Main Difference Positive vs Normative Economics

Positive and normative economics can be identified

as two major branches of economic reasoning. While
Positive economics is based on the development
and practicing of positive statements about the
world economy which is objective and provable,
normative economy can be defined as an opinion,
estimation or a point of view. It can be simply
differentiated as objective and subjectivestatements.
Accordingly, positive economics tend to ask what is
and normative economics tend to ask What ought to
be. Positive statements can be tested by theoretically
or in practice, but normative statements can never be
tested. This is the main difference between positive
and normative economics.
In this article, we will discuss,
1. What is Positive Economics?
2. What Normative Economics?
3. What is the difference between Positive and
Normative Economics?

What is Positive Economics

Positive economics is a branch of economics, based
on objective analysis. It looks at the cause and effect
behavioral relationships and the development and
practicing of economics theories.
The statement decreasing the interest rate will
increase the investments is an example of a positive
economic statement. The accuracy of this statement
can be measured, and it does not contain value
judgments. Anyone can get an idea about savings,
investments, future inflation, unemployment, supply,
and demand, etc. by statements which are
announced by the government or any other financial
institution. Positive economics helps to make better
decisions about economic activities.

What is Normative Economics

Normative economics is another branch of economics
based on objective analysis and it is concerned with
what ought to be. In other words, it reflects the

opinions and theoretical situations than actual facts.

We all can suggest ideas, opinions for any issue or
problematic situation. If it is only a value judgment, it
is a normative statement. Sometimes it can be proved
or disapproved. We can easily find the normative
economics in social media, journals, goals setting of
companies and government, etc. Those are
subjective opinions, and it would be the best target or
an idea for the company. Attempting to achieve the
normative economy is good for a countrys economy.
Differences
Economics

Between

Positive

and

Normative

Based on
Positive Economics: Positive Economics is based
on data and facts.
Normative Economics: Normative Economics
is based on opinions and values.
Type
Positive Economics: Positive Economic is
descriptive.
Normative Economics: Normative Economics is
narrow.
Function
Positive Economics: Positive Economics explains
cause and effect relationship between variables.
Normative Economics: Normative Economics pass
value conclusions.
Subjective vs Objective
Positive Economics: Positive Economics is
objective.
Normative Economics: Normative Economics is
subjective.
Question
Positive Economics: Positive Economics ask What
actually is.
Normative Economics: Normative Economics ask
What ought to be.
Statements
Positive Economics: Statement can be tested or
proved.
Normative Economics: Statement cannot be tested.
Use
Positive Economics: Positive Economics describe
economics issues.

Normative Economics: Normative Economics

provide solutions based on value.
Positive vs. Normative Economics Conclusion
By considering all the details above, we can conclude
that these two branches are not contradictory. They
are complementary to each other. The area of
description and explanation of economic occurrences
is described by positive economics. Normative
economics describe the values or normative
judgments about economic justice or what should be
the output of economic goals of public policy. Both
these terms are very useful to us but positive
economic statements can only be used in practical
life, and we can see or prove the final results. But in
practice, we should try to achieve the normative
statements.

Positive Statement: Minimum wage creates

unemployment by creating a surplus of
unemployed labor.
Normative Statement: Minimum wage is
good for society because it protects laborers
from wage exploitation.
Positive statement are describing what is
such as a reduction in export tarrifs has
encouraged exporters.
A normative statement is based on what
should be such as the government would
really help exporters if it reduced export
tarrifs.What are positive statements?
Positive statements are objective statements that
can be tested, amended or rejected by referring to the
available evidence. Positive economics deals
with objective explanationand the testing and
rejection of theories. For example:

A fall in incomes will lead to a rise in demand

for own-label supermarket foods

If the government raises the tax on beer, this

will lead to a fall in profits of the brewers.

The rising price of crude oil on world markets

will lead to an increase in cycling to work

A reduction in income tax will improve the

incentives of the unemployed to find work.

A rise in average temperatures will increase

the demand for sun screen products.

Higher interest rates will reduce house prices

Cut-price alcohol has increased the demand

for alcohol among teenagers

A car scrappage scheme will lead to fall in

the price of second hand cars

What are Normative Statements?

A value judgement is a subjective statement of
opinion rather than a fact that can be tested by
looking at the available evidence
Normative statements are subjective statements
i.e. they carry value judgments. For example:

supermarkets and off-licences in a bid to

control alcohol consumption
Focusing on the evidence is called adopting
an empirical approach evidence-based work is
becoming more and more important in shaping
different government policies and how much funding
to give to each.
Key point:
Most economic decisions and policy are influenced by
value judgements, which vary from person to person,
resulting in fierce debate between competing political
parties.
The Ten biggest problems facing the Philippines today
In order to find any solution, one must know the
problem. So let us make a list of the biggest problems
facing our country today. Here is my list of 10 and
everyone is invited to tell me which problems I missed
or which problems should have been not included:

Pollution is the most serious economic

problem

Unemployment is more harmful than inflation

The congestion charge for drivers of petrolguzzling cars should increase to 25

2. Trash

The government should increase the

minimum wage to 7 per hour to reduce
poverty.

4. High crime rates

The government is right to introduce a ban

on smoking in public places.

The retirement age should be raised to 70 to

combat the effects of our ageing population.

Resources are best allocated by allowing the

market mechanism to work freely

The government should enforce minimum

prices for beers and lagers sold in

1. Heavy Traffic

3. Flooding everytime there is rain

5. Drugs
6. Poor Educational System
7. Poverty as seen in the squatter areas
8. Too much politics
9. Pollution
10. Poor healthcare