Adam Smith's definition of Economics | Criticisms and Classical school of thoughts

In 1776, a Scottish economist and philosopher Adam Smith wrote a book (The wealth of nation), in which he defines the subject economics as "An inquiry into the nature and causes of the wealth of nations" in particular ways . In this book he discussed and specified the word "wealth" through its four aspects . Wealth means good and services transacted with the help of money.

1. Production of Wealth Production of wealth; it shows as to how goods and services are produced by combination of four factors of production i.e.

• Land; It is natural resources such as soil, sea, minerals, livestock, and forest, etc.
• Labor; It is the mental or physical work which is done for the sake of reward.
• Capital; Capital means all Man-Made things which help us in further production of goods and services.
• Organization; It is the act of combining four factors of production to produce goods and services for the sake of profit.

2. Exchanged of Wealth; there are many producers of goods and services in a society. Every producer produces goods and services more than his personal requirements. Therefore, the exchange of wealth enables everyone in the society to satisfy his multiple wants.

3. Distribution of Wealth Distribution of wealth; which means the distribution of goods and services among different sections or individuals of a society. As known by explanation of exchange of wealth that producers of goods and services, exchange the surplus goods and services with each other through out the year.

4. Consumption of Wealth; consumption of wealth that is using up the utility of goods and services for the satisfaction of wants is called consumption of wealth.

Criticisms on the definition of Adam Smith

During the late of 18th century religious sentiments of the people were very strong and spiritual values held sway over man's mind and it was difficult for them to accept economics 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 better", "a dismal science" and "a pig Philosopher".

According to them, it promotes selfishness and greed among the people. They taught that if economics was taught , the science of materialism will take mankind away from spiritualism. The follow are some crits on the Adam Smith's definition...

1. Restricted Meaning of Wealth; in Adam Smith's wealth-oriented definition, the meaning of wealth is restricted because only material goods were considered as wealth. Non-material goods like services of doctors, lawyers, and teachers etc. were not considered as wealth. This restricted meaning of wealth has restricted. The scope of the study of economics.

2. Neglect Human Welfare; during the late part of 19th century, the economists started realizing the humanistic character of economics. It was visualized that wealth is only a means to an end. Therefore, Some economist severely condemned Adam Smith wealth definition which gives too much importance on wealth and completely ignored human welfare.

3. The Concept of Economic Man; the concept of economic man is criticized by Marshall and Pigou. They believed that economic man who works for selfish ends alone is not found in real life.

4. Ignores the Problem of Scarcity and Choice; this definition by giving too much importance to wealth has completely ignored the problem of scarcity and choice.

5. A Materialistic Definition; Ruskin and Carlyle criticized this definition as it gives too much emphasis to wealth and neglect other humanitarian and social welfare aspect of man. Ruskin and Carlyle called Economics as a "Bastard Science".