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The Positive and Normative Economics

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 appro...

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The Positive and Normative Economics. (1969, December 31). In DirectEssays.com. Retrieved 12:15, December 20, 2014, from http://www.directessays.com/viewpaper/200269.html