Economics is a social science. Now the question arises whether it is a positive science or a normative science.


Economists make a distinction between positive and normative which has been well explained by David Hume in 1739, and Machiavelli used it two centuries earlier, in 1515.

According to George Bernard Shaw, “If you took all of the economists in the country and laid them end to end, they’d never reach a conclusion”.
Shaw’s line echoes a popular view that economists seldom agree, but all economists agree on about most basic concepts and broad models described in most standard economics textbooks.

In short economists may differ sharply about how even widely accepted theory applies in a specific case. They disputes about how to translate theory into policy get a lot of press, while broad areas of agreement tend to be ignored.

The question whether economics is a positive or normative science has been a controversial one.
There is of course, no disagreement on the positive character of economics. Economists tend to agree most about positive economics—which, ideally, generates ideas that are free of value judgments and which can be tested for accuracy.

The dispute, however, arises when it comes to discussing economics as a normative science.
There have been in the past two distinct schools of thought on this issue.

The old English classical school of economists held that economics was purely a positive science & economists had no right to comment on the rightness or wrongness of economic phenomenon.

The historical school of Germany held just the contrary view & firmly believed that eco should not cut itself apart from ethical consideration.

It is therefore necessary to understanding the meaning of the terms positive & normative. Lord J.M. Keynes has appropriately distinguished between them as A positive science may be defined as a body of systematised knowledge concerning “what is”: a normative science is a body of systematised knowledge relating to the criteria of “what ought to be”. It is concerned with the ideal rather than the actual.

The objective of a positive science is establishment of uniformities; of a normative science the determination of ideals.”In other words a positive science deals with things “as they are” .It explains their causes & effects, but it remains strictly “neutral between ends”

A normative science, on the other hand deals with things `as they ought to be’ It discusses the rightness or wrongness of anything, or whether the ends are good or bad etc. eg. Ethics.

Positive economics

Positive economics (as opposed to normative economics) is the branch of economics that concerns the description and explanation of economic phenomena.[1]
It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories.[2]

A positive statement is a statement about what is and that contains no indication of approval or disapproval. Notice that a positive statement can be wrong. “The moon is made of green cheese” is incorrect, but it is a positive statement because it is a statement about what exists.

Positive economics as science, concerns analysis of economic behavior. As such it avoids economic value judgements. For example, a positive economic theory might describe how money supply growth affects inflation, but it does not provide any instruction on what policy ought to be followed.

Still, positive economics is commonly deemed necessary for the ranking of economic policies or outcomes as to acceptability,[1] which is normative economics.

Positive economics is sometimes defined as the economics of “what is”, whereas normative economics discusses “what ought to be”.

The distinction was exposited by John Neville Keynes (1891)[4] and elaborated by Milton Friedman in an influential 1953 essay.[5]

Descriptive, factual statements about the world are referred to as positive statements by economists. The term “positive” isn’t used to imply that economists always convey good news, of course, and economists often make very, well, negative positive statements. Positive analysis, accordingly, uses scientific principles to arrive at objective, testable conclusions.

According to Milton Friedman, “positive economics deals with how an economic problem is solved; normative economics, on the contrary, deals with how an economic problem should be solved.”

Example-a positive enquiry would be, what determines the rate of interest? Therefore a positive enquiry is independent of ethical considerations.

Positive economics deals with ascertainable facts i.e “it studies ‘knowledge for the sake of knowledge”.

Positive economics concerns what is. To illustrate, an example of a positive economic statement is as follows, the price of milk is Rs 40 per litre.

Normative economics

Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be.[1]
Normative economics deals with values and addresses what should be rather than what is.

A normative statement expresses a judgment about whether a situation is desirable or undesirable. “The world would be a better place if the moon were made of green cheese” is a normative statement because it expresses a judgment about what ought to be. Notice that there is no way of disproving this statement. If you disagree with it, you have no sure way of convincing someone who believes the statement that he is wrong.

It is common to distinguish normative economics (“what ought to be” in economic matters) from positive economics (“what is”). But many normative (value) judgments are held conditionally, to be given up if facts or knowledge of facts changes, so that a change of values may be purely scientific. This leaves open the possibility of fruitful scientific discussion of value judgments.[3]

Positive economics is sometimes defined as the economics of “what is”, whereas normative economics discusses “what ought to be”.

Economists refer to prescriptive, value-based statements as normative statements. Normative statements usually use factual evidence as support, but they are not by themselves factual. Instead, they incorporate the opinions and underlying morals and standards of those people making the statements. Normative analysis refers to the process of making recommendations about what action should be taken or taking a particular viewpoint on a topic.

According to Milton Friedman, “positive economics deals with how an economic problem is solved; normative economics, on the contrary, deals with how an economic problem should be solved.”

A normative enquiry would be what constitutes a fair rate of interest? Therefore a normative enquiry is linked with ethical considerations.

Modern economists however say that economics is also a normative science or a` fruit-bearing’ science, as it is concerned with human welfare. It should give practical solutions to attain maximum welfare.

An example of a normative economic statement is as follows.
The price of milk should be Rs 50 per litre to give dairy farmers a higher living standard and to save the family farm.
This is a normative statement, because it reflects value judgments. This specific statement makes the judgment that farmers need a higher living standard and that family farms need to be saved.[1]


Positive and normative economics are often synthesized in the style of practical idealism. In this discipline, sometimes called the “art of economics,” positive economics is utilized as a practical tool for achieving normative objectives.

Economists have found the positive-normative distinction useful because it helps people with very different views about what is desirable to communicate with each other.

When they disagree, they can try to learn whether their disagreement stems from different normative views or from different positive views. If their disagreement is on normative grounds, they know that their disagreement lies outside the realm of economics, so economic theory and evidence will not bring them together.

However, if their disagreement is on positive grounds, then further discussion, study, and testing may bring them closer together.

Economists can confine themselves to positive statements, but few are willing to do so because such confinement limits what they can say about issues of government policy. Both positive and normative statements must be combined to make a policy statement. One must make a judgment about what goals are desirable (the normative part), and decide on a way of attaining those goals (the positive part).

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