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Positive and normative economics

(Redirected fromNormative economics)
For a broader discussion of the same idea in philosophy, seeFact–value distinction.

In thephilosophy of economics,adescriptiveorpositive statementis an assertion aboutfactsof the world, whileprescriptiveornormative statementsexpressvalue judgments.The former describe the worldas it is,while the latter talk about the worldas it should be.[1]The methodological basis for positive/normative distinction is rooted in thefact-value distinctionin philosophy.

Economics is often divided intopositiveandnormative economics.Positive economics focuses on the description, quantification and explanation of economic phenomena.[2]Normative statements about economics often take the form of discussions aboutfairnessand what the outcome of the economy or goals ofpublic policyought to be,[3]as well as prescriptions regardingrational choice,as studied indecision theory.

Definitions

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Positive economics as ascienceconcerns the investigation of economicbehavior.[4]It deals with empirical facts as well as cause-and-effect behavioral relationships and emphasizes thateconomic theoriesmust be consistent with existing observations and produce precise,verifiablepredictions about the phenomena under investigation.[5][6]

Examples of positive economic statements are "the unemployment rate in France is higher than that in the United States," or "an increase in government spending would lower the unemployment rate." Either of these is potentiallyfalsifiableand may be contradicted by evidence. Positive economics as such avoids economicvaluejudgments. For example, a positive economictheorymight describe howmoney supplygrowth affectsinflation,but it does not provide any instruction on whatpolicyought tobe followed.

An example of a normative economic statement is as follows:

The price of milk should be $6 a gallon to give dairy farmers a higher standard of living.

This is a normative statement, because it reflects value judgments. This specific statement makes the judgment that farmers deserve a higher living standard and that family farms ought to be saved.[3]

Some earlier technical problems posed inwelfare economicshave had major impacts on work in applied fields such asresource allocation,public policy,social indicators, andinequality and poverty measurement.[7]

History

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Since its inception as a discipline, economics has been criticized for insufficiently separating prescriptive from descriptive statements[8]and also for excessively separating prescriptive from descriptive statements.[9]

The field's current emphasis on positive economics originated with thepositivist movement of Auguste Comteand withJohn Stuart Mill's introduction ofHume'sfact-value distinctionto define the science and art of economics inA System of Logic.[10]which was introduced into the field byJohn Stuart Mill[11]and was further developed byJohn Neville Keynesin the 1890s.[12]John Neville Keynes'sThe Scope and Method of Political Economydefined positive economics as the science of "what is" as compared to normative economics, the study of "what ought to be".[12]Keynes was not the first person to make the distinction between positive and normative economics but his definitions have become the standard in economics teaching.[10]The scientific or positive aspects of economics were emphasized by many early-to-mid 20th century economists in an attempt to prove economic theories could answer questions with the same scientific methodology as the physical sciences.[6]

The fierce commentary ofLionel Robbinsin the 1930s, who argued that normative economics was wholly unscientific and should therefore be cast out of the field, were particularly influential for a time.[4]Robbins's 1932 "Essay on the Nature and Significance of Economic Science"argued economics should take as its subject matter attempts to achieve a given end with limited resources, and should not take a point of view on which ends should or should not be pursued.[13]Robbins was instrumental in promoting the fact-value distinction in economics and insisting that ethical or value judgments should not be a part of the discipline,[10]and by the 1950s some economists even asserted thatArrow's impossibility theoremproved any attempts to construct normative standards in economics were doomed to fail.

Paul Samuelson'sFoundations of Economic Analysis(1947) lays out the standard ofoperationally meaningfultheorems through positive economics. Positive economics is commonly deemed necessary for the ranking of economic policies or outcomes as to acceptability.[14]

By contrast,Friedmanin an influential 1953essayemphasized that positive and normative economics could never be entirely separated, because of their relationship with economic policy. Friedman argued about economic policy are primarily due to an inability to agree about the likely consequences of a piece of legislation. As economics developed, Friedman believed that it would become increasingly possible to derive undisputed results about positive economic statements and that this would help to make clear judgments about the best ways to achieve normative goals.[6]According to Friedman, the ultimate goal of a positive science is to develop a "theory" or "hypothesis" that makes meaningful predictions of a phenomenon that is not yet examined. Friedman states that sometimes it is a "" language "that designed to promote" systematic and organised methods of reasoning "and in part," It is a body of substantive hypotheses designed to abstract essential features of complex reality. "[6][15]

Criticism

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The logical basis of such a relation as adichotomyhas been disputed in philosophical literature. Such debates are reflected in discussion ofpositive science.Hilary Putnamhas criticized the foundation of the positive/normative dichotomy from a linguistic perspective, arguing that it is not possible to completely separate "value judgments from statements of facts".[10]

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.[16]Welfare economistAmartya Sendistinguishesbasic (normative) judgments,which do not depend on such knowledge, fromnonbasicjudgments, which do.[17]

Bryan CaplanandStephen Millerargue the dichotomy ineconomicshas been greatly overstated, in that many policy disagreements often described as value judgments are simply disagreements about facts. They cite evidence showing that descriptive statements have a strong effect on policy prescriptions, and thateconomicseducation tends to substantially affect both.[18]

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See also

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References

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  1. ^"Normative Economics".Business Dictionary.Archived fromthe originalon 23 December 2007.Retrieved9 October2014.
  2. ^Stanley Wong(1987). "positive economics," TheNew Palgrave: A Dictionary of Economics,v. 3, pp. 920-21
  3. ^abPaul A. SamuelsonandWilliam D. Nordhaus(2004).Economics,18th ed., pp. 5-6 & [end] Glossary of Terms, "Normative vs. positive economics."
  4. ^abLionel Robbins(1932).An Essay on the Nature and Significance of Economic Science.
  5. ^Richard G. Lipsey(2008). "positive economics."The New Palgrave Dictionary of Economics.Second Edition.Abstract.
  6. ^abcdMilton Friedman(1953). "The Methodology of Positive Economics,"Essays in Positive Economics.
  7. ^Marc Fleurbaey (2008). "Ethics and economics,"The New Palgrave Dictionary of Economics.Abstract.
  8. ^Peil, Jan; van Staveren, Irene (2009).Handbook of economics and ethics.Cheltenham, UK: Edward Elgar.ISBN978-1-84542-936-2.OCLC300403624.
  9. ^Hill, Lewis E. (2006)."A Critique Of Positive Economics".American Journal of Economics and Sociology.27(3): 259–266.doi:10.1111/j.1536-7150.1968.tb01047.x.ISSN0002-9246– via JSTOR.
  10. ^abcdPeil, Jan; van Staveren, Irene (2009).Handbook of economics and ethics.Cheltenham, UK: Edward Elgar.ISBN978-1-84542-936-2.OCLC300403624.
  11. ^Mill, John Stuart (1907)."Auguste Comte and positivism (5th ed.)".doi:10.1037/13650-000.{{cite journal}}:Cite journal requires|journal=(help)
  12. ^abKeynes, John Neville (1980).The Scope and Method of Political Economy.Batoche Books.
  13. ^Robbins, Lionel (1932).An Essay on the Nature and Significance of Economic Science.London, UK: Macmillan and Co. p. 23.
  14. ^Samuelson, Paul A. (1947).Foundations of Economic Analysis.Harvard University Press.
  15. ^Mäki, Uskali (2009).The Methodology of Positive Economics Reflections on the Milton Friedman Legacy.Cambridge University Press.ISBN978-0-511-58142-7.OCLC938893321.
  16. ^Stanley Wong (1987). "Positive economics", TheNew Palgrave: A Dictionary of Economics,v. 3, p. 21.
  17. ^Amartya K. Sen(1970),Collective Choice and Social Welfare,pp. 61, 63-64).
  18. ^Caplan, Bryan; Miller, Stephen C. (2010-08-19)."Positive versus normative economics: what's the connection? Evidence from the Survey of Americans and Economists on the Economy and the General Social Survey".Public Choice.150(1–2): 241–261.doi:10.1007/s11127-010-9700-z.ISSN0048-5829.S2CID254933570– via JSTOR.
A.2: Objection 2: Positive economics is value-free
A.3: How positive economics involves morality
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