1.2 Concepts of positive and normative economics
Positive and Normative Economics
Economics is a science. Now the question is whether it is a positive science for a normative science. This question can be discussed as follows:
i) Concept of positive Economics / Science
A positive science studies the things as they happen in reality. It explains what was, what is and what will be. It means positive science only describes. It is neutral
between ends. Economics is a positive science since it studies cause and effect relationship between economic variables. For example, the law of supply studies cause and effect relationship between price and supply of a commodity. This law states that the supply of a commodity rises, when its price rises and vice-versa. The concept of positive economics was introduced by classical economists such as Adam Smith, J.B.
Say, David Ricardo and Modern economist Lionel Robbins. According to Robbins, the function of economists is to explore and explain and not to advocate or condemn. Therefore, Robbins regarded economics as neutral between ends which is not concerned with good or bad, moral or ethical questions. Hence, economics is a positive science.
What is?
What was?
What will?
. If explains about reality / facts.
Tt shows cause and effect relationship of economic variable.
Classical and Modern economists advocate it
For example: (Low of Demand)
Effect
\( \downarrow D = f(P)\uparrow \) cause
and
Vice-Versa
Where,
D = Demand
f = function
P = Price
ii) Concept of Normative Economics | Science
A normative science studies things as they should be. It is related to the criteria of what ought to be. When economics is concerned with what is good or bad, it enters the world of value judgment. This side of the study of economics is called normative economics. The concept of normative economics was developed as well as led by neo-classical economists such as Alfred Marshall, A.C. Pigou etc.
The main aim of economics is to explain the general causes on which the material welfare of human beings depends. Economists offer valuable advice to solve the different economic problems. For example, economists suggest how to remove unemployment, how price can be stabilized etc. It is the duty of economists to make a careful study of different economic problems. Hence, economics is a normative science.
- It deals with what should be? OR
What ought to be?
- It explains about Idealism.
- It explains about ethics.
- It explains only cause.
- Neo-classical economists advocate it.
- It makes value Judgement.
Example: good or bad
pass or fail
Right or wrong etc.
Different between Positive and Normative Economics
The different between positive and Normative economics has been summarized in the following table:
s.N Positive Economics s.N Normative Economics
- It express what is/was/will be.
- It express what ought to be.
- It is based on facts
- It deals with actual or realistic situation.
- It is based on ethics.
- It can be verified with actual data.
- It deals with idealistic situation.
5 | Value judgment is not given
A. It cannot be verified with actual data.
- If deals with how an economic problem is solved.
- Value judgment is given.
- It deals with how an economic problem should be solved.