POSITIVE VERSUS NORMATIVE ANALYSIS

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POSITIVE VERSUS NORMATIVE ANALYSIS

To help clarify the two roles that economists play, we begin by examining the use of language. Because scientists and policy advisers have different goals, they use language in different ways.

For example, suppose that two people are discussing minimum-wage laws. Here are two statements you
might hear:

POLLY: Minimum-wage laws cause unemployment.
NORMA: The government should raise the minimum wage.

Ignoring for now whether you agree with these statements, notice that Polly and Norma differ in what they are trying to do. Polly is speaking like a scientist  She is making a claim about how the world works Norma is speaking like a policy adviser  She is making a claim about how she would like to change the world.

In general, statements about the world are of two types. One type, such as Polly’s, is positive. Positive statements are descriptive. They make a claim about how the world is. A second type of statement, such as orma’s, is normative. Normative statements are prescriptive. They make a claim about how the world ought to be.

A key difference between positive and normative statements is how we judge their validity. We can, in principle, confirm or refute positive statements by examining evidence. An economist might evaluate Polly’s statement by analyzing data on changes in minimum wages and changes in unemployment over time. By contrast, evaluating normative statements involves values as well as facts. Norma’s statement cannot be judged using data alone. Deciding what is good or bad policy is not merely a matter of science. It also involves our views on ethics, religion, and political philosophy.

Positive and normative statements are fundamentally different, but they are often closely intertwined in a person’s set of beliefs. In particular, positive views about how the world works affect normative views about what policies are desirable. Polly’s c laim that the minimum wage causes unemployment, if true, might lead her to reject Norma’s conclusion that the government should raise the minimum wage. Yet normative conclusions cannot come from positive analysis alone  they involve value judgments as well.

As you study economics, keep in mind the distinction between positive and normative statements becau e it will help you stay focused on the task at hand. Much of economics is positive. It just tries to explain how the economy works. Yet those who use economics often have goals that are normative: They want to learn how to improve the economy. When you hear economists making normative statements, you know they are speaking not as scientists but as policy advisers.

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POSITIVE VERSUS NORMATIVE ANALYSIS