Economic Laws Nature

Economic Laws Nature

Theory of Economics >> Microeconomics Help

Economics is a science and like other sciences it also has its laws. Economic laws are also known as general is action principles and uniformities. The economic laws describe how a man behaves as a producer and a consumer. The economic laws are also concerned with how the economic system works and operate. Main the economic life produces wealth consumes wealth exchange it with others. Therefore economic laws have been framed which govern production consumption and exchange of wealth by men. Besides economic laws are also concerned with how the national product profiled is distributed and how the level of income and employment are determined lastly economic laws also describe growth of the economy as well as international trade between the various countries of the world. In fact economic laws have been framed in all fields of the subject matter of economics namely consumption production price determination, determination of income and employment growth of the economy foreign trade etc. among the important laws of economics mentis on may be made of law of diminishing marginal utility law of variable proportions or diminishing return Keynesian psychological law of consumption the principles of multiplier ad accelerator Malthusian law of population law of comparative advantage.

Economic law as mere statements of tendencies

The nature of economic laws has been a subject of controversy. Marshall though that the laws of economics are not exact and definitetheyae mere statements of tendencies according to him this is unlike the laws of physical sciences which are quite exact precise and definite because of the exactness and definiteness the laws of physical sciences can predict the course of events. But laws of economics lack this predictive value. Laws of economics are conditional and are associated with a number of qualifications and assumptions and these assumptions and qualifications are generally contained in the phrase other things remaining the same or ceteris paribus which is attached to every law and theory of economics. But in the real worked these other things generally do not remain the same because the economic world is dynamic and ever- changing. For example according to the law of demand when price of a commodity rises, its quantity demanded by the consumer will fall but fi along with the rise in price of the commodity income of the consumer increases then the consumer may demand more of the commodity even at the higher price. This seems to be contrary to the law of demand but in fact this is not so because the law of demand assumes that other things such a income tastes and prices of the related goods remain the same and in our case this qualify Cation has to been fulfilled because income of the consumer has increased. Law of demand will hold good only if other things such as income tastes and preferences the prices of related goods remain constant and unchanged.

Scientific nature of economic laws

Laws of economics are of scientific nature. All scientific laws establish relationship between cause and effect. Economic laws also establish relationship between cause and effect about economic begaviour of man and economic phenomena. If we observe man in using his scarce resources to satisfy his unlimited wants then we will see that he behaves in a particular manner. By observing the behaviour of several people economists have established certain generalization or general principles which are called economic laws. Therefore these economic laws are general tendencies of man behaviour in his economic life. Therefore economic laws are related to economic life of man. In his economic life man produces wealth and consumes it decides the distribution and exchange of wealth also affect the economic life of man. Economists have made several laws regarding production consumption distribution and exchange of wealth. Like other scientific laws economic laws also establish relationship between cause and effect. For example according to the law of demand when price of a commodity fall sits quantity demanded increase other things remaining the same. Here the fall in the price is the cause and the rise in quantity demanded is the effect law of diminishing marginal utility describes that as a man has more units of a commodity is the cause and the fall in marginal utility is the effect. This holds goods in case of other economic laws also.

It is thus clear that economic laws are hypothetical and conditional. But this does not mean that economic laws are not scientific or that they are useless. As a matter of fact, al scientific laws are conditional. The famous scientific law of gravities a is also conditional. According to the law of gravitiaotn when any commodity is thrown in the air, then it falls down to the ground. This is because the earth has the power to attract and pull the rings to itself. But this famous scientific law also depends upon the fulfillment of certain conditions. The condition for the law of gravitation to apply is that no opposing forces obstruct the commodity form falling to the ground. We often see that aero planes bird’s balloons etc. fly in the air and don t fall to the ground. Due to the working of these opposing forces law of gravitational does not apply in this case. Therefore law of gravitation also applies when the opposing forces do not operate. Take another example of a scientific law form the skied of chemistry. According to a well – known law of chemistry water is formed if two atoms of hydrogen are mixed with two atoms of hydrogen and one atom of oxygen udder certain conditions of temperature and pressure. Thus all scientific laws hold good under certain conditions. Therefore the fact that economic laws are conditional and hypothetical is not a unique thing. Nor does this conditional and hypothetical nature destroy the scientific nature of economic laws. Economic laws are therefore as important and useful s the laws of physical sciences.

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