Positive vs. Normative Economics
What is Positive vs. Normative Economics?
Positive economics is the study of what is, while normative economics is the study of what ought to be.
Positive economics deals with objective or scientific explanations and predictions about economic relationships and phenomena. Normative economics deals with subjective or value-based statements about what is desirable or what should be. Positive statements can be tested and proven true or false, while normative statements involve personal perspectives and value judgments.
Positive vs. Normative Economics: a worked example
Sort four claims about a proposed soda tax in a made-up city. First: a tax of 2 cents per ounce raises the shelf price of a 20 ounce bottle by 20 x 2 = 40 cents. That is positive, since receipts can confirm or contradict it. Second: soda sales will drop 15 percent in the first year. Also positive, and it can turn out false without becoming normative. Third: the city should spend the revenue on parks. Normative, because should signals a ranking of outcomes. Fourth: the tax is unfair to low income families. Normative, even though the related claim that they spend a larger share of income on soda would be positive.
The mistake students make with positive vs. normative economics
The most common error is hearing positive as meaning correct. A positive statement is one that evidence could settle, not one that has already passed the test, so a forecast that sales fall 15 percent stays positive even if sales rise. The flip side is assuming any statement containing a number is positive. Saying the tax should be set at 2 cents an ounce has a number in it and is still a value judgment. Ask what evidence would refute the claim, rather than scanning for numbers.
Positive vs. Normative Economics questions
How do you tell if a statement is positive or normative?
A statement is positive when some piece of evidence could in principle prove it wrong, and normative when no evidence could settle it. Words like should, ought, fair, better and deserve hint at a normative claim, but they are hints rather than a rule, since a normative sentence can hide them. The reliable check is to name the data that would refute the statement. If you cannot name any, the claim rests on values.
Can economists disagree about positive economics?
Economists disagree about positive questions constantly, usually because the evidence is incomplete or because two models predict different things from the same data. That kind of disagreement is settleable in principle, since better data or a cleaner test can decide it. Normative disagreement works differently: two people can accept every fact on the table and still rank the outcomes differently, because they weigh things like fairness and growth against each other.
Is a prediction positive or normative?
A prediction is a positive statement, because it claims something about how the world will behave and future evidence can confirm or contradict it. Uncertainty does not turn a forecast into an opinion. What would make it normative is bolting a judgment onto it, such as saying the predicted outcome would be a good result and the policy therefore deserves support. The forecast and the endorsement are two separate claims.
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