Difference between positive and normative economy?

Question

Answer

A. Positive economics is objective and fact based, while normative economics is subjective and value based.
B. Positive economics is based on facts and purely objective. That means it describes economic topics and issues without judging them. Because, of this positive economics is sometimes also referred as the 'economics of what is '.By contrast, normative economics is based on values and therefore , inherently subjective. That means, it does not only describe economic issues but it judges them as well. Therefore ,normative economics is sometime also called the 'economics of what ought to be'.

Answer

The distinction between positive economics and normative economics may seem simple, but it is not always easy to differentiate between the two. Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements must be able to be tested and proved or disproved. Normative economic statements are opinion based, so they cannot be proved or disproved. In fact,  many widely accepted statements that people hold as fact are actually value based.

Answer

Difference between Positive and Normative Economy

Introduction

Economics is a social science that studies how individuals, businesses, and governments make choices to allocate limited resources to satisfy unlimited wants. It is divided into two branches: positive economics and normative economics. While both branches analyze economic issues, they differ in their approach and the type of statements they make.

Positive Economics

Positive economics is an objective and value-free approach that focuses on describing and explaining economic phenomena as they are. It aims to provide an understanding of the economy by using scientific methods and empirical evidence. Positive economics deals with facts and cause-and-effect relationships without making any value judgments or prescribing what should be done. It answers questions such as 'What is?' and 'What will be?'

Key Points:
- Objective and value-free approach
- Describes and explains economic phenomena as they are
- Uses scientific methods and empirical evidence
- Deals with facts and cause-and-effect relationships
- Does not make value judgments or prescribe actions

Normative Economics

Normative economics is a subjective and value-laden approach that focuses on analyzing economic issues from a moral, ethical, or policy perspective. It involves making value judgments and recommending what should be done to achieve specific economic goals. Normative economics answers questions such as 'What ought to be?' and 'What should be done?'

Key Points:
- Subjective and value-laden approach
- Analyzes economic issues from a moral, ethical, or policy perspective
- Involves making value judgments
- Recommends actions to achieve specific economic goals
- Answers questions related to what should be done

Differences

1. Objectivity vs. Subjectivity:
- Positive economics aims to be objective and value-free, focusing on describing and explaining economic phenomena as they are.
- Normative economics is subjective and value-laden, analyzing economic issues from a moral, ethical, or policy perspective.

2. Descriptive vs. Prescriptive:
- Positive economics describes and explains economic phenomena using scientific methods and empirical evidence without making value judgments or prescribing actions.
- Normative economics makes value judgments and recommends actions to achieve specific economic goals.

3. Fact-Based vs. Value-Based:
- Positive economics deals with facts and cause-and-effect relationships, focusing on what is and what will be.
- Normative economics is value-based, focusing on what ought to be and what should be done.

4. Understanding vs. Policy:
- Positive economics aims to provide an understanding of the economy through analysis and description.
- Normative economics is concerned with policy implications and recommendations to achieve desired economic outcomes.

Conclusion

In summary, positive economics focuses on objective analysis and description of economic phenomena, while normative economics involves subjective judgments and recommendations for achieving specific economic goals. Both branches play important roles in understanding and shaping economic policies, but they differ in their approach and the type of statements they make. It is essential to distinguish between positive and normative statements to ensure a clear understanding of economic issues and avoid confusion between what is and what should be.

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