Entrepreneurship, knowledge and employment

The scarcity definition of economics revisited

Schmidt Peter, University of Potsdam

This paper deals with the scarcity definition of economics. Nowadays it is perhaps the most common and accepted definition of this science. Defined by Lionel Robbins in 1932 as “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”, the definition among later economists changed to different versions of economics as ‘the social science concerned with the attempt to solve the fundamental economic problem of scarce resources and unlimited human wants’. Clearly, the more recent scarcity definitions of economics are similar but also different from the original definition given by Robbins in 1932. They are similar in terms of ‘scarce means’ but distinct to the extent that Robbins wrote about ‘alternative uses’ and not about ‘unlimited human wants’. The discrepancy between the early and later scarcity definition of economics is taken as the starting point for this paper to analyse the origins and also the transformations over time of this widely accepted definition. The paper eventually argues that at least Robbins’ definition of economics can be applied to the analysis of capitalist economies in which producers and consumers are confronted with limited financial resources they have to devote to alternative uses (goods and the means of production). Later definitions referring to ‘unlimited human wants’ confuse that it is not the desire for goods but for money which is unlimited in market economies and that human wants are always limited in themselves. Hence, these later scarcity definitions of economics define it away into a nirvana world in which humans can never satisfy their wants and in which money helps them to choose rationally among alternative uses. The latter is the analysis of market economies turned upside down but might explain why the concept of rationality is still one of the defining concepts of economics although irrational behaviour is more and more perceived as more realistic.

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Keywords: definition of economics, Lionel Robbins, scarce means, unlimited wants

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