According to Prof Lionel Robbins, “economics is a science which studies human behaviour as a relationship between ends & scarce
means having alternative uses.”
This definition of economics is based on the following fundamental propositions:
1. Multiplicity of ends (Unlimited ends).
2. Scarcity of means (Limited means).
3. Ends can be graded according to priority.
4. Means have alternative uses.
1. Multiplicity of ends:
Prof Lionel Robbins has used the term “ends” in his definition to indicate `wants’. Wants are the starting point of all economic activity.
In a primitive society wants were simple & few. As civilisation developed, population increased and new inventions took place wants increased. Wants became complex and many
Also when some wants are satisfied other wants take their place (recurring wants) and therefore wants are multiple, increasing and unlimited.
Satisfying all these wants is difficult. Therefore one has to choose between wants.
Thus wants are the root cause of all eco problems.
If wants were limited then all wants could be satisfied & economic problem would not arise.
2. Scarcity of means:
Human wants are unlimited. These wants have to be satisfied with consumption of goods and services. We therefore need to produce these goods and services which require “means”. Ie productive resources available for the production of goods & services, through which human wants can be, satisfied land, machinery, time, energy, money etc. These means are scarce and limited. The term “scarcity” indicates relative not absolute scarcity Scarcity of resources is a universal fact ie an individual or a country whether rich or poor cannot escape this problem.
Therefore, multiplicility of wants alone cannot create an economic problem, but along with scarcity of means to satisfy them, it creates an economic problem.
Since resources are scarce they have to be put to the best possible and economical use. We have to choose from among them according to our priority, whether to use more of land, labour, capital, electricity or coal etc. i.e. one has to economise on the use of resources.
If means like ends were unlimited there would be no economic problem as all wants (whether limited or unlimited) could be satisfied.
THEREFORE MULTICIPLITY OF ENDS & SCARCITY OF MEANS
ARE THE TWO FOUNDATION STONES OF ECONOMIC SCIENCE.
3. Ends are gradable:
Scarcity of resources imposes limitations on the ability of an individual or a society to satisfy wants and therefore the individual and society have to give up some wants and choose some wants.
Though wants are unlimitedly large in number, all are not equally important. Some wants are more important & urgent than others; Therefore wants can be arranged in a descending or diminishing order of importance/priority/urgencies on the basis of the individual’s or societies preference. This is known as the “scale of preference” which is subjective, therefore ends can be graded.
A rational person will choose few important and urgent wants for satisfaction (eg food, clothing and shelter) and less urgent wants can be rejected or their satisfaction can be postponed.
Therefore one has to choose between wants.
If all wants were of equal importance, it would not be possible to choose between them as gradation of wants would not be possible ie a rational choice would be difficult therefore there would be no economic problem.
If none of the wants were of any importance the problem of choice would not arise & therefore economic problem would not arise.
The scale of preference helps to choose between wants. All people have a scale of preference and therefore the concept of scale of preference is universal in nature.
The preference of people is different, due to which the scale itself differs from person to person and therefore is subjective
4. Means have alternative uses:
Though means are scarce they can be put to alternative uses ie
(i) One resource can be used to satisfy different wants.
(ii) One want can be satisfied by different resources.
(iii) Once this scarce resource is used to satisfy any want it cannot be reused to satisfy another i.e. it is exhaustible.
Money can be used to buy a commodity or a lottery ticket etc. 3 hours can be sent to see a cinema or read a book in the library, a piece of land can be used for cultivation, playground or building (office/residence) etc.
Since resources can be put to different uses, choice becomes difficult. Therefore the resource must be put to the best possible use. Selection of a right resource is thus another aspect of the economic problem. For this we have to apply the Mini-Max principle i.e. choose so that we minimise waste & maximise returns.
Scarce resources are not specific they have alternative uses and therefore give rise to economic problem.
If resources had specific uses ie one resource could be used only in one direction, there would be no question of selection of wants or resources, ie if water could be used only to quench thirst it will be demanded only if a person is thirsty. Therefore economic problem would not arise.
According to Robbins, all four conditions viz. multiplicity of ends scarcity of means; gradability of ends & alternative uses of means; have to be present for an economic problem to arise. If any of the four factors is absent economic problem would not arise.