difference between positive and normative economics

The Difference Between Positive and Normative Economics

When we talk about economics, it is essential to understand that there are two different approaches for analyzing economic theories or policies. These two approaches are known as positive economics and normative economics.

What is Positive Economics?

Positive economics is the study that focuses on how the economy functions objectively. It deals with the positive aspects of economics, such as facts, data, and cause-and-effect relationships. It examines how people make rational economic decisions based on the information they have, in other words, what is.

Positive economics aims to explain and predict economic phenomenon based on empirical evidence instead of personal preferences, opinions, or ethical or moral judgments. In positive economics, economists describe the relationship between two variables, such as supply and demand, without evaluating whether it is good or bad. Positive economics is used in economic analysis to understand the behavior of economic agents such as producers, consumers, and governments.

What is Normative Economics?

Normative economics is the study of what ought to be. It deals with value judgments or opinions about what is good and bad, right and wrong, and ethical or moral. Normative economics aims to provide prescriptive advice on how economic policies should be designed or altered to achieve a desirable outcome.

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Normative economics is not based on empirical evidence, but rather on the values, beliefs, and goals of individuals or societies. For example, it may suggest how income should be distributed among different income groups, how resources should be allocated, and what the optimal level of taxation is. Normative economics is subjective and influenced by the values and morals of the economist, policymakers, or society as a whole.

The Differences Between Positive and Normative Economics

The main difference between positive and normative economics is that positive economics is objective, while normative economics is subjective. Positive economics aims to explain how the economy works based on empirical evidence, while normative economics provides opinions on how the economy should work based on values and beliefs.

Positive economics does not make value judgments or prescribe what is good, bad, right, or wrong. It aims to explain facts about the economy without making value judgments that can bias the results. Unlike positive economics, normative economics is subjective and is based on personal preferences, opinions, and values.

In conclusion, understanding the differences between positive and normative economics is crucial for anyone who wants to gain an in-depth understanding of economic theories and policies. Positive economics helps to explain how the economy works, while normative economics offers suggestions for how it should work. While positive economics is objective, normative economics is subjective, which makes it essential to know which approach is being used when evaluating economic theories and policies.

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Table difference between positive and normative economics

Positive Economics Normative Economics
Attempts to explain how the economy works by using data and facts. Focuses on how the economy should work based on value judgments and opinions.
Describes what is happening in the economy, without making any judgments about whether it is good or bad. Suggests what should be happening in the economy based on personal beliefs and values.
Gives objective analysis of economic data and helps in understanding cause and effect relationships. Deals with subjective opinions and ideas about what is fair and just in the economic world.
Based on empirical evidence, tested through analysis, experiments and surveys. Based on individual’s assumptions and value system.
Used mainly in positive sciences like mathematics, statistics, and physics. Used mainly in normative sciences like philosophy, ethics, and politics.