Distinguish between positive and normative economics. Which one should be preferred and why?

1. Introduction:

Economics is a social science that studies how individuals, businesses, governments, and societies allocate scarce resources to satisfy their unlimited wants. It is often divided into two branches: positive economics and normative economics. These two branches differ in their approach and focus, leading to distinct methodologies and conclusions.

2. Positive Economics:

• Definition: Positive economics focuses on the objective analysis of economic behavior and the facts of the economy. It seeks to describe how the economy works without making value judgments.
• Nature: Positive economics is descriptive and factual, relying on data and empirical evidence to explain economic phenomena.
• Example: "An increase in the minimum wage will lead to a decrease in employment among low-skilled workers" is a statement of positive economics because it can be tested and verified using data.

3. Normative Economics:

• Definition: Normative economics, on the other hand, involves making value judgments about what the economy should be like or what actions should be taken to achieve certain goals.
• Nature: Normative economics is prescriptive and involves opinions, beliefs, and subjective assessments about what is desirable in the economy.
• Example: "The government should increase spending on education and healthcare" is a statement of normative economics because it reflects a value judgment about government policy.

4. Key Differences:

• Objectivity: Positive economics is objective and based on empirical evidence, while normative economics is subjective and based on value judgments.
• Testability: Positive economics statements can be tested and verified using data, while normative economics statements cannot be tested in the same way.
• Policy Implications: Positive economics provides the foundation for understanding the consequences of different policy options, while normative economics guides policymakers in making value-based decisions.

5. Preference and Justification:

Positive economics is generally preferred over normative economics for several reasons:

• Objectivity: Positive economics is more objective and scientific, relying on empirical evidence rather than subjective opinions.
• Predictive Power: Positive economics has greater predictive power, as it is based on observable facts and data.
• Policy Implications: Positive economics provides a clearer basis for policy decisions, as it focuses on the consequences of different actions rather than subjective values.

6. Conclusion:

While both positive and normative economics play important roles in understanding and analyzing economic issues, positive economics is generally preferred for its objectivity, testability, and predictive power. By relying on empirical evidence and data, positive economics provides a more reliable foundation for economic analysis and policy-making.