In economics, there is an important distinction between
normative analysis and positive statements.
Normative analysis deals with ideas/opinions/feelings or
moral statements, and generally these statements begin with the word
should. Positive analysis is a statement
or hypothesis about the being or current state of something, and can be tested
to be either true or false.
For example, here are some positive statements:
- The temperate is 85 degrees today (this can be tested, and found to be true or false)
- The sky is blue (if we know what “blue” is, this can be tested)
- More people will buy homes if the price of homes goes down (again, can be tested)
- Raising the minimum wage causes unemployment (again, look at the data and see if it is true or not)
Here are some similar statements that are normative in
nature:
- It is too hot today (how can we test this? It is an opinion)
- We should take a picture of the blue sky (again, a recommendation or opinion)
- We should lower the price of homes (can’t test this, it is how someone feels)
- To be fair, minimum wage should go up (what is fair? There is no real definition in economics about fairness so this cannot be tested)
Sometimes textbooks or teachers will discuss normative analysis
and positive analysis as well, but this generally involves answering the
normative or positive statements or questions.
Being able to recognize the difference between the two is the trick, and
this trick involves the ability to test the statement or not.
So when you see a statement, ask yourself if the statement
can be tested realistically. If it can,
it is a positive statement, and if not, a normative statement.
Finally, remembering the difference between the two. You can think of a positive statement as
either positive or negative, the fact that it can be tested. While a normative statement is what people “think”
is normal. This should help you keep
track of the difference between the two.
If you have other good examples/questions leave them in the comments!
