PURPOSE AND SCOPE OF ECONOMICS 1. Economics defined.—Like any science econom ics, or political economy as it is often called, may be defined in different ways. For the practical man the simplest definition is this : Economics is the science which seeks to explain._ all business phenomeriir: Briefly, it is the science of Iiii-siness.
That definition, however, takes it for granted that the reader knows exactly what is meant by business. When we analyze the term we find that in its broadest sense business embraces all forms of human activity which have for their purpose the increase of wealth, that is to say, of all the things which men desire to possess. Viewing economics from this angle we may define it as the science which seeks to explain the phenomena incident to the production, consumption, exchange and distribution of wealth. A definition something like that will be found in the "Principles of Political Economy" of John Stuart Mill, Eng land's greatest economist. This definition is some times condensed as follows: Economics is the science of wealth. Modern economists seldom use this defi nition for the reason that the word "wealth," as we shall see later, is a popular term which cannot be de fined in a clear-cut and scientific fashion.
When we consider that all forms of human activity have for their purpose the gratification of our wants WC can quite properly define economics as the science which is concerned with all phenomena incident to man's efforts to get what he wants, especially in so far as those efforts lead him to hire the services of others or to buy and sell goods.
Whatever formal definition we accept it is suffi cient at the outset for the reader to know that econom ics is concerned with the problems of values, prices, wages, interest, rent and profits, and with the human and physical factors upon which these things de pend. These are terms concerning which every 'nisi ness'man has sonie knowledge. It is the purpose of economics to make that kno-wledge more definite, scientific and satisfactory.
2. Why economics is a seeks to understand phenornena ; it addresses itself solely to the intellect. It gives pleasure and satisfaction only
to those who love the truth and enjoy intellectual achievement.
Art aims to utilize the qualities of material objects or the faculties of human beings in such fashion as to give men pleasure or satisfaction. Its appeal is not to the intellect but to the emotions, or the senses, or the .cesthetic side of human nature. The scientist seeks to know, to understand, to explain; the artist seeks to please, and in his efforts is often assisted by the discoveries of the scientist.
Economics deserves to be called a science because it aims at an understanding of business phenomena. Just as does the physicist or chemist, the economist first classifies the phenomena which he wishes -to study and then proceeds to inquire into the causal relations existing 'between them. With him, as with every scientist, the eternal question is "why." In the com plex field of business he sees changes constantly tak ing place, prices and wages rising, interest rates de clining, wage earners striking, and he wants to know what causes these things.
His science cannot be an exact one like physics or mathematics for the simple reason that many of the causes of business phenomena are rooted in the vari able and conflicting desires of men, and these desires he cannot accurately estimate, nor can he foresee changes in them.
Why are building rents higher on Broadway than in Jersey City? Is the high rent of farm lands the cause of high prices for foodstuffs? What effect will an increase in the country's money supply have upon prices and the rate of interest? Why does a movie actor command the salary of several thousand dollars a day while a hired man on a farm can get only $30 a month and "keep"? Why is the value of a country's exports sometimes for many successive years in excess of the value of its imports of merchandise? Problems of this sort—and there are hundreds of them—are the kind over which the economist puzzles.