Question

Social issues often are focused around important issues of economic growth and how resources are distributed to society in general. When discussing the idea of what the correct policy should be, we often must make a judgement call related to a given policy.

For this discussion, please define what positive versus normative economics is. Provide an example of each type.

If I suggest that income should be taken from those that can most afford it and redistributed to those who are less fortunate in society what type of economics is this?

Answer 1

Positive economics talks about things that “are”. They are facts. They can be verifiable. You can prove it or disprove it. You can test it. And you can find out whether these statements mentioned under positive economics are true or untrue.

But normative economics is fiction. They aren’t facts; rather they are opinions of economists who tell us what they think. It can be true for some and false for some. And these statements mentioned under normative economics aren’t verifiable. They can’t be tested either.

To make policies of businesses or of any country, we need both positive economics and normative economics. We need to know which are facts and then we should use our judgement to form policies that will help individuals and the society at large.

• The biggest difference between positive economics and normative economics is the former one is based on facts and the latter one is based on values, judgments, and opinions.
• The statements under positive economics can be tested or verified. That means the statements can be either true or false. The statements under normative economics, on the other hand, are opinions and recommendations which can’t be verified until they’re acted upon first.
• The statements under positive economics are objective in nature. The statements under normative economics are subjective in nature.
• The statements under positive economics focus on cause and effect relationships. On the other hand, the statements under normative economics concentrate on what can work and why.
• positive economics and normative economics both are important because, without one, another doesn’t make sense.

Positive economics and normative economics is not important only to policymakers or planners. They are equally important for anyone who is trying to find out a solution based on a fact. If a school sees that the students of the school have been performing lower than average for the last couple of years, they can call up a meeting, talk things out, jot down ideas, and can find the best alternative which can help the students get better marks. In this simple scenario, the combinations of the fact and the solution can be easily traced down from the concepts of positive economics and normative economics.

The two types of economics are so very practical that you can apply them in anything – from business to politics, from sports to social reforms, from policy making to becoming wealthy. All you need to understand to apply these are the combinations of both – positive economics and normative economics.