Positive Vs Normative Economics_Khushi Gupta
Positive and Normative Economics
1. Positive economics.
Positive economics is a part of economics that contemplates the explanation and evidences of economic ovcurance.
It is the study of economics grounded on the intentionally analysis. Today most economists concentrate on the positive economics analysis.
👉 Objectiv approach.
👉 Rely on facts.
Positive economics is the study of "what is".
It relies on valid data and facts. Every statement is proven significantly and either proven or disregarded.
Example of positive economics:-
Here's an example of a positive economics statements:
"Government-provides Healthcare increases public expenditure."
Thus statement is fact based and has no value judgement attached to it. It's validity can be proven (or disproven) by studying Healthcare spending where government provide Healthcare.
Importance of positive economics.
1. Positive economics is based on Objective data rather than options and value judgements.
2. There are evidences in the form of historical Data. For instance - we can use historical data to determine the relationship between interest interest rate and consumer behavior.
3. Helps policy makers to formulate the appropriate measures required to tackle any economics conditions to move the economy in certain direction.
For example -RBI can decrease repo rates to prevent recession.
4. Helps individual to make wiser economic decisions.
5. Individual interest ar3 least heard.
Drawbacks of positive economics
1. Not everyone is concerned with facts and certain economic conditions are based on emotions.
2. There is the difference between history and present their are various changes in economics. Thus history data are not always valid.
3. Polices and situations that arise from positive economics don't affect everyone the same way
Normative Economics
Unlike the positive economics it iss a perspective on economics that relies on Objective data analysis, Normative economic development, investment, projects, statement and scenarios.
Normative economies is concerned with value judgement and statement of "what ought to be". It expresses ideological judgement about what may result in economics activity if public polices changes are made. Normative Economics statements can't be verified or tested.
👉 It can not be verified or tested.
👉 Normative Economics expresses ideological judgement.
Normative Economics aims to determine people's disrebility or the lack thereof to various economic programs, situations and conditions bybasking what should happen or what ought to be.
Examples of normative economies
The government should offer basic Healthcare for all people and should not discriminate against any citizen".
Importance of Normative economies
1. Normative economies aims to determine what should happen or what ought to be.
2. Normative Economics aims to give solutions.
3. Normative Economics expresses ideological judgement about what may result in economic activity if public polices changes.
4. Normative Economics cannot be verified or tested.
5. Behavioral economics tends to be aa normative proggram.
Drawbacks of Normative Economics
1. There are no facts to verify whether the options is accurate or not.
2. It account for individual opinion which do not have factual accuracy in most of the cases.3. Decision-makers must Rely on assumptions with incomplete knowledge about the area of interest.
4. There are multiple variations for real situations. It provides considerations that cannot be applied to real life.
End.
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