Economics Has Several Different Definitions

The most basic of these saying that economics is a 'social science'. Paul Samuelson, Nobel laureate in economics in 1970, defines economics as how a person or society meets its unlimited needs and wants through effective allocation of resources. Some other definitions of economics include " Economics is a social science that deals with the study of human behaviour as a relationship between ends and scarce means which have alternative uses", Lionel Robbins, British economist. "Economics is the study of mankind in the ordinary business of life; it examines that part of an individual and social action which is most closely connected to the attainment of and the use of materials requisites of well-being", Alfred Marshall, (hubpages.com) When studying economics, it is important to know the economists that have shaped modern eonomics. Such figures include Adam Smith, Alfred Marshall, Milton Friedman, John M. Keynes and Karl Marx. All of these men had different views on different economic policies. However they all contributed heavily in the foundation of modern economics. In this essay, I hope to acknowledge their contributions and show some detail on their individual lives.

Adam Smith (1723-1790) was born in Kirkcaldy, Scotland. When he was fourteen he attended the university of Glasgow and also attended Balliol college at Oxford. He graduated with an extensive knowledge of european literature. He returned home and after a series of well recieved lectures was made first chair of logic in 1971 and then chair of moral philosphy in 1972 in Glasgow university, (econlib.org). Smith was involved in classical economics. In Smith's time, a country's wealth was judged by how much precious metal they had. For this reason, imports were not favoured as this meant that these metals would be leaving the country while exports were seen as positive due to the metals they would recieve in return. Smith however that this trade benefitted both parties involved. He said that imports were just as valuable to them as exports were to others. Smith also stated that a nation's wealth was not just the amount of precious metals in its vaults but its total product and commerce also,(adamsmith.org). Smith's most influential contribution to economics was possibly his book, The Wealth of Nations. In this book Smith explained that the persuit of self gain and the stimulation of competition would prove to boost an economy. At this time Smith's ideas were considered controversial. Although Smith is considered one of the founding fathers of economics, some believed that his ideas were unorginal. Joseph Schumpeter says "His very limitation made for success. Had he been more brilliant, he would not have been taken so seriously. Had he dug more deeply, had he unearthed more recondite truth, had he used more difficult and ingenious methods, he would not have been understood. But he had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along."

Smith's contributions to economics were;

1. Canons of Taxation

2. Division of labour

3. The invisible hand

The Canons of Taxation were : "(i) The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is in proportion to the revenue which they respectively enjoy under the protection of the state. (ii) The tax which the individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor and to every other person. (iii) Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. (iv) Every tax ought to be so contrived as to take out of the pockets as little as possible, over and above that which it brings into the public treasury of the state, (economictheories.org). The Division of Labour was another concept of the Wealth of Nations. The idea is about the specialisation of labour, which turns each worker into an expert in their area which inturn makes them more efficient at this job. This saves time and improves production levels from that ares of the business. This also saves time as workers do not have to switch tasks in the middle of the day. Smith said that productive labour leads to the production of tangable objects and that it must create a surplus, (victorianweb.org). Smith's other idea has the invibible hand. Investorwords.com says that this was the term used by Smith to describe the natural force that guides free market capitalism through competition for scarce resources. According to Smith, in a free market, each perticipant will try to maximise self interest and the interaction of market participants, leading to the exchange of goods and services, enavles each participant to be better off than if they were just providing for themselves. He also said that, in a free market, that no regulation should be needed to ensure that the mutually beneficial exchange os goods and services took place since the 'invisible hand' would guide market participants to act in the most benefitial way.

Alfred Marshall (1842-1924) was born in London. He was known as a neoclassical economist and he specialised in microeconomics. His major contributions were his ideas of

1. Supply and Demand

2. Marginal Utility

3. Costs of Production

The law of supply states that the quantity supplied will rise with rising market prices and fall with falling prices. Demand is the opposite. It is a function of a market to find its equilibrium between the two. An equilibrium price is one at which each producer can sell all he wants to produce and each consumer can buy all he demands. "Naturally, producers would always like to charge higher prices. But even if they have no competitors, they are limited to the law of demand: if producers insist on a higher price, consumers will buy fewer units. The law of supply puts a similar limit on consumers. They always would prefer to pay a lower price than the current one and if they succeed in having to pay a lower price, suppliers will produce less and some demand will go unsatisfied, (econlib.org). Also important is the demand and supply curves. These curves are used to show the contradicting