ECONOMICS Positive and Normative

ECONOMICS Positive and Normative Economists make a distinction between positive and normative that closely parallels Popper's line of demarcation, but which is far older. David Hume explained it well in 1739, and Machiavelli used it two centuries earlier, in 1515. A positive statement is a statement about what is and that contains no indication of approval or disapproval. Notice that a positive statement can be wrong. "The moon is made of green cheese" is incorrect, but it is a positive statement because it is a statement about what exists. A normative statement expresses a judgment about whether a situation is desirable or undesirable. "The world would be a better place if the moon were made of green cheese" is a normative statement because it expresses a judgment about what ought to be. Notice that there is no way of disproving this statement. If you disagree with it, you have no sure way of convincing someone who believes the statement that he is wrong. Economists have found the positive-normative distinction useful because it helps people with very different views about what is desirable to communicate with each other. Libertarians and socialists, Christians and atheists may have very different ideas about what is desirable. When they disagree, they can try to learn whether their disagreement stems from different normative views or from different positive views. If their disagreement is on normative grounds, they know that their disagreement lies outside the realm of economics, so economic theory and evidence will not bring them together. However, if their disagreement is on positive grounds, then further discussion, study, and testing may bring them closer together. Economists can confine themselves to positive statements, but few are willing to do so because such confinement limits what they can say about issues of government policy. Both positive and normative statements must be combined to make a policy statement. One must make a judgment about what goals are desirable (the normative part), and decide on a way of attaining those goals (the positive part). Economists often see cases in which people propose courses of action that will never get them to their intended results. If economists limit themselves to evaluating whether or not proposed actions will achieve intended results, they confine themselves to positive analysis. (You should realize that although economists can speak with special authority on positive issues, even the best can be wrong.) However, virtually all economists prefer a wider role in policy analysis, and include normative judgments as well. On normative issues economists cannot speak with special expertise. Put somewhat differently, addressing most normative issues ultimately depends on how one answers the following question: "What is the meaning of life?" One does not study economics to answer this question. Most statements are not easily categorized as purely positive or purely normative. Rather, they are like tips of an iceberg, with many invisible assumptions hiding below the surface. Suppose, for example, someone says, "The minimum wage is a bad law." Behind that simple statement are assumptions about how to judge whether a law is good or bad (or normative statements) and also beliefs about what the actual effects of the minimum wage law are (or positive statements).