Table of Contents
Like all other sciences, economics collects facts and undertakes systematic study. The facts are analyzed and conclusions are drawn. These conclusions establish a causal relationship between the concerned points. These very conclusions are called laws or generalizations.
Law means “rule of conduct.” A law expresses the causal relationship between two sets of phenomena. According to Prof. Tugwell, “A Law is a summary of observed relations.” In the words of Marshall, “The term law means nothing more than the general proposition or statement of tendencies, more or less certain, more or less definite this respect, Anatol Murad says, “Statements of similarities and uniformities among events is called generalizations, theorems or lays’.
Types of Laws
Laws may be of the different types, such as:
(1)Statutory Laws: These laws are framed and enforced by the government within the national boundaries. Citizens violating these laws are liable to be punished.
(2) Social Laws: These laws are framed by different societies in order to regulate the social life of their members, for instance, laws relating to marriages, festivals, etc. Those violating social laws are liable to be boycotted by the society.
(3)Moral Laws: These laws are framed to regulate the life of a man from the moral point of view. These laws enjoin on the people what they should do and ‘what they should not do. For example, they should speak the truth and not tell a lie.
(4) Procedural Laws: Under these laws, procedures are laid down to perform different functions smoothly. For example, rules of games; rules of examinations, etc.
(5) Scientific Laws: These laws establish a relationship between cause and effect. These laws can also be referred to as ‘generalizations. These laws state, that if such a cause takes place then such an effect is likely to follow.
Economic laws are neither statutory nor social nor moral. They are scientific laws because they establish the relationship between economic causes and their effects. For example, the Law of Demand states: When the price of a commodity rises its demand is likely to contract.” It is a scientific law because it seeks to establish a relationship between the cause (that is rise in price) and the effect (that is contraction of demand). Unlike the laws of other sciences, the laws of economics do not describe a particular phenomenon, rather they describe general features of all similar phenomena. That is why these laws are also known as generalizations
Features or Nature of Economic Laws
(1) Economic Laws are human laws: Economic laws are concerned with human behavior They are not concerned with the behavior of lifeless things. Economic laws tell about the expected behavior of such economic units as consumer, producer, employer, employee, debtor, creditor, buyer seller etc. under given circumstances.
(2) Statements of tendencies: Economic laws express tendencies. They are not exact laws. For example, the law of supply states that with a fall in price, supply is likely to fall but it does not clarify categorically that a fall in price must be followed by a fall in supply. This law simply refers to the tendency found in the relationship between ‘price’ and ‘supply’.
(3) Generalisation: Economic laws do not explain any particular phenomenon, rather they refer to the general features found in all phenomena. Law of demand does not assert that a rise in the price d petrol will be followed by a fall in its demand or a fall in its price will be followed by a rise in its demand. Th law states the relationship between price and demand for “all” things. Economic laws are concerned with ‘the average’ not with “any particular” phenomenon or event. That is why these laws are called generalizations.”
(4) Economic Laws are positive: Economic laws are positive laws. Economic laws state how men will behave under given circumstances or how they are likely to behave. Unlike statutory, moral, and social laws, economic lay does not state how a ban-myst behaves. पारकल्पित माना हुआ कल्पान (Bard on situations)
(5) Economic Laws are Hypothetical: In the words of Seligman, “Economic laws are essentially hypothetical.” In logic, a hypothetical proposition is a proposition that becomes valid if certain conditions are fulfilled. Economic laws are also valid only ‘if certain assumptions hold good Economic laws are hypothetical because they too assume the ceteris paribus clause (i.e. other things being equal). The law of demand states, other things being equal, a rise in price leads to a contraction of demand. is so because economics deals with human behavior that varies from individual to individual.
(6) Economic Laws are Abstract: Real life is very complex Every economic phenomenon is influenced by several factors, like, the price of the good, income, fashion, substitutes, time, place, etc. It is pretty difficult to study the effect of these factors simultaneously. So economists study the causal relationship between some important variables and assume other less important variables to be constant For instance, the law of demand expresses the causal relationship between the price of a thing and i demand. It assumes that there is no change in income, fashion, taste, or habit of the consumer, whereas in real life these factors do change.
(7) Economic Laws are relative: Economic laws are valid under given conditions. When these conditions undergo a change, there is a change in economic laws as well. For instance, the law of demand states that an increase in income leads to an increase in demand. But this is true in the case of demand for ‘normal goods. In case, the goods are inferior, then an increase in income may lead to a fall in their demand. Thus due to changes in the type of goods (normal or Inferior), there is a change in the effect of the law of demand.
(8) Economic laws are uncertain: Laws of natural sciences are true and certain. For instance, we can say with certainty that all solid things expand due to heat or that all things thrown up fall to the ground due to the force of gravitation. These are the laws of Physics and quite certain. But economic laws are not that certain and true. Economic laws express the probabilities. In the words of E.H. Brown, “Economic laws are inexact because they deal not with a constant, uniform and inert matter but with the changing and thinking human being.”
(9) Economic Laws are Axiomatic: There are some economic laws that do not require any of them to establish their veracity. For example, higher profits are preferred to lower profits.
(10) Some Economic Laws are Universal: Some economic laws have universal validity. For example, the law of diminishing returns and laws of demand and supply are universal laws, as they apply everywhere.
(11) More exact than the Laws of other Social Sciences: Compared to the laws of other social sciences, laws of economics are more exact, true, and perfect. It is so because economists have a measuring rod, in the form of money, to measure the economic activities of the man. Other social sciences lack such a measure. According to Marshall, ‘Just as the chemist’s fine balance has made chemistry more exact than other physical sciences, so economist’s balance, rough and imperfect, as it is, has made economics more exact than any other branch of social sciences”.
(12) Economic Laws are qualitative: Economic laws do not express the phenomenon in quantitative terms, rather they tell about the direction of their change. For instance, the law of demand does not state how much demand will extend with a given fall in its price. It simply states the likely direction of change (extension or contraction) in demand as a result of a change in price. According to Wagh. “We describe the characteristics of economic laws by saying that they are qualitative rather than quantitative, they tell the kind or direction of change that is expected rather than the amount of change”. In the words of Samuelson,” Economic Laws are probability laws, not exact relationships.”
Causes Of Less Exact Nature Of Economic Laws
Marshall is saying that economic laws are more like the laws that explain ocean tides rather than the precise law of gravity.
Here’s a simpler way to put it: Imagine the laws of economics are like trying to predict when the tide will be high at the beach. We know that when there’s a full moon, the tide is usually strong, and when the moon gets smaller, the tide weakens. But we can’t predict the exact tide level with 100% certainty because things like heavy rain or storms can change it unexpectedly. So, economic laws are like this – they give us a general idea of how people might behave, but they can’t predict it perfectly.
For example, one economic law says that when prices go up, people usually buy less of something. But sometimes, like in India with scooters, even when prices rise, people still buy more. So economic laws are not always right, unlike the law of gravity, which is always true.
In simple terms, economic laws are more like general tendencies, similar to predicting tides, rather than precise and unchanging like the law of gravity.
(1) Study of Man: Economics studies the behavior of man. Every man behaves according to the dictates of his will. He cannot be forced to do anything contrary to his desire. It is, therefore, not possible to make any prediction with certainty regarding the economic behavior of the man.
(2) Defective Measuring Rod: The economist measures the economic activity of the man with money as the measuring rod. But measuring-rod of money is defective. It is imperfect and unreliable. This is so because the value of money often fluctuates. Thus the measuring rod of money in economics cannot measure economic activities with the same exactitude as the balance of a chemist.
(3) Less Possibility of Experiments: An economist does not have any facility of experimentation as a natural scientist has. Man is the subject of study in economics. In natural sciences, the subject of study is lifeless matter. Experiments can be conducted in respect of lifeless matter in laboratories but man cannot be subjected to any laboratory test. He has his own discretion to react to a particular situation
(4) Influence of different tendencies: Economics is a social science studying different types of individuals. These individuals are influenced by social, political, religious, and several other tendencies It is therefore very difficult to say how an individual will react under given circumstances. That is why Economic Laws are mere statements of tendencies.
(5) Change in Time: According to Marshall, it takes some time for the causes to show their effects. In the meanwhile, the circumstances or conditions may change resulting in a change in the expected effects. With the passage of time, man’s taste, nature, habits, attitudes, etc. also undergo change, therefore becomes difficult to say how a man will behave under different circumstances or conditions.
(6) Effects of Unknown Factors: In the words of Durbin, “The true determinants of economic events are not adequately discovered”. Every economic event is influenced by several unknown factors. As such, predictions based on known factors may prove wrong due to the influence of unknown factors.
(7) Other things being equal: Economic laws are valid only if “other things are equal,” but in real life, other things’ or ‘assumptions’ never remain equal. These ‘other things’ are subject to change. Since the assumptions of economic laws are not fulfilled, the predictions made on the basis of these laws often prove untrue.
In short, keeping in view the imperfections of economic laws, Marshall has aptly said. “The laws of economics are to be compared with the laws of tides rather than with the simple and exact laws of gravitation”.
Difference Between Economic Laws and The Laws of Physical Sciences
Economic laws and laws of physical sciences have the following differences:
(1) Economic Laws are less exact: According to Peterson, “Economic laws are less exact than laws of physics and biology.” For instance, there is a law of chemistry explaining that when two parts of hydrogen and one part of oxygen are mixed at a certain pressure and temperature, the result will be er. Economic laws are not so exact. For example, the law of demand cannot assert categorically that if a commodity is doubled its demand must contract by one-half.
(2) Economic Laws are not so permanent: Economic laws change with changes in time and conditions. Most economic laws are fickle. For example, during the period of Adam Smith, the Theory of free trade was in vogue. But Fredric List of Germany recommended the theory of protection which is the antithesis of free trade. Laws of natural sciences are of permanent nature. For example, the Law of Gravitation was as much valid at the time of Newton as it is today. In the words of Stalin, “One of the distinguishing features of Political Economy is that its laws unlike those of natural sciences are impermanent”.
Frequently Asked Questions (FAQs)
What are the 3 laws of economics?
The three fundamental laws of economics are 1. Law of Supply and Demand, 2. Law of Diminishing Marginal Utility, 3. Law of Comparative Advantage.
What do you mean by economic laws?
Economic laws are principles that describe consistent patterns of behavior in economic systems. They help understand how individuals, businesses, and markets interact, guiding economic analysis and decision-making.
What are the 4 rules of economics?
Economics operates on fundamental principles, not specific “rules.” However, key concepts include scarcity, opportunity cost, supply and demand, and rational decision-making, which collectively help analyze and understand economic choices and behavior.
What are the 7 fundamentals of economics?
Seven fundamental concepts in economics include scarcity, opportunity cost, supply and demand, marginal analysis, trade-offs, incentives, and market structures. These concepts help explain and analyze economic decision-making and behavior in various contexts.
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