Difference Between a Positive and Normative Statements In Economics

This paper explains in detail basic terms in economics and its importance. Economics is mainly one of the social sciences that focus on manufacture, distribution, sale, and consumption of goods or services. Its main aim is to explain how the working principles of economies and the interaction between its varied agents. Economists have to distinguish between positive and normative economics, so as to be able to make informed decisions. Positive economics are mainly objective and based on facts, while normative economics are based on values and very subjective (Stock, 2012). Therefore, positive economic statements must be able to be tasted either in theory or practically, and proved to be either right or wrong. Normative economic statements on the other hand cannot be proved or disapproved because they are based on people’s opinions. Since normative statements are derived from opinions or a person’s point of view, words like “ought to” and “should” are frequently used in the statements.

It is also important to note that normative statements can be rephrased to form positive statements. An example of a normative statement is, “It is a good thing to raise farm prices in developing countries.” This statement can be rephrased to form a positive statement like, “The aspect of raising the prices of farms in developing countries will help in improving rural incomes amongst the populations.” This statement is positive because it can be tested theoretically. Positive statements can also be broken down into cause and effects, while normative statements cannot. Better and effective policy making can only be promoted if policy makers opt to use positive statements because they can be proved to be correct or not (Stock, 2012).

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