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Positive-Economics-vs-Normative-Economics

Welcome back you bunch of HomoEconomicus! Today, we will be exploring the differences between positive and normative economic statements.

So, a while ago I conversed with my great friend Muhammad about economics as we so often do. We were debating the nature and definition of positive and normative statements, as well as how they apply to Micro and Macro. I grudgingly hate to admit I was wrong but he corrected my failure of understanding. Here are the facts, so you do not make the same terrible mistakes.

Positive Statement:

A positive economic statement is a FACT! Facts are based on empirical evidence which is scientifically provable. It is an hypothesis with no room for personal opinions.

Normative Statement:

A normative statement is entirely based on value judgments and the endorsement of individuals. They are based on opinions so cannot be disproved.

Essentially, positive states the facts and normative provides a value judgement which can be debated in the future (by getting rid of absolute statements). Therefore, when policymakers issue economic policies it is best to blend both of these statements. For instance, we can all agree that the groundwork of a policy should be based on empirical data. However, economics cannot deliver moral arguments and society faces a clear dilemma. So, it up to a wide array of individuals from different fields to debate the inherent effectiveness and morality of a certain policy application. Unfortunately, science is not without its flaws and the political pressure lobbies can manipulate statistics to suit their agendas – I will be uploading a post regarding this phenomenon. On the other hand, there does not seem to be a better way to reach the truth, than through free and productive debate.

So that is that… and never make the same mistake twice!

May the ECON be with you