FEATURES OF ECONOMIC LAWS
Economic laws possess the following important features or characteristics.
1]. Economic laws are not exact
Economic laws are less exact and less definite than laws of natural sciences like physics chemistry etc. as they deal with human beings having a free will. However they are more exact than laws of other social sciences as they can be measured in terms of money.
2].Economic laws are indicative rather than assertive
They are subject to assumptions or conditions. If these conditions are absent economic laws will not operate. Laws of physical sciences are assertive & not subject to any conditions.
3].Economic laws are general not universal
Laws of natural sciences are exact and universal not general ie They do not change from time to time, place to place& person to person. They are applicable to all people at all times in all places. for eg. the sun rises in the east & sets in the west this will never change. These laws are universal in nature
Economic laws are statements which are true only in general. eg. more will be bought at a lower price is generally true but not universally true, as some may buy the same amount due to habit or buy more to help a friend etc. Therefore economic laws change from time to time, place to place& person to person. They need not be applicable to all people at all times in all places. Such cases are however a small transaction of total transactions of human beings thus economists ignore it as exceptions & frame their laws on the expectation that men’s actions in the great majority of cases follow a uniform pattern.
4] Economic laws are generalizations and tendencies
Economic laws relate to a course of human actions in a given set of circumstances. They are based on assumptions they are not universally true and they are less exact. They do not represent any settled any conclusions.
Economic laws deal with human actions under given conditions & assumptions, they ignore exceptions & therefore are generally (not universally) true, They are generalizations of human actions or also known as statements of tendencies as they affirm how under given conditions & assumptions human beings tend to behave.
5].Economic laws are positive not normative
They describe conditions as they are & bring out the generalisation of the subject as they are, not as they ought to be. They do not set any norms or ideals.
6].Economic laws are hypothetical or conditional.
Any economic law begins with the term `other things remaining constant…’(ceteris paribus) we assume that other things are constant or do not change i.e. we form a hypothesis on the assumption that other things do not change. The three main eco assumptions are,
a) Rationality-i.e. maximisation of satisfaction (eg utility, income from work, etc) & minimisation of loss.
b) Assumptions about the institutional set up with in which decisions are taken eg. free market economy etc.
c) Assumptions to each law eg law of demand (we assume income, taste, habits etc remain constant), law of supply etc.
Other sciences also have laws hypothetical in nature but in their case the other conditions can be specified eg in physics bodies do not fall towards the ground-according to the law of gravity-if there is no atmospheric pressure.
In case of economics these conditions cannot be measured eg `other things remaining constant demand varies inversely with price’ is unrealistic as everything changes with time—income, tastes habits etc may change actual human behavior and market behavior & influence demand even if price does not change.
As Oscar Lange remarks, “economic laws are historically limited”. This is due to the impact of social, political, religious etc institutions.
7].Economic laws are causal relationships
Economic laws are causal relationships (like all other laws) between two phenomenon (economic phenomenon in this case), one of which one is the cause & the other the effect.eg law of demand is a causal relationship between price (cause) & demand (effect).An economic law therefore indicates a consequence due to a particular change in an economic phenomenon under given conditions.
8].Predictions in economics are not very accurate
Since economic laws are generalisations or statements of tendencies & hypothetical in nature they do not provide accurate predictions. In case of natural sciences, physics for example. simple & exact laws of gravitation enables astronomers to make accurate forcasts.
According to Dr Alfred Marshall,”laws of economic can be compared with the laws of tides rather than the laws of gravitation as in physics.”According to the laws of tides, tides are formed twice a day under the influence of the sun & the moon. They also tell us when to expect a high or a low tide. However they cannot predict the exact strength of the tide as it is affected by changes in other factors like heavy rains, strong winds etc.
Therefore economic laws are like the laws of tides they are` probabilities’ i.e. due to unexpected factors or influences people’s reactions differs from time to time & place to place.
9] Economic laws are influenced by dynamic changes
The economic world is a dynamic one therefore economic laws change from time to time, place to place and person to person.
Usually laws are enforced under static conditions.
10].Economic laws have a prognostic value
Economic laws are probabilities that explain aggregate social behavior. When we study the process of consumption, production or distribution we cannot take note of all individual peculiarities. Though economic laws are less exact than laws of natural sciences, it is far more exact than other social sciences as According to Dr Alfred Marshall, “motives of men in business life can be measured in terms of money.” .i.e.in quantitative terms. Though economic laws cannot be compared to the laws of gravity, prediction is possible under given conditions therefore economic laws have a prognostic value.
11].Quantitative measurement is possible
Economic phenomenon cannot always be stated in quantitative terms eg fall in price leads to a rise in demand but the extent of a rise in demand cannot be predicted. Economics however has one advantage over other social sciences. In economics acquiring money is man’s main motive. Therefore all economic activities can be measured in terms of money like costs, profits etc.
In other social sciences, for eg. Political science the intensity of public opinion over a controversial issue can be visualised not measured. In Economics costs profits demand etc can be expressed in terms of money – a producer thinks in terms of profits, a worker in terms of wages, a consumer in terms of price etc.
Therefore inspite of its limitations economic laws are largely applicable to the real world.
12].Economic laws are concerned with a group i.e economic laws are concerned with an individual as a member of a group. Group behaviour can be fairly well predicted for in a group, individual peculiarities tend to counter balance each other.
13].Economic laws are axiomatic (self-evident).Some economic laws are as true as laws of natural sciences eg. the law of diminishing marginal utility, principal of capital accumulation which involves a fact that income must exceed consumption expenditure. etc.
14].Economic laws are not obligatory. They do not impose any conclusions as in case of statutory laws. Non-observance of eco laws, unlike non-observance of statutory laws, is not punished. Statutory laws differ from time to time & state to state, economic laws are more universal in character as compared to statutory laws.
15].Economic laws differ from physical laws which deal with inanimate matter which can be experimented on. Physical laws are objective generalizations as they can be experimented on.
Economic laws deal with human behaviour which is difficult to experiment on & therefore one has to wait for the experiment to take place. Rational elements in society do not conform to economic generalisations therefore economic laws are not exact but statements of tendencies.
16]. Economic laws differ from ethical laws i.e. they have no ethical significance. Ethical laws lay down principles of good\bad conduct, right\wrong etc. If we fail to abide by these laws, society looks down upon us with contempt. Economic laws explain the behaviour of rational individuals under certain economic conditions. It is therefore not necessary for people to abide by them eg. if price rises an individual buys more he is not socially condemned.
17].Economic laws are subjective as they are influenced by subjective elements eg. the observer himself maybe the subject.
18]. Economic laws are useful in making policies. The validity of economic laws depends on the validity of basic postulates. If the basic postulates are valid laws based on them are also valid & therefore useful in making policies.
However one may also add at this point that with increased application of statistical methods to economics, economic laws are beginning to lose a certain amount of uncertainty & are becoming more predictable. With better tools of inquiry & research it is hoped that economics will become a more exact science.