Economic Laws:Similar to other social sciences, economics possess its own laws. The law is a statement of what should happen given certain circumstances. Every cause has a tendency to generate some outcome. For illustration, in Physics, we study that things fall to the ground since of gravitation. Law of gravitation is the statement of tendency. Likewise, the laws of economics are statements of tendencies. For illustration, according to the law of demand, whenever there is fall in the price of a good, the demand for it will enlarge. It means that there is a tendency amongst people to buy more whenever there is fall in the price of a good. Likewise, when price rises, they buy less. Laws operate beneath certain conditions. When such conditions alter, they will not operate. This is valid in all sciences. Whenever some economic laws do not operate, it means that the conditions have modified.We might broadly categorize sciences into physical and social sciences. Physics and chemistry are illustrations of physical sciences. Economics and politics are illustrations of social sciences. The laws of physical sciences are precise. However the laws of economics are not as precise as the laws of physical sciences. For illustration, we have the law of gravitation. It is an easy and exact statement. However in economics, we deal with human beings and their behavior with reference to the economic activity. We can’t conduct experiments with human beings either in the laboratory or exterior it. That is why economic laws can’t be as exact as the laws of physical sciences. We might also note that we study concerning average human behavior in economics.Since economics deals with man and his behavior, its laws are complicated and inexact. That is why Marshall has stated that “the laws of economics are to be compared with the laws of tides instead of with the simple and exact law of gravitation”. The science of tides states the tides mount and fall under the influence of the Sun and Moon. Probably there will be high tide on full moon night. It might be there or it might not be there. It is only a possibility.Likewise, economic laws also point to probable trends. For illustration, whenever there is increase in the amount of money, there might be increase in the price level. However we cannot say exactly by how much prices will rise. However economic laws are more exact than the laws of history and politics since economics make utilization of money as a measuring rod of utility. Although money is a rough measure, it provides a concrete shape to economic laws.Every economic law depends on certain assumptions. Let us take the law of demand. It states that “other things being equivalent”, whenever the price of a good falls, people will buy more of the good. By “other things are being equivalent” we mean (1) That the income of the people remains similar, (2) That their tastes stay similar, (3) That the prices of other goods stay similar and (4) That no new replacement for the good is discovered. The law will hold well only whenever the above suppositions are fulfilled.At times, it is said that the laws of economics are theoretical. That is, we make a hypothesis. Only after it is confirmed by facts and experiments and found true, and it becomes a law. However many economic laws can’t be confirmed by experiment. That is why we say at times that economic laws are hypothetical.The laws of physical sciences contain universal application. However that is not generally the situation with regard to economic laws. Obviously, there are one or two exceptions. The Law of Diminishing Returns has worldwide application.
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