Positive Economics
Positive economics is a branch of economics that focuses on the study of what is rather than what ought to be. In other words, it deals with the objective analysis of economic behavior and outcomes without making any value judgments.
Positive economics seeks to explain economic phenomena as they are rather than how they should be. It is based on empirical evidence, which is derived from observation, measurement, and experimentation. This approach helps economists to develop theories that are based on facts and evidence rather than opinions and beliefs.
Positive economics is concerned with the analysis of economic behavior and outcomes in a manner that is based on objective data and scientific methods. It is a descriptive approach to economics that seeks to explain economic phenomena through observation, measurement, and experimentation.
One example of positive economics is the study of the effects of a minimum wage increase on employment. Economists can analyze data to determine how minimum wage laws affect the number of people employed in a particular industry. This approach can help policymakers make informed decisions about minimum wage laws based on empirical evidence.
Positive economics is important because it helps economists to develop theories that are based on objective data and scientific methods. This approach can help policymakers to make informed decisions about economic policies that are based on evidence rather than opinions and beliefs. It also helps to promote transparency and accountability in economic decision-making.
Normative Economics
Normative economics is a branch of economics that deals with the study of economic behavior and outcomes, with a focus on what ought to be rather than what is. This approach involves making value judgments and opinions on what should be done to achieve desired economic outcomes.
Normative economics is a branch of economics that deals with the study of economic behavior and outcomes, with a focus on what ought to be. This approach involves making subjective value judgments and opinions about what should be done to achieve desirable economic outcomes.
Normative economics is concerned with what should be done to achieve desirable economic outcomes rather than describing economic phenomena as they are. It involves making subjective value judgments and opinions about what economic policies should be implemented to achieve desired outcomes.
One example of normative economics is the study of how to reduce income inequality in society. Economists can analyze different policies, such as progressive taxation or a minimum wage increase, and make value judgments on which policy would be the most effective in reducing income inequality.
Normative economics is important because it helps policymakers to make informed decisions on economic policies that promote desirable economic outcomes. By making value judgments about the most effective policies to achieve desired outcomes, normative economics can help promote greater economic equality, social justice, and overall well-being in society. However, it is important to note that normative economics is subjective and can vary depending on individual values and beliefs, making it a complex and often the contested field.
Differences between Positive and Normative Economics
| Basis of Difference | Positive Economics | Normative Economics |
|---|---|---|
| Focus | Descriptive | Prescriptive |
| Concern | What is | What ought to be |
| Approach | Objective | Subjective |
| Analysis | Empirical | Value-laden |
| Assumptions | Positive | Normative |
| Basis of Judgment | Factual | Opinion-based |
| Methodology | Observation | Judgment |
| Scientific | Yes | No |
| Policy Implications | Neutral | Prescriptive |
| Examples | Minimum wage laws | Income inequality |
The above table shows highlights of the Differences between Positive and Normative Economics. These highlights are explained as follows:
- Positive economics is descriptive, while normative economics is prescriptive.
- Positive economics focuses on what is, while normative economics focuses on what ought to be.
- Positive economics is objective, while normative economics is subjective.
- Positive economics is based on empirical analysis, while normative economics is value-laden.
- Positive economics assumes the presence of a market, while normative economics does not.
- Positive economics uses factual information, while normative economics uses opinion-based information.
- Positive economics relies on observation, while normative economics relies on judgment.
- Positive economics is scientific, while normative economics is not.
- Positive economics is neutral in terms of policy implications, while normative economics is prescriptive.
- Examples of positive economics include minimum wage laws, while examples of normative economics include income inequality.
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