Nature of Economic Laws

Nature of Economic Laws

An economic law is a statement of tendencies—a statement of a causal relationship between two groups of phenomena. All scientific laws are laws in the same sense. If there isa combination of hydrogen and oxygen, other things being equal, we get water. So also in economics, other things being equal, if the price of a commodity rises, the demand for it will usually fall. If a law of chemistry be a natural law, an economic law is also a natural law in the same sense. But the laws of economics cannot be as exact as the laws of natural sciences. This is due to the following reasons.
First, economics is a social science and as such it has to deal with a multiplicity of men guided by a multiplicity of motives. This element in the situation is responsible for the fact that economic laws can give only average results. Secondly, not only are the economic data innumerable but they are themselves changeable over a period of time. Since men change in their attitudes, tastes and disposition over a period of time, the task of predicting how different men will react to a given change in circumstances on different occasions becomes extremely risky and precarious. Thirdly, there are many unknown factors in the situation. All the data cannot be known and prediction based on known data may be falsified or distorted by the influence of the unknown data. Economic laws may, however, be compared with the laws of tides rather than the simple and exact law of gravitation. The laws of tides explain how there is a rise and fall of tides twice a day under the influence of the sun and the moon, how there are strong tides at new and full moon, etc. In human activities, too, there are many unforeseen circumstances, as a result of which the expected course of action may not happen in the regular way.
“Economic laws,” writes Seligman, in his Principles of Economics, “are essentially hypothetical”. All economic laws contain the blowing qualifying clause “other things being equal,” i.e. we assume that from a given set of facts, certain conclusions will follow, if no other change takes place in the meantime. But other things are not always equal and, consequently, in economics, definite conclusions cannot be predicted from a given set of facts. Economic laws are, therefore, described as hypothetical— hypothetical because their truth and operation depend upon so many factors which are variable and imperfectly ascertainable.
But it does not follow that because an economic law is hypothetical it is unreal or useless. The laws of all other sciences are also hypothetical. Every science assumes certain causes and draws certain generalizations from those causes, assuming that nothing changes in the meantime. Moreover, all economic laws are not essentially hypothetical. There are some economic laws which may be regarded as true as physical laws and there are others which are true as axioms as we find in the case of the law of diminishing returns. Economics, unlike other branches of the social sciences, has got a common measuring rod of human motives in the shape of money. As Marshall has observed, “Just as the chemist’s fine balance has made chemistry much more exact than any other physical science, so also the economist’s balance,—the money measuring rod of human motives—rough and imperfect as it is—has made economics much more exact than any other branch of the social sciences.” Thus economics, though much less exact than the physical sciences is much more exact than the other social sciences. Economics does not, generally speaking, give us a body of settled conclusions and doctrines. It imparts instead an apparatus of the mind, a technique of thinking, an outlook and an approach. Training in economic theory and economic analysis enables us to understand better concrete economic problems and thus equips us for finding a scientific solution to our problems. With this brief analysis of economic laws we may proceed to explain the basic concepts of Islamic laws and their ability for evolution to face the conflicting present-day problems.