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The objective to the success of a specific science is the capability to identify and delineate opinions on 'what is' from 'what ought to happen'. This includes providing a demarcation between positive statements and normative statements. Positive statements deal with 'what is, was or what will be' but the normative statements deals with 'what ought to be' and are based on value judgments regarding what is good or what is bad. The positive conclusions could be considered as those which are extensively applicable throughout the whole world and they are testable whereas the normative instructions are not testable but constitute the basis for formulation of positive statements. Positive statements are for example, when we ask economists to inform us regarding how the price system operates, we are asking them to travel us along the road of positive economics. The following statement "if the price of petrol increases the demand for petrol falls" is a positive statement that could be either agreed or refuted. The normative economics on the other hand deals with the prescriptive statements, to illustrate, how the price system would function. Normative statements could generate positive hypothesis regarding the basis on which 'ought'-type conclusion depends on. It thus helps the policy decision makers to provide for the maximum well-being of all people. (The Tools of Economics Analysis) The positive analysis concentrates on becoming fully aware of the economic variables, unemployment, inflation, growth rates, interest rates etc and the way they associate with one another. The normative theory contains the policy recommendations that the government activity in the economy is to be devised so as to maximize the national welfare. (The Demand Side: Keynesian Economics)
The U.S. trade policy exhibits three distinct modeling approaches: the normative approach that mostly associated with the goal of social welfare function, the positive approach associated with the basic postulates of the political economy and the transaction cost approach that is following a mid-way between the positive and normative approaches. The normative approach to the trade policy of the US government emphasizes on the objective function that incorporates the issues of maximization of well being, optimization of resource allocation under the environment of perfect competition. The effective operation of such a system necessitates a type of government that itself functions perfectly and that is quite effective in handling the policies so as to accomplish the objectives of welfare maximization and efficiency objectives. (An Overview of the Modeling of the Choices and Consequences of U.S. Trade Policy)
However, in reality it is not necessary to examine in the normative modeling approach so as how a government is required to be organized and functioned to accomplish the conditions of first best world. On the theoretical framework at the minimum it is essential to assume that the government is fully aware of the economic indicators and functions so as to play the part of a beneficent dictator. However, what continues to be unclear in such circumstances is why governments will be originated initially and what should be the norms for guidance of their policy initiatives. The normative approach thus takes for granted the prevalence of perfect government and represents its part in policy making as an executing agency to implement the norms of normative approach for the benefit of the society. However, taking into account the prevailing structure of the U.S. government along the types and complexities of the concerned objectives it is apparent that an imaginary environment needs to be created so as to make
Names mentioned in this term paper
Fredric L. Pryor,
Organizations referenced in this report
US government, U.S. government, Congress,
Locations included in this paper
Keywords referenced in this paper
trade, trade policy, positive statement, normative economics, trade liberalization, political economy, trade law, policies, positive economic, international trade, multilateral trade negotiations, foreign trade, policy making, transaction cost, US government, price system, capitalism, Cost Approach, human rights, newly industrialized countries, social welfare function, economic indicators, international financial institutions, global economy, foreign direct investment, market, welfare, economic system, World War II, Keynesian Economics, objective function, perfect competition, resource allocation, working hypothesis, electoral politics, export subsidies, social institutions, Executive Branch, twentieth century, organizational structure, market oriented, private sector, Public spending, income distribution, financial markets, trading system, global field, testable, Southeast Asia, Latin America,