Laws of Economics

Economics is an important field of study which directly or indirectly focuses on human welfare through material or non-material means. Economic principles or Economic laws are the results of certain causes that arise from human activities.

What kind of laws are Economic Laws?

Economic laws are different from laws of sciences like Physics, Chemistry, Biology, Mathematics, etc. Scientific laws are based on realities of nature and developed through a detailed process including observation, hypothesis through experiment, acceptance or rejection of hypothesis, and development of law or theory. Economics laws are not developed in that way. These are formed based on changing the behavior of humans.                                                                    

According to Alfred Marshall:

“Economic laws are those social laws which relate to branches of behavior, in which the strength of purpose concerned can be measured by money prices.”

Economic laws are based on common behaviors or actions of people which they take on to fulfill their unlimited wants with the help of limited resources. Whether you’re a first-time homebuyer or an experienced investor, https://www.propertyleads.com/virtual-wholesaling-real-estate/ has something for everyone.

Characteristics of Economic Laws:

• Each economic law is conditional in nature which means with every law there are some conditions attached to it. For example, in the Law of demand, the demand of commodity increases or decreases with the condition of fall or rise in prices respectively.
• As human behavior varies from person to person and hence economic laws are predictable to some extent as these relate to human behavior. And the prediction of economic laws is possible only in presence of certain conditions. Also, economic laws are not correct in all respect as they are based on human behavior which is var,iant and hence no verification of these laws is possible.
• Economic laws are optional for people to follow. They are not compulsory.
• No fine or punishment can be imposed for disobeying economic laws as these are not harmful to society and may cause financial losses to individuals.
• Economic laws are based on human behavior in certain cases so they tend to be universal laws. For example Law of Demand etc.
• Economic laws are more valid than other social sciences (sociology, history, Psychology, etc.) and lack validity as compared to scientific laws.

Comparison of Economic Laws with other laws:

Economic laws are different from other laws i.e. scientific and social. Difference between economic laws and other laws is discussed below,

Economic Laws and Scientific Laws:

Scientific laws are those which are developed from a process of observation, formulation of hypothesis, the validity of the hypothesis, creation of law. Economic laws are not formed in such a manner they are developed under some assumptions or conditions. For example Laws of motion, Law of Energy, etc.

• A huge difference between economic laws scientific laws is that the nature of scientific laws is quantitative which means they are measurable and are expressed in terms of numerical values whereas economic laws cannot be measured because they are based on human behavior which cannot be expressed in terms of numerical value.
• Scientific laws can be easily verified or validate from laboratory tests or some sort of experiments whereas economic laws cannot be tested as human behavior varies from person to person.
• Based on past results we can predict scientific laws (i.e. solar or lunar eclipse, Laws of motion, etc.). Hence scientific laws are predictable. Whereas economic laws cannot be predictable as human behavior cannot be predicted and they can be proved true only in the presence of certain conditions.
• Scientific laws are always true in each condition so they are exact and definite. Economic laws are true only under some assumptions in a case.

Economic Laws and Country Laws:

Laws in a country are formed by the people or government of that country. Citizens of that country must follow these laws otherwise they would be punished or charged. For example theft, bribery, robbery, harassment, etc. Government forms laws to prevent this kind of crime by strict punishment. 

• Laws in a country are formed by a group of people known as the government or its institutions (National Assembly, Congress, etc.). A state builds laws for the betterment of its people and makes compulsion for citizens to follow. On the other hand, economic laws are not formed in such a manner. These are the statements about human behavior in certain cases.
• Laws of a country can be easily changed, amended, or modified by the government or members of law-making bodies (i.e. Congress, Parliament, National Assembly, etc.). Economic laws cannot be changed unless human behavior is changed.
• State laws are limited to a particular country or a state or for a particular time period while economic laws are for every place and time.
• For violation of state laws, a person is punished or fined but there is no punishment for violation of economic laws but financial losses are likely to occur individually or as a whole.

Economic Laws and Moral Laws:

Moral laws are formed by the society in which we are living. These laws reflect the social traditions or religious values of people living in a society. For example truth, respect for elders, courtesy, harmony, etc. These are some values which we learn from society or our elders.

• Moral laws are developed by society. These laws reveal the religious, cultural, social values of people living in a society. Economic laws are based on human behavior in their economic struggle.
• Moral laws are formed by society and society itself implements these laws. However economic laws are not implemented by anyone.
• Violation of moral laws is considered a crime in the eyes of society and religion. The person is punished according to traditional or religious principles. For economic laws, there is no such restriction to be must be followed or not and also there is no punishment.
• Moral laws must be followed without any condition or assumption. However economic laws cannot be followed without the presence of certain conditions.

Types of Economic Laws:

Various laws of economics help us to study human behavior in the process of economic struggle. When a person tries to fulfill his unlimited wants by alternative allocation of scarce resources to get high utility. Following are some laws of economics,

1. Law of Diminishing Marginal Utility
2. Law of Equi-Marginal Utility
3. Consumer Equilibrium
4. Consumer Surplus
5. Indifference Curve
6. Law of Demand
7. Price Elasticity of Demand
8. Point Elasticity of Demand
9. Arc Elasticity of Demand
10. Income and Cross Elasticity of Demand
11. Law of Supply
12. Price Elasticity of supply
13. Equilibrium Price
14. Law of Increasing Return
15. Law of Diminishing Return
16. Law of Variable Proportion
17. Marginal Productivity Theory of Distribution
18. Modern Theory of Distribution
19. Ricardian Theory of Rent
20. Liquidity Preference Theory OR Keynes Theory of Interest

Summary:

                        Laws of economics are based on the behaviors of humans in their struggle for satisfying their unlimited wants by using scarce resources. Economic laws can prove truth only in the presence of certain conditions. These laws are developed for human welfare. If a person does not follow these laws he may incur financial losses. Economic laws have various limitations as compared to scientific laws such as prediction, validity, etc. But economic laws are much better than other laws of social sciences like sociology, psychology, etc. In short, economic laws help deal with business and financial matters of individuals, organizations, and governments.
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