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Difference between Positive and Normative Economics

Positive economics

Positive economics is a stream of economics has an objective approach, that focuses on the description, quantification, and explanation of economic developments, expectations, and associated phenomena. It relies on objective data analysis, relevant facts and associated figures. It explains people about how the economy of the country operates.

Positive economics attempts to establish any cause-and-effect relationships or behavioral associations which can help ascertain and test the development of economics theories. Statements based on positive economics considers what’s actually occurring in the economy. It helps the policymakers to decide whether the proposed action, will be able to fulfill our objectives or not. In this way, they accept or reject the statements.

Normative economics

Normative economics is another branch of economics based on objective analysis and it is concerned with “what ought to be.” In other words, it reflects the opinions and theoretical situations than actual facts. We can easily find the normative economics in social media, journals, goals setting of companies and government, etc. Those are subjective opinions, and it would be the best target or an idea for the company. Attempting to achieve the normative economy is good for a country’s economy.

In short, normative economics focuses on the ideological, opinion-oriented, prescriptive, value judgments and statements aimed towards economic development, investment projects, and scenarios.

Differences Between Positive and Normative Economics

Positive and Normative Economics

1- Positive Economics is based on data and facts. while Normative is based on opinions and values.

2- Positive Economic is descriptive and objective. But Normative Economic is narrow and subjective.

3- Positive Economic explains the cause and effect relationship between variables. While Normative Economic pass value conclusions.

4- While Positive Economics ask “What actually is”. Normative ask “What ought to be”.

5- In Positive Economics, Statement can be tested or proved. But in Normative Economic, Statement cannot be tested.

6- Positive Economics is used to describe economics issues. But Normative is used to provide solutions based on value.

7- A positive statement can be verified against evidence or historical instances and can be approved or disapproved. A normative statement is usually based on opinion and remains a value judgment that originates from personal perspectives, feelings, or opinions involved in the decision-making process.