In economics, there are two main types of Economics: Positive and Normative. Positive economics is the study of how things are, without making any judgments on whether they should be that way or not. Normative economics, on the other hand, is the study of how things should be and making judgments about what is best for society. While both fields are important in understanding how the economy works, they use very different methods and tools to arrive at their conclusions. In this blog post, we will explore the differences between Positive and Normative Economics in more detail.
What is Positive Economics?
Positive economics is the study of economics that focuses on what actually happens and experiments with what could happen. It uses a scientific approach to study economic behavior and test theories. The goal of positive economics is to build models that can be used to make predictions about how the economy will behave. Positive economics is mainly interested in facts and causes, rather than values and preferences. For example, positive economics would study how an increase in taxes would affect consumer spending, while normative economics would focus on whether or not the government should impose higher taxes. Positive economics is sometimes also referred to as objective economics.
What is Normative Economics?
Normative economics is a branch of economics that focuses on making recommendations about what should be done, rather than on describing what is. In contrast to positive economics, which focuses on describing economic phenomena, normative economics takes a value-laden approach. As such, it unavoidably involves ethical judgments about what is good or bad, desirable or undesirable.
Normative economics often takes the form of policy analysis, in which economists evaluate the likely consequences of different courses of action and make recommendations about which one should be chosen. While normative economics is sometimes criticized for being too subjective, it can be a valuable tool for policy-makers, providing them with evidence-based advice about how to improve the economy.
Difference between Positive and Normative Economics
- Positive and normative economics are two different types of economic analysis. Positive economics is that branch of economic analysis that studies the economic phenomenon as it actually exists and attempts to explain it. On the other hand, normative economics is that branch of economic analysis that studies the economic phenomenon as it ‘ought’ to be and prescribes what should be done to remedy the existing situation.
- In simple words, positive economics deals with ‘what is’ whereas normative economics deals with ‘what ought to be’. Positive economics is objective while normative economics is subjective in nature. Positive economics is concerned with facts while normative economics is concerned with values.
- Positive economics is an empirical science while normative economics relies heavily on value judgments. Positive economists try to develop a theory or hypothesis which can be verified by observation or experiment while normative economists recommend policies based on their value judgments. Thus, we can say that there is a clear-cut difference between positive and normative economics.
Conclusion
In the world of economics, there are two dominant schools of thought-positive and normative. While they share some similarities, they differ in their fundamental assumptions about human behavior and the role of economics in society. In this article, we’ve outlined the key differences between these two approaches to economic thinking. We hope this provides you with a better understanding of how economists think about the world and how you can use this knowledge to make more informed decisions about your own finances.
