The Scope of Industrial Economics and Its History

Industrial economics is a distinctive branch of economics which deals with the economic problems of firms and industries, and their relationship with society. In economic literature it is known by several names with marginal differences such as ‘Economics of Industries’, ‘Industry and Trade’, ‘Industrial Organization and Policy’, ‘Commerce’ and ‘Business Economics’ etc. The name ‘Industrial Economics’ was adopted in the early fifties perhaps through the writings of P.W.S. Andrews.1 Although this name is becoming popular day by day some authors, particularly in the American circle, prefer ‘Industrial Organization’ as a title of the subject.2 At present there is no clear-cut consensus on the name of the subject. There are two broad elements of industrial economics. The first one, known as the descriptive element, is concerned with the information content of the subject. It aims at providing the industrialist or businessman with a survey of the industrial and commercial organizations of his own country and of the other countries with which he might come in contact. It would give him full information regarding the natural resources, industrial climate in the country, situation of the infrastructure including lines of traffic, supplies of factors of production, trade and commercial policies of the governments and the degree of competition in the business in which he operates. In short, it deals with the information about the competitors, natural resources and factors of production and government rules and regulations related to the concerned industry. The second element of the subject is concerned with the business policy and decision-making. This is the analytical part dealing with topics such as market analysis, pricing, choice of techniques, location of plant, investment planning, hiring and firing of labour, financial decisions, product diversification and so on. It is a vital part of the subject and much of the received theory of industrial economics is concerned with this. However, this does not mean that the first element, i.e. descriptive industrial economics, is less important. The two elements are interdependent, since without adequate information no one can take proper decision about any aspect of business. THE SCOPE OF INDUSTRIAL ECONOMICS AND ITS HISTORY 1