From birth till death, man struggles to survive
relentlessly. All throughout the life man proceeds overcoming various
obstacles. The subject, economics, helps in numerous ways to overcome these
problems or obstacles on man's path to tread upon. Economics plays a very
significant role to obtain prosperity for human, society or country. To know
and learn about economics is, therefore, important.
What is Economics?
With the development of knowledge and science, the sphere of
economics has grown as well. As a combination of the knowledge of economics
from both the past and the present, economics, as a discipline is now much
developed or enriched. Among those who have presented economics as a subject or
discipline, Adam Smith, David Ricardo, John Stuart Mill think of economics as a
science of wealth. This trend of economics is known as classical economics.
Definition of Economics Given by Adam Smith:
"Economics is a science that explores the nature and
reason of the wealth of the nations." 'Economics grows centering wealth or
resources. So, to acquire resources is the main purpose of man's economic
activities. The weakness of Smith's definition lies in: 1. how economics would
satiate man's unlimited wants by means of limited resources, there is no
mention to that in this definition. 2. Although resources have been emphasized
in this definition, man and his activities have been ignored. 3. To acquire
resources have been given importance, whereas by which means resources can be
acquired, that has not been referred to. 4. In this definition, resources stand
for goods, but there is no mention of services.
Definition of Economics Given by Professor Marshall:
Marshall emphasizes more on human welfare than resources. He
says, "Economics discusses the general activities of human life." The
prior topics of discussion of economics are income of man and the expenditure
of that money for the purpose of satisfying wants. That means, the main purpose
of economics is to accomplish human welfare. Marshall has only discussed about
the accomplishment of human welfare in real life. Nowadays, the problem of
scarcity is the main problem of economics. In Marshall's definition, this basic
problem of the humans has not been taken into consideration.
Definition of Economics Given by Professor L. Robins:
Professor L. Robins has defined Economics in a way that has
been much more acceptable. In his opinion, "Economics is a science that
analyses human behavior related to the combination of unlimited wants and
alternatively usable scarce resources." The characteristics of this
definition are as follows: 1. Human wants are unlimited and the nature and
volume of the wants are different. 2. The resource and time to fulfill the
wants are very limited. 3. One very important part of discussion of economics
is how to adjust unlimited wants by the means of limited resources. 4. As the
supply of the resources is limited, we have to try to satisfy our varied wants
with the same resources. 5. Wants are fulfilled as per their priority. For
these reasons, this definition is considered to be a more suitable one.
Criticism of the Definition of Robins:
1. Robins has observed the subject matter of economics from
an extended point of view. 2. Humans like some things in their personal and
social lives that are not discussed in economics. 3. It is not referred that
the main purpose of economic activities is human welfare. 4. The social
position of economics has not been discussed in Robins' definition. 5. The
economic development of the modern world has not been included in his
definition. 6. Robins has only discussed economics with price but skipped to
discuss national income, employment system, investment, etc. In the end it can
be said that Robins' definition is comparatively complicated. No theory in
economics is above criticism. Therefore, in spite of the flaws, the definition
provided by Robins is more acceptable.
History of development economics
Today the economics we study was not so organized in earlier
times. The way of living of humans was much simpler in ancient societies. Food,
clothing and habitation-these, only, were the basic needs of humans. The modes
of exchanging goods were very limited. Basically, physical labor was the only
means for production. During the time of the prophet Moses, that means, at
around 2500 BC, in Hebrew civilization, in religious scriptures and in the
books of philosophy, there have been some scattered discussions about
economics. Income, religion, morality, philosophy and economics were discussed
all together at that time. There was no individual existence of economics as a
discipline.
The basis of today's European civilization is constructed
upon the thoughts of the Greek thinkers, Roman laws and the Christian religion.
It was in Greece that Aristotle and other philosophers accepted the idea of
individual ownership for the first time, and individual ownership upon land had
been established. In the history of Greek civilization, Aristotle is taken to
be the first economist. Special attention has been paid on the division of
labor, business and the use of money. The Greek civilization is mainly a
civilization based on city-states. Slavery was an accepted fact at that time.
The inhabitants of the cities were mainly traders and mechanics. The English
word, economics, has come from the Greek word Okonimia. Okonomia means the
Management of the Household. Plato (427-347 BC) and Aristotle (384-322 BC) were
the two famous scholars of the Greek civilization. These two thinkers have
discussed about varied fundamental topics of economics, along with individual
property, the wages of the laborers, slavery and interest.
The Romans are known better as martial and successful state
administrators. The Romans had mainly adopted the economic guidance of the
Greeks as their own. In the Roman society, agriculture was considered as one
very great and honorable occupation. And the Roman philosophers considered
lending money at interest as a crime equal to that of murdering.
In ancient India, at 4th BC, the issues of politics,
society, economics and martial factors have been cast light upon in Koutillya's
'Political Economy'. From the last part of the 16th century till the last part
of the 18th century, (1590-1780), the expansion that occurred in international
trade in England, France and Italy, that is termed as Mercantilism. With the
target of increasing the wealth of the country, the power of the state and
making of surplus in trade, the merchants of England exported more while
imported very little. Goods produced in England were exported in different
countries of the world in huge quantities and valuable metals/minerals (gold,
silver, diamonds, etc) were imported. By the middle of the 18th
century, the French took their stance against the luxurious lifestyle of the
rich people of that country, excessive taxation, and the mercantilism of
England and propagated the tenet of Physiocracy. In the opinion of the
physiocrats, agriculture (along with mining and pisciculture) is the productive
sector. On the other hand industry and trading were considered as
non-productive sectors.
This way, during the ancient and middle ages, economics has
been discussed in a scattered way. Economics received the recognition as a
separate discipline when the British economist, Adam Smith in 1776, wrote his
famous book, "An Inquiry into the Nature and Causes of the Wealth of
Nations". The basis of today's economics is this book of Smith.
Different Economic Systems
It is the expectation of every country of the world to enhance
the welfare of the country solving the economic problems. Economic system stands
for economic laws and provisions, philosophy, rules and regulations and the environment
in which the economic activities take place. There are many economic systems in
the world.
For example,
a. Capitalist economy,
b. Socialistic economy,
c. Mixed economy and
d. Islamic economy.
Capitalist Economy
In this system, the materials of production are under individual
proprietorship and the entire economic activities are run by automated price system,
mainly by nongovernmental initiatives and without any governmental
interference. This type of financial system is termed as capitalistic economy. By
the end of the 18th century, through the French Revolution, there was the
initiation of the capitalistic economy in whole of Europe. Classical economist
Adam Smith and his followers support this system.
Characteristics of Capitalistic Economy
The major characteristics of the capitalistic economy are
given below:
1. Private Property:
In capitalistic economy, majority of the resources or the materials for production
of the society are under individual ownership. Individual exchanges or consumes
these.
2. Private
Enterprise: In capitalism maximum economic activities, e.g.- production, exchange,
distribution, consumption, etc are run by individual enterprise. Governmental interference
is not expected in these enterprises.
3. Free Competition: In
this system, many farms get involved in free competition regarding the
production of goods and services. As a result, the prices of the goods are less
and newer discoveries are possible.
4. Automatic Price
System: In capitalism the demand and supply in the market automatically
decide the price of the good.
5. Profit: the
producer, in capitalism, produces with the target of the highest profit
possible.
6. Consumers'
Liberty: Every consumer is free to buy and consumer goods according to his/her
individual choice wish and taste. The producer supplies as per the demand of
the consumer.
7. Inequality of
Income: In a capitalistic society there remains a greater inequality
between the rich and the general people in the society.
8. Role of the
Government: Government, in this system, remains occupied with the maintenance
of the law and order, protecting the state, and securing the rights of wealth.
In different sectors of economy, through mutual dependence,
the activities of the capitalistic economy are run. It is not selflessly,
rather everyone; according to their own interests perform the economic
activities.
Socialistic or Command Economy
In socialistic economy, the state holds the ownership of
maximum of the resources and factors of production in the society. State is the
owner of majority of the industries and institutions of production and they are
run by the directions of the government. The state decides which products will
be produced and in what quantity, how and for whom.
Characteristics of Socialistic Economy
1. State Ownership of
Resources: In socialistic economy, state is the owner of most of the
resources (land, industries, mines, etc) and factors of production.
2. Central Planning’s:
The state performs all the tasks alongside the production and distribution. All
the planning’s taken by the center or the state.
3. Lack of Consumers'
Freedom: In socialism, in maximum cases, the consumers consume the goods
decided by the state to be produced. No consumer can consume anything spending
money on his/her own will.
4. Lack of Free
Competition: As the production, in maximum cases is run by state
enterprise, there is no free competition between a large numbers of private
entrepreneurs.
5. Absence of Private
Profit: In socialism, instead of individual profit, production is run for
national demand and overall welfare. So, no industry is developed here by
individual or private enterprises. Agriculture, industries and trade,
everything is under the state's control, so there is no private profit.
Mixed Economic System
The economy in which individual ownership and private
enterprise exists side by side with state enterprise and control, that is known
as the mixed economy. That is, in this financial system, private and state
enterprises play a combined role. In maximum countries of the world, mixed
economy is existent.
Characteristic of Mixed Economy
In different countries of the world, the characteristics of
mixed economy are of different kinds. Usually, the following characteristics of
mixed economy are observed:
1. The Private and
State Ownership of Resources: In mixed economy an individual can freely
possess and enjoy his/her movable and immovable properties and also trade those
off. Side by side with that, the government runs the institutions that provide
the public properties (highway) and services (healthcare).
2. Private
Enterprise: In mixed economy, maximum economic activities along with
production, trading, distribution and consumption, are organized and conducted
by private enterprises.
3. State Enterprise:
In mixed economy, state enterprises are taken alongside private enterprises.
The vital/basic and heavy industries, national security and institutions that
are significantly public-related, are conducted by the state.
4. Profit: It is
possible to earn huge profits by conducting maximum economic activities in the
private sector.
5. Freedom of the
Consumer: In this system, the consumer enjoys complete freedom regarding
the trading and consuming general products. However, if the government feels it
necessary, it can influence the price of the goods and control the production
and consumption of any good as per its necessity. For example: smoking,
production of drugs and consumption, etc.
Many think of this mixed economy as a developed financial
system since pure capitalism or socialism can be found nowhere in the world.
Islamic Economic System
The economic system that is built upon the fundamental rules
and regulations of Islam is known as the Islamic economic system.
Characteristics of the Islamic Economic System:
In Islamic economic system it is suggested to use all the
resources in the world for the welfare of human kind. The characteristics of
this system worth mentioning are as follows:
1. Related to All the
Areas of Human Life: Islamic economic system discusses about all the
sectors of human life instead of any separated or partial sectors of life.
2. There is No
Discrimination in Human Rights and Responsibilities: In Islamic economic
system there is no inequality or discrimination regarding the rights, duties
and responsibilities between individual and the community. The reason behind
this is, in this system, every individual is given honor and the fullest
rights to live.
3. Conducted on the
Basis of Islamic Law: The basic principles of Islamic economies depend on
the Islamic laws. It has been told to solve the economic problems as per the
main philosophy of Islam, the direction and guidance of the Holy Quran and the Prophet
(SM).
4. The Utmost Use of
Resources for Human Welfare: In Islamic economic system, all the natural
and human resources of a country are referred to as under people's possession
and are to be utilized for people's welfare.
5. Depository
Ownership of the Resources: Regarding the use of resources, man can only
consider himself as a depositor of the Creator. For this reason, economic prosperity
and success cannot create corruption and self-indulgence in human character.
6. Interest-Free
Deposit: Islamic economy does not permit taking interests. Here the banking
system offers interest-free deposits.
7. Jakat and Fitra: In
this system, a distribution system based upon reason and logic has been propagated.
With this target, money is taken from the rich people in the form of Jakat and
Fitra and is distributed among the poor.
End
0 comments:
Post a Comment