Normative and Positive Statements

11 Key excerpts on "Normative and Positive Statements"

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  Microeconomics

  A Contemporary Introduction

  • William A. McEachern(Author)
  • 2016(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  If we reject the hy-pothesis, we can try to go back and modify our approach in light of the results. Please spend a moment now reviewing the steps of the scientific method in Exhibit 3. 1-3c Normative Versus Positive Economists usually try to explain how the economy works. Sometimes they concern them-selves not with how the economy does work but how it should work. Compare these two statements: “The U.S. unemployment rate is 5.6 percent,” and “The U.S. unemployment rate should be lower.” The first, called a positive economic statement , is an assertion about eco-nomic reality that can be supported or rejected by reference to the facts. Positive economics, like physics or biology, attempts to understand the world around us as it is. The second, called a normative economic statement , reflects an opinion. And an opinion is merely that—it cannot be shown to be true or false by reference to the facts. Positive statements concern what is; normative statements concern what, in someone’s opinion, should be. Positive state-ments need not necessarily be true, but they must be subject to verification or refutation by reference to the facts. Theories are expressed as positive statements such as “If the price of Pepsi increases, then the quantity demanded decreases.” Most of the disagreement among economists involves normative debates—such as the appropriate role of government—rather than statements of positive analysis. To be sure, many theoretical issues remain unresolved, but economists generally agree on most fun-damental theoretical principles—that is, about positive economic analysis.

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  Macroeconomics

  A Contemporary Introduction

  • William A. McEachern(Author)
  • 2016(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  If we reject the hy- pothesis, we can try to go back and modify our approach in light of the results. Please spend a moment now reviewing the steps of the scientific method in Exhibit 3. 1-3c Normative Versus Positive Economists usually try to explain how the economy works. Sometimes they concern them- selves not with how the economy does work but how it should work. Compare these two statements: “The U.S. unemployment rate is 5.6 percent,” and “The U.S. unemployment rate should be lower.” The first, called a positive economic statement, is an assertion about eco- nomic reality that can be supported or rejected by reference to the facts. Positive economics, like physics or biology, attempts to understand the world around us as it is. The second, called a normative economic statement, reflects an opinion. And an opinion is merely that—it cannot be shown to be true or false by reference to the facts. Positive statements concern what is; normative statements concern what, in someone’s opinion, should be. Positive state- ments need not necessarily be true, but they must be subject to verification or refutation by reference to the facts. Theories are expressed as positive statements such as “If the price of Pepsi increases, then the quantity demanded decreases.” Most of the disagreement among economists involves normative debates—such as the appropriate role of government—rather than statements of positive analysis. To be sure, many theoretical issues remain unresolved, but economists generally agree on most fun- damental theoretical principles—that is, about positive economic analysis.

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  The Philosophy of Economics

  On the Scope of Reason in Economic Inquiry

  • Subroto Roy(Author)
  • 2003(Publication Date)
  • Routledge

    (Publisher)

  ought to be done or not done by a government or a private economic agent, have been believed to fall into quite a different category. These have been believed to amount sooner or later to being expressions of subjective personal opinion, either on the part of individual economists or of those whom they may happen to be advising.

  Most economists who have considered the matter have allowed that there is usually at least some scope, and sometimes much scope, for common reasoning on logical and empirical grounds to be brought to bear in normative discussion; making it possible that at least some of the disagreements between economists or citizens or politicians on normative questions can come to be objectively resolved. But it has been believed possible also for the processes of common reasoning to become exhausted in discussions of normative questions like those of economic policy or ethics or jurisprudence, in a way they are not supposed to become exhausted in discussions of positive questions like those of economic theory or econometrics or natural science or mathematics. Once such a point of the exhaustion of reason has been reached, any residual conflict which remains is to be considered necessarily irreconcilable and of a sheer normative kind. And such sheer normative opinions, upon which it is not possible to bring to bear any further objective consideration, are to be supposed to express the purely subjective attitudes and feelings of the individual person, opinions which might happen to be shared by others too, but which are certainly closed to further argumentation, whether in public or in the person’s own mind. Put a little differently, the theory of knowledge and policy, which we shall see to have been widely accepted by many economists in the twentieth century, has made an assumption that while all questions of analysis and evidence can have objectively true or false answers, only some and not all questions of evaluation and prescription can have objectively right or wrong answers.

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  Public Finance

  A Contemporary Application of Theory to Policy

  • David Hyman(Author)
  • 2013(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  POSITIVE AND NORMATIVE ECONOMICS Positive economics is a scientific approach to analysis that establishes cause-and-effect relationships among economic variables. Positive theory attempts to be objective, making no presuppositions about what is good or bad or what should be accomplished. It merely formulates hypotheses of the “If … then” variety that can be checked against facts. 1 For example, a positive analysis of the impact of a proposal to widen a road can be used to predict how the road will benefit users by reducing the time and money costs involved in getting between two locations. A positive analysis of the impact of a food subsidy to low-income persons can be utilized to estimate the effect of the subsidy on the price of food and the quantity available to the recipients. The predictions can then be checked against the facts to determine how well the positive theory has worked. The normative approach is based on value judgments about what is desirable or what should be done to achieve the desired outcome. Normative theory begins 1 For a classic discussion of the positive approach, see James M. Buchanan, “Positive Economics, Welfare Economics, and Political Economy,” Journal of Law and Economics 2 (October 1959): 124–138. 54 PART ONE The Economic Basis for Government Activity Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. with predetermined criteria and is used to prescribe policies that best achieve those criteria. Normative economics is designed to formulate recommendations as to what should be accomplished.

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  Economic Analysis & Canadian Policy

  • David Stager(Author)
  • 2013(Publication Date)
  • Butterworth-Heinemann

    (Publisher)

  Some of the disagreement stems from problems with analytical techniques and inadequate statistics. But more often the disagreement stems from differences in political or social judgments about what should be done in response to economic problems. Normative and Positive Economics These two types of disagreement reflect different aspects of economics: economic analysis and economic policy, A policy is a course of action that is expected to bring about some specific objective or goal. An economic policy thus includes a statement of what the goals should be, as well as the means for attaining such goals. It is at this point that the role of the economist is sharply questioned; that is, should his or her studies be confined to analysis or positive economics, or should these deal in policy or normative economics as well? Positive economics is concerned with describing and analyzing the way things are. Normative economics emphasizes the way things should or ought to be. Positive economics would, for example, be interested in a change in the price of milk, without being concerned about whether this price was good or bad. Normative economics, however, would make a judg-ment about the price of milk, perhaps that it was so high that some chil-dren received too little milk, or so low that dairy farmers received an inadequate income. 22 Chapter Two Disputes in positive economics can be settled by appealing to the rele-vant facts and the analytical techniques. If there is agreement on what the facts are and how they should be analyzed, there is no reason for further dispute. Because economists have been concerned with develop-ing analytical techniques, they are equipped to handle problems in posi-tive economics. However, they have no similar tools for dealing with dis-agreements about the value judgments made in normative economics.

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  The Positive and the Normative in Economic Thought

  • Sina Badiei, Agnès Grivaux, Sina Badiei, Agnès Grivaux(Authors)
  • 2022(Publication Date)
  • Routledge

    (Publisher)

  1 The Positive and the Normative in Economic Thought A Historical-Analytic Appraisal Sina Badiei and Agnès Grivaux DOI: 10.4324/9781003247289-1 Introduction The relationship between the positive and the normative is one of the most central methodological and theoretical problems in economics, as shown by numerous debates in the last two decades. Examples from the growing body of work on this subject include Davis (1990, 2003, 2014), Hausman (1992/2003, 2011, 2018), Hausman et al. (2016), Mongin (2002, 2006a, 2006b, 2018), Putnam (2002, 2003), Putnam and Walsh (2012), Caplin and Schotter (2008), Boylan and Gekker (2009), Hands (2012), Su (2012), Colander and Su (2013, 2015, 2019), and Marchetti and Marchetti (2017). Studying various and distinct approaches to the relationship between the positive and the normative is valuable for economics and philosophy, since it can allow us to lay bare the assumptions that are often implicitly presupposed in the works of economists. These assumptions tend to exert significant influence on the way economists describe social phenomena, evaluate them and propose a whole range of policies and proposals to reform public institutions. These studies can moreover highlight or make explicit an important number of conceptual distinctions, for example, between norms, values and facts, or between description, evaluation and prescription. For example, Wade Hands (2012) insists on the necessity of distinguishing, on the one hand, between epistemic values that influence scientific work and social norms that regulate the behaviour of socio-economic agents in general (ibid., 220–221) 1 and, on the other hand, between ethical norms and other types of social norms. For Hands, it is a mistake to consider all norms as ethical since, for example, ‘rationality in the sense of rational choice theory does not imply moral choice; it may be a normative theory, but it is not an ethically normative theory’ (ibid., 231)

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  Economics and Ethics

  An Introduction

  • A. Dutt, C. Wilber(Authors)
  • 2010(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  “What is” and “what ought to be” are thus inextricably commingled in the data, the facts, the theories, the descriptions, the explanations, the prescriptions, and so on. All are permeated by the a priori world view. Making explicit the values embodied in that world view will help keep economics more honest and useful. However, our analysis does not imply that the positive/normative distinction should be discarded. Although ethical considerations enter both positive and normative economics, they enter them in different ways and this may make it useful to distinguish between them. 21 Some questions are purely evaluative ones which cannot even in principle be decided by appealing to what the real world looks like, and others are primarily about the real world and can in principle be evaluated using empirical information. The positive–normative distinction can be use- ful because it keeps these questions separate, and because it can make debates about some issues less acrimonious by making it less likely that the debate will focus on raising doubts about the moral character of its 34 Introduction and Background participants. Moreover, it can issue a warning to the general public about the relevance of the credentials economists – say those who are experts at mathematical modeling or statistical analysis – have in deciding what is good for society. Our conclusion that value judgments cannot be separated from eco- nomics also does not imply that that we may as well stop having reasoned discussions concerning economics and economic policy, and that anything goes. It means that ethical considerations will have to enter the equation in deciding on what should be proper policies. Ethical issues also need not be decided on purely personal beliefs or preferences, but can, at least to some degree, be subject to reasoned argu- ment and discussion.

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  Survey of Economics

  • Irvin Tucker(Author)
  • 2018(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  CHAPTER 1 • Introducing the Economic Way of Thinking 11 CONCLUSION CONCLUSION is close to 9 percent, the unemployment rate for teenagers never reaches 80 percent. For example, the overall unemployment rate was 9.6 percent in 2010, and the rate for teenagers was 25.9 percent—far short of 80 percent. Based on the facts, we would conclude that this positive statement is false. Now we can explain one reason why economists’ forecasts can diverge. The statement “If event X occurs, then event Y follows” can be thought of as a conditional positive state-ment. For example, two economists may agree that if the federal government cuts spending by 10 percent this year, prices will fall about 2 percent next year. However, their predictions about the fall in prices may differ because one economist assumes Congress will not cut spending, while the other economist assumes Congress will cut spending by 10 percent. Economists’ forecasts can differ because using the same methodology, economists can agree that event X causes event Y , but disagree over the assumption that event X will occur. 1–6b Normative Economics Instead of using objective statements, an argument can be phrased subjectively. Normative economics attempts to determine “what should be.” Normative economics is an analysis based on subjective value judgments. Normative statements express an individual or col-lective opinion on a subject and cannot be proven by facts to be true or false. Certain words or phrases, such as good , bad , need , should , and ought to , tell us clearly that we have entered the realm of normative economics. The point here is that these subjective value judgments are the result of ever-present social and political influences that shape our opinions. An animal rights activist says that no one should purchase a fur coat. Someone else may argue that government ought to take steps to ensure a more fair distribution of income and wealth.

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  Reassessing the Paradigm of Economics

  Bringing Positive Economics Back into the Normative Framework

  • Valeria Mosini(Author)
  • 2011(Publication Date)
  • Routledge

    (Publisher)

  VII). His conclusion stemmed from the consideration that economic concepts reflected different outlooks on social interactions in general, of which economic interactions were only an aspect, and on different conceptions of human nature, which may or not be approximated by homo economicus. Regarding economic concepts as unavoidably value-loaded, Myrdal identified an important step in the direction of making economic discourse more rigorous in the explicit acknowledgement that subjective evaluations were embedded in economic concepts, and that value-judgements were often subsumed in the assumptions of economic theorising. The positive-normative distinction at the time of publication of Essays Summing up, in the early 1950s, a widely shared position on the positive-normative distinction had emerged, which accepted that economists’ preconceptions, presuppositions and prejudices affected positive analysis; it may be summarised as follows: 1.  positive and normative inquiry concern different areas of economics; the former is subjected to scientific, the latter to ethical and social, criteria; 2.  there are areas of overlap between positive and normative inquiry in that the ‘what is’ investigated by positive analysis does not exist in a vacuum but in the context of the normative framework in operation; moreover, given the impact of policy directions on everyone's life, the conclusions of positive analysis should be subjected to moral scrutiny and their social consequences carefully evaluated prior to basing policy recommendations on them; 3.  given the overlap between positive and normative matters, leaving out of positive inquiry ethical, political and social considerations is a methodological error. The position summarised above remained the dominant one in the 1960s (see, for instance, Marris: 1954, Allen: 1960), 13 leading to the suggestion that economists would command more respect if ‘they laid greater stress on the

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  Foundations of Organisational Economics

  Histories and Theories of the Firm and Production

  • Paul Walker(Author)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  Looking at the history of the theory of production/the firm, the replacement of a normative framework of analysis with a positive one also stands out. Before the seventieth century, the predominant mode of enquiry was a descriptive/normative one. Looking back at ancient China, India and Greece or to medieval Islam and Christianity, we see that the little that was written on production was written within a descriptive/normative framework. The frameworks applied were ethical and/or religious. The questions asked were about what should be produced or what production or occupations would find favour with God or what production was ethically justified. The important point is that these normative frameworks did not give rise to a theory of production, such a theory had to wait for the mercantilists, and a more positive approach to economics before it stated to develop.

  A clear recognition of a formal distinction between normative and positive analysis goes back, at least, as far as John Neville Keynes. Keynes wrote

  [a]s the terms are here used, a positive science may be defined as a body of systematized knowledge concerning what is; a normative or regulative science as a body of systematized knowledge relating to criteria of what ought to be, and concerned therefore with the ideal as distinguished from the actual; an art as a system of rules for the attainment of a given end. The object of a positive science is the establishment of uniformities, of a normative science the determination of ideals, of an art the formulation of precepts.

  (Keynes 1917: 34–5; emphasis in the original)

  Carl Menger also saw a difference, with regard to ethical considerations, between theoretical economics (positive economics) and economic policy (normative economics). In Investigations into the Method of the Social Sciences with Special Reference to Economics

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  Macroeconomics as a Second Language

  • Martha L. Olney(Author)
  • 2011(Publication Date)
  • Wiley

    (Publisher)

  Economists sometimes use the phrase aggregate to describe any such group. Macroeconomics is usually applied to a national econ- omy, such as that of the United States, but the tools of macroeconomics can be applied to any aggregate economy: a region, a state, a county, a city. Questions in macroeconomics include • What determines the economy’s inflation rate? • What determines the economy’s unemployment rate? • What determines the total income of an economy? Economic analysis—whether it is microeconomic or macroeconomic analysis—can be divided into two categories: positive economics and normative economics. Positive economics answers questions that are usually phrased as “How does this thing affect that thing?” How does a drop in spending by households affect the number of jobs in an economy? Normative economics answers questions that are usually phrased as “Should this action be taken?” Should the federal government raise taxes? Most economic analysis is positive economic analysis. Positive economics requires analysis of a question, but no judgment as to what is best for soci- ety. Normative economics requires a value judgment. When offering a normative analysis—should this action be taken?—it is necessary to state what goal(s) we are trying to achieve. Disagreements among economists are almost always in the realm of normative economics. Disagreeing economists usually agree on the pos- itive analysis: how will the policy affect the economy? But they disagree on the best goal: Is our goal to reduce inequality, or to enhance growth? Is it to lower inflation, or to create jobs? When you hear economists disagree, oftentimes their ultimate disagreement is over what goals they hold for society. Overview of Macroeconomics 5 The use of empirical evidence is also an important part of economics. Empir- ical evidence means data—statistics, numbers—that can be used to support an argument.

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