Difference Between Positive and Normative Economics
Positive economics is entirely based on facts which means it provides explanation for topics and such issues that are related to economy without even judging then while normative economics is merely based on values and it is inherently subjective which means it does not just provides explanation for issues and topics concerned with economics but judges them as well.
Economics is both science and art. And it is not only limited to fact or fiction. It is a 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.
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To make policies of businesses or of any country, we need both positive 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.
Positive vs Normative Economics Infographics
Key Differences Between Positive and Normative Economics
Here are the most important differences–
- The biggest difference 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.
- Both economics is important because, without one, another doesn’t make sense.
|Basis for Comparison||Positive Economics||Normative Economics|
|1. Meaning||It 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 opinions and judgments.|
|3. Nature of the branch||Nature factual and descriptive.||Nature is prescriptive.|
|4. Type of argument behind||The type of argument behind positive economics is objective.||The 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.|
They are 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.
These 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 policymaking to becoming wealthy.
Positive Economics vs Normative Economics Video
This has been a guide to Positive Economics vs Normative Economics. Here we discuss Positive and normative economics differences with infographics and comparison tables. You may also have a look at the following articles for gaining further knowledge in Economics –