Answer to Question #162335 in Macroeconomics for Pearl

Question

Explain the difference between positive economics and normative economics. 

Answer 1

Positive economics is the subdivision of economics that relies on factual data and uses an objective approach. Normative economics is a division of modern economics that deals with theoretical or prospective situations. Positive economics is centered on description and measurement of economic phenomena and depends upon analysis of objective data as well as pertinent facts. It also tries to establish behavioral relationship used to test development of economic theories. Positive economic statements are precise and quantifiable by use of noticeable evidence e.g. A rise in government spending reduces the unemployment rate.

Normative economics uses a subjective approach towards economic phenomena. It centers around perspective-based statements on economic phenomena with an aim to express ideological judgment or ‘what ought to be’. Normative economic statements are rigid and perceptive as they are heavily concerned with values informed by opinion e.g. No individual should be entitled to inheritances as it belongs to society.