Positive vs Normative Economics

Positive economics is entirely based on facts which means it explains topics and issues related to the economy without judging them. At the same time, normative economics is merely based on values. Moreover, it is inherently subjective, which means it does not just explain issues and topics concerned with economics but also judges them.

Economics is both science and art. And it is not only limited to fact or fiction. It is a combination of both.

• Positive economics talks about things that exist. They are facts that can be verifiable. You can prove it or disprove it. You can test it and find out whether these statements mentioned under positive economics are true or untrue.
• But normative economics is fiction. They aren't facts; rather, they are economists' opinions who tell us what they think. It can be true for some and false for some. And these statements mentioned under normative economics aren’t verifiable. They can’t be tested either.

You may think, why are there two divisions of economics? If normative economics doesn't talk about facts, why should it exist as a division of economics? Here's why.

To make businesses or any country policies, we need both positive and normative economics. First, we need to know which facts are, and then we should use our judgment to form policies that will help individuals and society.

1. Positive economics examines economic topics and concerns without putting judgement on them because it is entirely fact-based. But, normative economics is only founded on ideas.
2. Cause and effect connections are the main focus of the claims under positive economics. Conversely, the claims made under normative economics focus on what can succeed and why.
3. The assertions made under "positive economics" can be examined or confirmed. In other words, the statements could be true or false. On the other hand, the assertions made by normative economics are opinions and suggestions that cannot be validated.

Here are the most important differences–

• The biggest difference is that the former is based on facts, and the latter is based on values, judgments, and opinions.
• The statements under positive economics can be tested or verified. That means the statements can be either true or false. The statements under normative economics, on the other hand, are opinions and recommendations which can't be verified until they're acted upon first.
• The statements under positive economics are objective. The statements under normative economics are subjective.
• The statements under positive economics focus on cause and effect relationships. On the other hand, the statements under normative economics concentrate on what can work and why.
• Both economics is important because, without one, another doesn't make sense.

They are not important only to policymakers or planners. They are equally important for anyone trying to find a solution based on a fact. So, for example, if a school sees that the students of the school have been performing lower than average for the last couple of years, they can call up a meeting, talk things out, jot down ideas, and can find the best alternative which can help the students get better marks. In this simple scenario, the combinations of the fact and the solution can be easily traced down from positive and normative economics concepts.

These two types of economics are so practical that you can apply them in anything – from business to politics, from sports to social reforms, from policymaking to becoming wealthy.

This has been a guide to positive economics vs. normative economics. Here we discuss positive and normative economics differences with infographics and comparison tables. You may also have a look at the following articles for gaining further knowledge in Economics –

• Examples of Economics Equity
• Real-Life Economics Examples
• Economics vs Business
• Finance vs Economics