclusion that it says that economics is concerned with how a man and society use its scarce resources so as to achieve maximum possible satisfaction of human wants.
But this maximum satisfaction of wants is nothing else but maximum welfare. Robbins’ definition implies that allocation of resources to the satisfaction of wants has to be made in such a way that maximum satisfaction is achieved. Thus, without the satisfaction or welfare being brought into consideration the question of allocation of scarce resources does not arise. Thus, it is not correct on the part of Robbins to assert that economics is neutral between ends.
Many economists are of the view that if economics has to be made a means of promoting social welfare and economic growth it has to give its decision what is good and what is bad to achieve these ends. In other words, if economics is to serve as an engine of social betterment, then it would have to abandon the neutrality between ends or objectives. Economist would have to tell what is good or bad for welfare and progress and what steps should be taken to attain these ends. Thus, in the opinion of Robbins, that economists should eschew the term welfare from the scope of economics is quite uncalled for. Thomas rightly remarks, “The function of the economist is not only to explain and explore but also to evaluate and condemn”.
Economics is a Social Science:
As noted above, Robbins viewed economics as a human science and not a social science. In one sense the scope of economics has been unnecessarily widened by Robbins. In accordance with Robbins’ view economist would also study a sadhu who lives in a cave of Himalaya because that sadhu would also be faced with the problem of how to distribute his time between various ends.
That is, a sadhu has also to face the problem of choice and therefore comes within the purview of Robbins’ definition. But many economists are of the view that economics is a social science and it should study the problem of choice when it has a social aspect i.e., when a man’s choice affects other members of the society.
Therefore, many economists though laying stress on the scarcity of resources and the problem of choice have described it as a social science and not a human science as Robbins treats it. Thus, Sictovosky defines economics as “a social science concerned with the administration of scarce resources.” Likewise, according to Cairncross, “Economics is a social science studying how people attempt to accommodate scarcity to their wants and how these attempts interact through exchange.” It is thus clear, contrary to the views of Robbins, economics has been regarded by many economists as a social science. Economics studies the problem of choice if it has social implications.
Economics is more than a study of Resource Allocation:
A serious objection against Robbins’ definition is that it has reduced economics to a mere value theory. In other words, economics has to study only how the prices of goods and factors are determined and consequently how the allocation of resources to the production of various goods is decided. But the scope of economics is wider than the allocation of resources and the price theory.
These days the importance of macroeconomics has increased in which we study how the national income of country and its total employment are determined. But the determination of national income and employment does not fall within the purview of Robbins’ definition which only lays stress on the allocation of resources. The history of western economies has revealed that there has been great instability in them.
There has been periodic occurrence of mass unemployment and depression. On the other hand, at other times, these economies have encountered the problems of boom and inflation. It is the task of economics to explain this instability and short-run fluctuations in the levels of income, prices, output and employment. But Robbins’ definition leaves this untouched. It is thus clear that macroeconomics which has become more important these days does not come within the purview of Robbins’ definition.
Robbins’ definition also does not cover the theory of economic growth and development. The theory of economic growth and development studies how the national income and per capita income of a country increase over a long period of time and what factors cause such increases. With economic growth productive capacity of the country expands which brings about an increase in national income, per capita income and level of employment.
While Robbins takes the resources as given and talks about their allocation, the theory of economic growth implies how to minimise the problem of scarcity by expansion of capacity to produce more goods and services. In developing countries the question of economic growth is more important because these countries are making efforts to remove poverty from their people and to raise their living standards through economic growth.
In the recent years, many theories regarding how to initiate economic growth and also how to accelerate it in the developing countries have been propounded. The theory of economic growth has become the core of the science of economics both in the developed and. developing countries. Robbins’ definition is defective because it does not cover an important subject like economic growth.
Joan Robinson’s Critique of Robbins’ Definition:
A prominent British economist, Joan Robinson has asserted that the existence of involuntary unemployment at times of slump, as occurred in the early thirties and explained by J. M. Keynes, contradicts the principle of scarcity and choice which Robbins considered as the subject of economics.
According to her, the existence of involuntary unemployment of labour on the one hand and the idle capital stock of the other in the situation of depression represent indeed the situation of abundance of resources in the sense that we do not have to forego one thing in order to have another since with the use of unemployed and idle resources we can produce some goods more without sacrificing others provided there is sufficient demand for them.
Referring to Robbins book “Essay on the Nature and Significance of Economic Science” wherein he described economics as the subject that deals with the allocation of scarce means between alternative uses. Joan Robinson writes, “By the time the book came out there were 3 million workers unemployed in Great Britain and statistical measure of GNP in USA had recently fallen to half its former level. It was just a coincidence that the book appeared when means for any end at all had rarely been less scarce.
Defending Robbins definition against the onslaught of Joan Robinson Late Prof. A. K. Dassgupta writes, “Keynesian involuntary unemployment does by no means suggest a failure of the scarcity postulate; it is due, on the other hand, to one of those vagaries of the capitalist system which segregates the act of investment from the act of saving.
He further writes, “the abundance that Keynesian economics denotes is an apparent abundance, not real. The fact is that even at the depth of depression labour is paid a wage and capital earns interest. Keynesian involuntary unemployment, far from being a sign of the failure of the scarcity principle, is rather to be explained by a feature of the capitalist system”.
In view of the present author Prof. A. K. Dassgupta misses the real point in Joan Robinson’s criticism of Robbins definition of economics. The real import of Robinson’s critique of Robbins’ definition is that the nature of the basic economic problem faced in the period of slump was not one of scarcity of resources and their allocation among alternative uses, but of the use of massive amount of idle and involuntarily unemployed human and capital resources in the economy.
These resources were lying idle because investment in a private enterprise economy was lacking not because of scarce resources or small savings but due to the deficiency of effective demand for goods which lowered the expected rate of return from investment.
Thus, if the purpose of economic theory is to raise relevant questions and provide answer to them, economics of Robbins’ definition which concerns itself with only allocation of scarce resources among alternative ends did not cover the paramount economic problem, namely, the existence of involuntary unemployment on a massive scale faced by the private enterprise economy at times of depression.
In our view the significance of the economic problem highlighted by Keynes lies in describing that massive unemployment of labour and gross underutilisation of capital stock at times of depression is not due to the supply-side factor, namely, the scarcity of resources but due to the fact that economic system failed to generate sufficient effective demand to ensure full employment of resources.
The investment was lacking not because of scarce savings but due to the deficiency of effective demand for goods, the expected rate of profits on the new investment was not enough to ensure the amount of investment equal to the saving gap corresponding to full employment level of national product.
We therefore agree with Joan Robinson that the economic problem facing a private enterprise economy at times of depression underwent a sea change; it was of a different nature from the problem of allocation of scarce resources among alternative uses and required an answer different from the economic theory described by Robbins’ definition.
In defense of Robbins’ definition Late Prof. A. K. Dassgupta further argues that the theory of growth involves a choice of resource allocation and therefore can be described within the framework of Robbins’ definition. According to him, growth is essentially a choice between the present and future output and consumption.
Thus, according to Neo-Classical economics as defined by Robbins, economic growth depends upon rate of investment which is governed by saving. Therefore, how much to grow depends upon how much to consume out of current national income and how much to save for investment purposes so as to expand production and consumption in the future.
To put in terms of physical resources, the decision regarding saving and investment implies how much of the available resources should be allocated for the production of consumer goods and how much for making capital goods. And, the greater the amount of resources devoted to the production of capital goods, the greater the rate of growth of output.
Thus, Prof. A. K. Dassgupta writes, “it is not true that the theory of growth eschews choice. It very much involves choice. Is not the problem of growth one of allocation of scarce resources among outputs at different points of time? And, is not such allocation a function of the relation between current output and future output? Growth rightly understood is essentially an extension of allocation problem to cover time.”
However, in our view, the scarcity of resources and the choice about their optimum allocation, between the present and future does not tell the full story of economic growth. There is no dispute about the fact that economic growth in an economy to an extent depends on investment but whether investment is determined by the savings as Prof. Dassgupta and other economists who view the process of growth as an allocation of scarce resources between the present and future is a doubtful proposition.
In fact, Keynes and his followers such as Joan Robinson have argued that in the dynamics of growth it is investment that determines saving rather than the other way round. Investment depends upon expectations of profits from the sale of goods produced with the capital goods in which investment has been made and these expectations of profits from investment depend on the level of aggregate demand. Investment leads to increase in national income and, given the propensity to save, at a higher income more is saved.
As has been brought out by Harrod and Domar who extended the Keynesian short-run analysis to the long-term problem of growth that steady growth in the presently developed countries can be achieved if demand for goods is increasing sufficiently to match the expanding productive capacity due to investment that is currently taking place.
Thus, the sustained and steady growth in the present-day industrialised countries is not merely a problem of allocation of scarce resources between the present and future but also hinges on whether adequate demand for goods is forthcoming or not. This is not to deny the crucial importance of scarcity of resources and the need for its proper allocation among products and between the present and future. What is being suggested is that this does not tell the whole story about economics; the demand side of the problem is also important.
Likewise, in developing countries in the initial years of planned development the growth of GNP was described as the prime objective and for promotion of growth stress was laid on raising the rate of saving so as to mobilise scarce resources for investment. However, the experience of six decades of development in these countries reveals that, as in developed countries, the growth in the developing countries can also be constrained by effective demand apart from scarcity of resources for investment.
Further, it has now been realised that economic growth in developing countries is not function of investment in capital alone but also depends on technological progress, expansion in education and health care, and institutional changes such as land reforms in agriculture.
Moreover, the real problem of developing countries is not merely to generate and promote high growth rate in GNP but also to eradicate mass poverty and chronic unemployment. Thus raising the rate of saving and allocating scarce resources efficiently to generate higher rate of economic growth is necessary but not a sufficient condition of eliminating mass poverty and large-scale chronic unemployment.
Of course, in the fifties and sixties it was widely believed that benefits of growth would trickle down to the poor and unemployed and therefore once growth takes place, the problem of poverty and unemployment faced by the developing countries would automatically be solved. This has been belied by the actual experience. For removal of poverty and unemployment what is required is not only the growth of output but also of what is being produced and how the output is being distributed.
Thus, Joan Robinson writes, “But a growth in wealth is not at all the same thing as reducing poverty. A universal paean was raised in praise of growth. Growth was going to solve all problems. No need to bother about poverty. Growth will lift up the bottom and poverty will disappear without any need to pay attention to it. The economists who should have known better, fell in with the same cry.”
To sum up, Robbins’ definition which lays stress on allocation of scarce resources to meet various ends does not fully bring in its ambit the problems o/growth, poverty and unemployment faced by the developing countries like India. For a long time Robbins’ definition was accepted as a proper one but nowadays it is felt that Rabbins’ definition does not indicate adequately the content, scope and the subject-matter of economics.
As we have pointed out above, Robbins’ definition does not cover the theory of income and employment determination as well as the theory of economic growth. According to Charles Schultze of the University of Maryland, “Robbins’ definition of economics is misleading, in particular it does not fully reflect two of the major concerns of modern economics, namely, growth and instability.
Economic is What Economists Do:
However in recent years economists have stopped discussing the problem of giving proper definition of economics and the controversy regarding its proper and adequate definition has almost stopped. Many modern economist think that for explaining what economics is about, there is no necessity for defining it. What economics is about can he better understood by knowing subjects with which economists have been concerned and with which they are concerned today.
Therefore, Professor Jacob Viner has remarked,” Economics is what economists do. “This means what economists is about can be better understood from knowing the questions which economists have raised and discussed. What economics is about can therefore be better understood from the study of its subject-matter. We have discussed above the various questions and issues with which economists are concerned.