Positive vs Normative Economics

Positive economics is the study of economic facts and data that can be objectively verified. It deals with the understanding of the economic phenomena as they are, and attempts to explain how they function. In contrast, normative economics is concerned with opinions and values, and considers what should be done to address economic issues. It is a subjective analysis based on personal beliefs and values.

Key Differences

Objective vs Subjective: Positive economics is objective, while normative economics is subjective. Positive economics deals with facts and data while normative economics expresses opinions and values.

Descriptive vs Prescriptive: Positive economics is descriptive, while normative economics is prescriptive. Positive economics explains what is happening, while normative economics suggests what should be done.

Factual vs Opinion-Based: Positive economics is based on facts and data, while normative economics is based on opinions and values. Positive economics deals with what is, while normative economics deals with what should be.

Example

Suppose that the government is considering increasing the minimum wage. Positive economics would examine the effects of the minimum wage on employment levels, inflation, and economic growth. Normative economics would consider whether the government should increase the minimum wage based on values such as fairness, social justice, and equality.

Conclusion

Positive and normative economics are two branches of economics that differ in their approach to analyzing economic issues. Positive economics is focused on describing and explaining the objective economic phenomena while normative economics is concerned with values and opinions about what should be done. Understanding the differences between these two branches of economics is essential in making informed economic decisions.