Positive versus Normative Analysis

To help clarify the two roles that economists play, we begin by examining the use of language. Because scientists and policy advisers have different goals, they use language in different ways.

For example, suppose that two people are discussing minimum-wage laws. Here are two statements you might hear.

Ignoring for now whether you agree with these statements, notice that Polly and Norma ditter in what they are trying to do. Polly is speaking like a scientist: She is making a claim about how the world works. Norma is speaking like a policy advicer: She is making a claim about how the world like to change the world.

In general statements about the world are two types. One type,such as Polly is positive. Positive statements are descriptive. They make a claim about how the world is. A second type of statements, such as Noarm's is normative. Normative statements are prescriptive. They make a claim about how the world ought to be.

A key difference between positive and normative statements is how we judge their validity. We can in Principle, contirm or refute positive statements by examining evidence. An economist might Polly’s statements y analyzing data in changes in minimum wages and changes in unemployment over time. By contrast, evaluating normative statements involves values as well as facts. Norma’s statements cannot be judged using data alone. Deciding what is good or bad policy is not merely a matter or science. It also involves our views on ethics, religion and political philosophy.

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