Normative Economics

Normative economics is a sub discipline of economics which explains how economics “ought to be” against positive economics which shows how economics practically is. Many normative judgments are condition based working on certain situations where change of values is scientific. Basic or normative judgments do not depend on such knowledge while non basic judgments depend on them. Normative economics is completely theory based and opposite of positive economics. Normative statements are generally found in the information media where people come up with proposals. A better way to understand would be through the instance where a same idea is told as the normative statement “we should cut tax to improve income” and positive statement which would put it as “Reducing tax helps the public and the government”.

Examples of normative statements

• The decision to sanction money to xyz is unwise.
• The national minimum wage is undesirable as it does not help poor.
• The policy of protection is the only proper way to help workers.

Benefits of Positive and normative distinctions

The distinction between positive and normative statements has been very useful because economists find it easier to communicate with each other in a desirable way. This distinction helps us understand why they disagree. When people disagree in their views, they could learn whether their difference stems from varying normative ideas or varying positive ideas. If the dispute is on normative grounds, even evidences would not make them agree each other. On the other hand differences in positive ground would make them agreeable to each other. While making policies however, normative and positive ideas should be combined.

Value judgments are used to measure the validity of economic suggestions and policies. Normative statements cannot be tested, confirmed or refused. Predictions and individual hopes form the base of normative economics. They have a capability to influence one’s attitude towards an economic proposal. When a statement does not agree universally and benefits some while it harms others, it becomes a normative statement since its validity cannot be proved as true or false. This perspective of economics would help one to understand things better.

Economics in general keeps one educated about probable economic perils and have people armed in precaution to meet them. Origins of economic problems are studied so that they are nipped at bud in future. Normative economics is very important for anyone who desires a future in law or politics. With thorough knowledge, economics is easy to be followed.

Questions:

• What is normative economics?
• Mention few examples of normative statements.