What is Positive and Normative Economics

Economics can be viewed from two angles one is called positive economics and other is called normative economics. Let’s look at both of them

Positive Economics – Positive economics is that branch of economics which uses scientific method to observe data, and do testing. Statement made in positive economics are one which can tested against real world facts or statistics and hence can either proved right or wrong. Hence positive economics does not any economic value judgments. Hence for example if there is debate whether to produce cigarettes or not then person using positive economics will only see the data regarding demand and supply related to cigarettes and will not pass any judgment whether it is advisable to produce it or not. It will also not take into account the diseases which occur due to smoking it will only give statement like cigarette demand has risen from 1 million to 1.5 million which can be tested against real world statistics.

Normative Economics – On the other hand normative economics is that branch of economics which passes value judgments rather than giving only data. Hence in above case normative statement would be that cigarette is injurious for health.

Therefore from the above one can see that positive economics makes statement about “What is” without passing any judgment on it and normative economics makes statements about “What ought to be” and hence it passes judgment whether it is advisable to do it or not.

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