B.A. LL.B. (Five Years) Sem 2 Economics I (old course) 2014 Dec Question Paper with Solutions

2. The age that produced it

Before Smith, the mercantilists held that a nation's wealth lay in its stock of gold and silver, gained by exporting more than it imported. Smith rejected this. In Book IV of The Wealth of Nations he wrote: "That wealth consists in money, or in gold and silver, is a popular notion". He treated this popular notion as a mistake.

For Smith, a nation is rich when its people produce much. The first sentence of his book says so: "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes". Wealth, on this view, is a yearly flow of goods made by labour, not a heap of coin.

3. The definition in the authors' words

Adam Smith (1776). His book's full title, An Inquiry into the Nature and Causes of the Wealth of Nations, states the subject. In Book IV he wrote that political economy "proposes two distinct objects". The second of his sentences reads: "It proposes to enrich both the people and the sovereign".

1. A clear field of study. For the first time economics had a subject of its own, apart from ethics and politics.
2. The right question for a poor country. How to raise output is still the first economic question in a developing country.
3. Wealth as a flow. Treating wealth as the yearly product of labour is the seed of the modern idea of national income.
4. The causes of growth. Division of labour, saving, capital and trade, which Smith stressed, remain central to economics.

6. Critical examination

1. Carlyle's charge of a "dismal science". Thomas Carlyle called economics "the dismal science" in 1849. A subject built round wealth looked cold and selfish to its critics. Some called it a gospel of Mammon.

2. Ruskin's reply: "There is no wealth but life". John Ruskin, in Unto This Last (1860), argued that goods have value only so far as they serve human life. Wealth is a means, and the definition wrongly made it the end.

7. Was the attack fair?

Partly not. Smith was a moral philosopher, and he did not make wealth an end in itself. He wrote: "Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer." So, for Smith, goods existed to serve people.

The fault lay more in the narrow way later writers stated the definition, and in the word "wealth" itself. That word suggested money-making rather than human well-being.

8. Relevance in India today

The core concern of the wealth definition, raising output, still matters. India's real GDP grew by 7.7 per cent in 2025-26 on the Provisional Estimates. But the critics' point also holds. The Human Development Report 2025 ranks India 130 of 193 countries, with an HDI of 0.685. Fast growth of wealth does not by itself bring health, schooling and fair shares. Both the wealth view and its critics are needed.

Conclusion. The wealth definition of Smith and Mill made economics the science of the nature of wealth and the laws of its production and distribution. It gave the subject a clear field and saw wealth as a yearly flow of output, the root of national income. Critically examined, it took too narrow a view of wealth and leaned on an unreal economic man. It was also silent on distribution and welfare, which drew the attacks of Carlyle and Ruskin. Smith's own words on consumption show that the attack was partly unfair. Marshall's welfare definition kept wealth in the subject but put human welfare first.