Positive Economics

Positive economics is a study of economics based on facts, and is easily verifiable for the concerned authorities to approve or disapprove.. It is an objective analysis that derives test statements, which could be held true or false based on the facts, figures, explanations, and comparisons that helped analysts to come to the respective conclusions.

A positive economics statement obtained is all about getting to a point where there can be no further opinion on it. This state of equilibrium is achieved when the statement is free of judgments, evaluations, and arguments.

• Positive economics is a branch of economics that is fact-based, verifiable, and subject to proof or refutation. Additionally, you can put positive economic statements to the test to determine their veracity.
• The law of demand is positive economics since it can be proven; it is a descriptor that can either be true or untrue after being tested or validated.
• Income isn’t equal in all countries; another positive economics statement that can be proven or stated as right or wrong. 
• When the government levied taxes on tobacco, people started smoking less. It is a fact that can be proven with statistics.

Positive economics came into existence when British economist John Neville Keynes first talked about the differences between positive and normative economics in 1891.. He mentioned that this economics depicts “what is” and normative economics portrays "what ought to be."

Then, in 1947, American Economist Paul A. Samuelson from Harvard University Press published a book Foundations of Economic Analysis –. where he labeled the statements under positive economics as “operationally meaningful theorems.”

In a 1953 book named “Essays in Positive Economics,” another economist from America, Milton Friedman, emphasized positive economics methodology. It clarified how this part of economics talks only about the descriptive options and statements, not about the judgments or opinions offered by people (or experts).

The study focuses on the fact-based description and explanation of a scenario to reach a conclusion and derive reliable and effective economic theories that hold true in the global economic sphere.

Normative and positive economics are two opposite concepts. As Keynes, the economist mentioned above stated how positive statements of economics are based on what is unlike normative economics conclusions that emphasize what ought to be.

Some of the features that make positive economics statements the most reliable economic sources of information include:

• These are developed on the basis of facts and proper explanations. Hence, if individuals and entities need to verify the data, they can easily do so.
• There is a foolproof series of steps followed to reach a valid conclusion for the statements to be developed. Those who desire to investigate the process can do so.
• No subjectivity is involved. From gathering facts to deriving conclusions, the analysis is objective in nature.

These are fact-based reliable sources, which help develop appropriate economic theories and concepts.

Let us consider some positive economics examples to understand the concept better:

Statement # 1

The law of demand - “If other factors remain constant, if price rises, demand declines; and if price decreases, demand inclines.”

This is the law of demand. It is a positive economic statement because demand will rise or fall if prices fall or rise in inverse proportion; when other factors remain constant. However, it is not an opinion. It is not a value-based description of what could be. It is not even a judgment of an expert stating about the price and demand. Rather, it is a descriptive statement that can be tested or verified and can be true or false.

But if it can be true or false, why do we need these sorts of statements? The reason is we need facts before we opine. It is important to know "what is" before we reach the point of "what ought to be."

Statement #2

Income isn’t equal in all countries.

This statement again doesn't tell whether it's true or false. It's also not the opinion of an economist or an expert. Rather it simply is. In some countries, this statement may not be true. But since there is a huge gap between rich and poor and as the middle class is quickly evaporating, we can state this.

This is a positive economic statement because we would be able to verify it by looking at the statistics of various countries. If we see that most countries suffer from the extreme upper and lower limit in wealth, this statement will certainly become the truth. Otherwise, we will call it false.

Statement #3

When the Government levies more taxes on tobacco, people started smoking less.

Ask any addicted smoker, and you would see that this statement isn't true at all, and that's why it's a positive economic statement. Usually, when the government levies huge taxes on tobacco, people stop/reduce smoking. So it's, it's not an opinion since it is a fact (or opposite of fact). As a result, one can verify this by looking at the various statistics.

If an economist or expert offers their sagacious comment, this statement will turn into a statement under normative economics.

Since positive economics is fact-based, there is no assumption or opinions involved when the statements are prepared. Given the objectivity of the study, observing and analyzing economic theories and establishing relationships between two economic entities or concepts is easier.

The fact-based analysis helps establish relationships between the market and price equilibrium. At a point, the equilibrium is what it is when there’s no further opinion applicable. This is where when a statement is derived or prepared, it falls under this type of economics.

This has been a Guide to what is Positive Economics. Here we explain the concept with examples of statements, importance, and characteristics. You may also learn more about Economics from the articles below –

• Compare - Positive vs Normative Economics
• Grexit
• General Examples of Economics
• Microeconomics Principles