Nature of Economics Video Lecture - CA Foundation

quite an interesting topic will be
studying now we'll be studying the
nature of economics is economics a
science or is economics in art or
economics is both a science and an art
and also in science there are two types
of science positive science and
normative science so we'll be studying
is economics positive science or
economics normative science a lot of
questions come from this part and if you
understand it finally there is no scope
of you answering them incorrectly in the
exam so let's start with the big
question is economics or science well
how would we know that because we are
commerce students how do we know what
science is so so I will give you five
parameters if any subject satisfies
these five parameters that subject can
be called as science so the five
parameters are first systematic body of
knowledge second cause-and-effect
relationship third capable of being
measured fourth its own methodology and
five is the ability to forecast so if
any subject can fulfill these five
conditions that subject can be called as
a branch of science of that subject can
be called as a science now let's see how
economic fulfills all these five
conditions starting with the first one
the first one was systematic body of
knowledge well economics is a systematic
body of knowledge if it was not it could
not be taught and learned right so
that's why it's a systematic body of
knowledge and that's why it is in our
curriculum too the second one is a cause
and effect relationship now let's
remember the law of demand what did it
say other things remaining constant if
the prices of a product went up the
demand for the same product would go
down
now what was the cause and what was the
effect because is the going up of prices
and what is the effect of it the effect
of it is that the demand of the product
will go down so yes
economic does Studies cause-and-effect
relationship the third is it capable of
being measured can we measure economics
yes we can in which format in the format
of money for its own methodology does
economics has its own methods
yes which have the methods there are two
methods inductive method and deductive
method and these two methods very soon
we will be studying fifth point the
ability to forecast does economics have
the ability to forecast yes with the
help of economics we forecast what would
be the unemployment rate next to it what
would be our GDP next year so we
forecast a lot of things using economics
hence economics fulfills all the five
conditions and economics can be called
as a science now let's see whether
economics is an Arts or not before we
proceed one name and his definition is
very important
the name is JM Keynes and the definition
is an artisan system of rules for the
attainment of a given end remember end
is the result or the target right so
according to mr. Cain's a system of
rules for the attainment of a given
target is called as an art so basically
art means nothing but the practice of
the knowledge science teaches us to know
how to do while as our teaches us to do
so when I say that I I know a recipe you
know I can cook something
this is science because I have the
knowledge to cook the recipe but when I
threw myself into the kitchen and I do
the cutting in the chopping and I make
something which can be eaten by humans
that is called as art
but artist practical and let's look at
economics when we study economics we
just don't study
okay the unemployment in India is X
percentage we also find out how do we
drop it to Y percentage right so
economics is not just the study of facts
we also try to get some judgments some
value out of it and this getting some
judgment or getting the values out of it
is called as arts so hence economics is
both science and arts and very rightly
mr. Costa had stated he was also an
economist and he stated science requires
arts and arts require science each being
complementary to each other well so now
we know that economics is both the
science as well as an art and and
science has two bifurcation within
itself one is a positive science and the
another is a normative science and
economics is both a positive as well as
a normative science so so what is
positive science and what is normative
science the best way to look at it is
like let let's look at the difference so
positive science states the fact what it
is while normative says what it ought to
be what it should be right that's the
first difference suppose Phillips is
eating Maggie now now this is a positive
science what it is and what is he doing
he's eating mag considering Philip is a
is an obese person or considering
Felipe's is a is a fat guy what he
should be eating he should be eating
salads not Maggie so what would normally
say Normandy would say Phillips
you should eat salads right so you get
the difference positive said Philip is
eating Maggie
while normative said Philip you should
be eating salads
so in a way positive wants to state
facts while normative wants to pass
judgments positive is descriptive in
nature and normative is prescriptive in
nature suppose you you were sick and you
went to a doctor and the doctor
conducted few tests and found out that
you had malaria so positive science is
descriptive in nature that's the method
of finding out how you had malaria and
and the doctor conveying you the message
head you have malaria and normative is
prescriptive normative is when he
prescribes you the the the prescription
in which he writes that you need to take
these five medicines for the next five
days and you'll be okay right so this is
positive and normative the difference is
positive is descriptive while normative
is prescriptive well the next difference
is that positive studies
cause-and-effect relationship that means
positive science we'll study okay
because of this this will happen because
of that this will happen if you heat the
water the temperature of the water will
go up and normative will give you value
judgments don't put your hand into the
water when the water is hot right so so
so positive science kills you
cause-and-effect relationship while
normative science give you value
judgments the next difference the next
difference is the positive science is
positive aspects of science it disgusts
only the positive aspect of science
while as normative science also discuss
the ethical aspects of science suppose
positive science will say yes you can
consume cigarette but it is the
normative science which will say that if
you consume cigarette your lungs will go
back right so so normative science is
more concerned with the ethical part
what is ethical what is not ethical and
that is why we give judgments on the
basis of it positive science is strictly
between neutral between ends it doesn't
take any side Wireless normal
science is actually judgmental or and
that's why it's not neutral between ends
it's not neutral between two targets it
will always drift you towards the
ethical part also when we read the
definition of Robbins we feel it's it's
very closely related to positive science
well on the other side when we read the
definition of Marshall and P GU they are
more in the normative nature now let's
play a simple game it's it's more for
rapid-fire games I'll ask you a sentence
and you have to judge in your head
whether it's positive or it's normative
ready for it
let's go sentence number one India is
overpopulated sentence number two
agriculture income should not be taxed
in India it's number three
service class people should be exempted
from paid taxes sentence number four
there is tremendous tax evasion in India
Wow wonderful I hope you got all the
sentences correctly and now for more
practice which is very required as this
is an important topic and a lot of
questions come from this please go to
our practice module and practice it