Economics as Science of Wealth
No doubt Adam Smith is a founder of economics. The viewpoint of Adam Smith regarding the definition of economics was advocated by many other classical economists. All of them defined economics as a science of wealth. Adam Smith defined economics as a science of national wealth.
Adam Smith and the other classical economists considered wealth as the central issue of the study of economics. According to them economics studies the principles of term of the following aspects of wealth.
What is Wealth in Economics
Those material things which are produced by labor, can satisfy human wants and must have an exchange value.
Characteristics of Wealth
Wealth must have the following characteristics
- Wealth is material, we will not consider human skill and mental ability as wealth.
- It produced by labor. If we consider land have all the characteristics of except one that it is not produced by labor.
- Capability to satisfy human desire. For instance money is not wealth but a medium of exchange
- Wealth must have Exchange value
Production of Wealth
Production of wealth means goods or services produced by labor and bring to the consumers. Factors of wealth include land, labor and capital. The main goal of production of wealth is to satisfy human wants. Services directly satisfy human wants which is not include in material form.
Exchange of Wealth
Exchange of wealth refers to the transfer of goods (material goods only) from one person to another or one sector of the economy to other to maintain economic activities.
Distribution of wealth
Distribution of wealth refers to the division of production among different segments of society or among those who produced these goods and services. The factors of distribution of wealth are rent, wages and interest. Transportation charges and acquiring of wealth does not come under the umbrella of distribution of wealth but under production of wealth.
Consumption of Wealth
The ultimate aim of production, exchange and distribution of goods or services is to satisfy human desires.