In the following, I summarize the characteristics of the normative statement: Unlike positive statements, which are based on objective analysis of the data, normative statements are more about „what should be“ than facts or causal relationships. Normative economics expresses ideological judgments and ideal states that relate to a state, event, action, or behavior. Some prescriptive statements can be found in online articles. Some of them come from expert opinions on the economy and can, contrary to what you believe. In other places, you will find an expert who is good at providing economic data. He explained in detail the causes of the current economic conditions. The second type of activity is more subjective and inevitably based on the researcher`s values. This is called normative thinking, and conclusions are called normative statements. A policy recommendation might be that, since the unemployed do not earn income, the government should try to stimulate demand in the economy so that the unemployed can return to work. Another policy recommendation could be that stimulating demand could include a larger federal budget deficit that future generations would have to pay back with higher taxes, so the government should not try to stimulate demand. Which of these recommendations is the right one? It depends on your subjective values. Just as the positive economy describes economic programs, situations, and conditions as they exist, normative economics aims to prescribe solutions.
Prescriptive economic statements are used to identify and recommend ways to change economic policy or influence economic decisions. Economic statements from a positive economic perspective can be broken down into determinable and observable facts that can be examined and tested. Because of this characteristic, economists and analysts often practice their profession under the positive economic aspect. The positive economy, the measurable perspective, helps policymakers and other government and economic agencies decide on important issues that affect specific policies under the direction of evidence-based outcomes. You can test or verify the veracity of a positive statement using data. Therefore, economists and analysts often like it. It becomes a measurable perspective that helps policymakers, governments and other trade authorities make credible decisions. Unlike positive economics, which relies on objective analysis of data, normative economics is heavily interested in value judgments and statements about „what should be,“ rather than facts based on statements of cause and effect. It expresses ideological judgments about what can lead to economic activity when public policy changes are made. Prescriptive economic statements cannot be verified or verified.
Although normative statements are generalized and subjective, they function as necessary channels for original thinking. Such opinions can form the basis for necessary changes that have the potential to completely change a particular project. But normative economics cannot be the only basis for decisions on major economic fronts. The positive economy fulfills the objective point of view, which focuses on facts and cause and effect. In conjunction with positive economics, normative economics can be useful in establishing, generating, and realizing new ideas and theories for different economic goals and perspectives. These statements are based on the values of the person making them and cannot be proven false. Economic statements that are prescriptive in nature cannot be examined or proven for factual values or legitimate cause and effect. Examples of normative economic statements include „women should receive higher school loans than men,“ „workers should receive a larger share of capitalist profits,“ and „workers should not pay for hospital care.“ Prescriptive economic statements typically contain keywords such as „should“ and „should.“ Normative economics is subjective and values-based and arises from personal perspectives, feelings, or opinions involved in the decision-making process. Prescriptive economic statements are rigid and prescriptive. They often seem political or authoritarian, which is why this industry is also called „what should be“ or „what should be“ economic.
A clear understanding of the difference between positive and normative economics can lead to better policy-making if the policy is based on a balanced mix of facts (positive economics) and opinions (normative economics). Nevertheless, many policies on issues ranging from international trade to welfare are based, at least in part, on normative economics. Common observations suggest that public policy discussions generally involve normative economic statements. There is an even higher degree of disagreement in such discussions, as neither party can clearly prove their accuracy. It is not uncommon for people to present an argument as positive to make it more convincing to an audience, when in fact it has normative elements. Opinion pieces in newspapers or other media are good examples. Therefore, it is important to be able to distinguish between positive and normative demands. Normative economics focuses on ideological, dictive, and dictive, opinion-based value judgments and „what should be“ statements that target economic development, investment projects, and scenarios.
Its purpose is to summarize people`s interest (or lack thereof) in various economic developments, situations, and programs by asking or quoting what should happen or what should be. Normative economics aims to determine the desirability or absence of people for various programs, situations, and economic conditions by asking what should happen or what should be. Therefore, normative statements generally represent an opinion-based analysis of what is considered desirable. For example, the assertion that the government should aim for economic growth of x% or inflation of y per cent could be considered prescriptive. Positive, normative economic statements are needed to create the policies of a country, region, industrial sector, institution or company. However, policymakers, entrepreneurs, and other organizational authorities also tend to consider what is desirable and what is not desirable for their respective constituents, making normative economics an important part of the equation for deciding important economic issues. Coupled with a positive economy, normative economics can branch into many opinion-based solutions that reflect how an individual or an entire community represents certain economic projects. These types of views are particularly important for national policy makers or leaders.
Because people have different values, normative statements often cause disagreement. An economist whose values lead him to conclude that we should help the poor more will disagree with an economist whose values lead to a conclusion we should not make. Since there is no test for these values, these two economists will continue to disagree unless one convinces the other to adopt a different set of values. Many of the disagreements among economists are based on such differences in values and are therefore unlikely to be resolved. Watch this short video to explore the differences between positive and normative analysis. A positive economy is objective and evidence-based if the statements are specific, descriptive and clearly measurable. These statements can be measured by hard evidence or historical cases. There are no cases of approval and disapproval in the positive economy. Although people often disagree on positive statements, these disagreements can ultimately be resolved through an investigation. However, there is another category of claims for which an investigation can never resolve disputes. A normative statement is a statement that makes a value judgment. Such a judgment is the opinion of the speaker; No one can „prove“ that the statement is correct or not.
Examples of normative statements in business include: Prescriptive statements and positive statements often appear in economics textbooks or in the media. The two statements are contradictory. Positive economics is an economic stream that focuses on the description, quantification and explanation of economic developments, expectations and related phenomena. It is based on an objective analysis of data, relevant facts and related figures. It attempts to establish cause-and-effect relationships or behavioral associations that can help identify and test the development of economic theories. Normative economics is a perspective on economics that reflects normative or ideologically prescriptive judgments about economic development, investment projects, statements, and scenarios. Positive statements (and positive thinking in general) are objective. As such, they can be tested. These can be divided into two categories. One is an assumption such as „unemployment is caused by a decline in GDP.“ This can be verified empirically by analysing unemployment and GDP data.
The other category is a statement of fact such as „It`s raining“ or „Microsoft is the world`s largest computer operating system manufacturer.“ Like assumptions, such claims can be shown to be right or wrong. A statement of fact or hypothesis is a positive statement. Also note that positive statements may be false, but as long as they are verifiable, they are positive. Positive economics and normative economics are two standard branches of modern economics. Positive economics describes and explains various economic phenomena, while normative economics focuses on the value of economic justice or what the economy should be. An example of a positive economic statement is: „Government-provided health care increases public spending.“ This statement is based on facts and has no value judgment. Its validity can be proven (or disproved) by examining health spending when governments provide health care.