Positive Economics vs Normative Economics

Positive Economics vs Normative Economics

Economics is both science and art. And it is not only limited to fact or fiction. It is the combination of both.

• Positive economics talks about things that “are”. They are facts. They can be verifiable. You can prove it or disprove it. You can test it. And you can find out whether these statements mentioned under positive economics are true or untrue.
• But normative economics is fiction. They aren’t facts; rather they are opinions of economists who tell us what they think. It can be true for some and false for some. And these statements mentioned under normative economics aren’t verifiable. They can’t be tested either.

You may think, why then there are two divisions of economics? And if normative economics doesn’t talk about facts, why should it exist as a division of economics? Here’s why.

To make policies of businesses or of any country, we need both positive economics and normative economics. We need to know which are facts and then we should use our judgment to form policies that will help individuals and the society at large.

In this article, we will talk about both a comparative analysis between positive economics and normative economics.

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Positive Economics vs Normative Economics Infographics

There are many differences between positive economics and normative economics. Here are the top ones described below –

 

Positive Economics vs Normative Economics – Key Differences

We now know that there are many differences between positive economics vs normative economics, here are the most important differences between them given below –

• The biggest difference between positive economics and normative economics is the former one is based on facts and the latter one is based on values, judgments, and opinions.
• The statements under positive economics can be tested or verified. That means the statements can be either true or false. The statements under normative economics, on the other hand, are opinions and recommendations which can’t be verified until they’re acted upon first.
• The statements under positive economics are objective in nature. The statements under normative economics are subjective in nature.
• The statements under positive economics focus on cause and effect relationships. On the other hand, the statements under normative economics concentrate on what can work and why.
• positive economics and normative economics both are important because, without one, another doesn’t make sense.

Positive Economics vs Normative Economics (Comparison Table)

Basis for Comparison between Positive Economics vs Normative Economics	Positive Economics	Normative Economics
1.    Meaning	Positive economics concentrates on what already are – the facts, the verifiable.	Normative economics depicts a picture of what should be – the opinions, the prescriptions of economists & experts.
2.    What it’s all about?	Positive economics talks about the cause and effect relationship.	Normative economics talks about the opinions and judgments.
3.    Nature of the branch	The nature of positive economics is factual and descriptive.	The nature of normative economics is prescriptive.
4.    Type of argument behind	Type of argument behind positive economics is objective.	Type of argument behind normative economics is subjective.
5.    Merit of testing	Statements under positive economics can be tested and the right/wrong can be found.	Statements under normative economics can’t be tested or verified.
6.    Needed because	Positive economics points out the thing as it is so that a judgment can be passed based on that fact.	Normative economics passes opinions on the facts presented in positive economics.
7.    Based on	Facts, reality.	Values.

Conclusion

Positive economics and normative economics is not important only to policymakers or planners. They are equally important for anyone who is trying to find out a solution based on a fact. If a school sees that the students of the school have been performing lower than average for the last couple of years, they can call up a meeting, talk things out, jot down ideas, and can find the best alternative which can help the students get better marks. In this simple scenario, the combinations of the fact and the solution can be easily traced down from the concepts of positive economics and normative economics.

The two types of economics are so very practical that you can apply them in anything – from business to politics, from sports to social reforms, from policy making to becoming wealthy. All you need to understand to apply these are the combinations of both – positive economics and normative economics.

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