Positive and normative economics

What is positive economics?

Positive economics is based on specifying, demonstrating and answering economic questions from reason, that is, from an objective point of view by which things happen.

In the positive economy, no advice is given to remedy economic problems, but rather the problems that affect the economy are described, without mentioning whether the results will be positive or negative, through concrete and accurate data.

Examples of positive economics

Next, we propose different conclusions in which positive economics was applied:

• GDP growth during 2017 was 5.5%.
• Inflation decreased 3% in March.
• In the last semester, 300 new SMEs were opened.
• Tax pressure increased in the last year.

What is normative economics?

Unlike the positive economy, normative economics is responsible for giving personal opinions, subjectively, about what should really be within an economic framework.

This type of economy is not objective at all, but rather it is done from a value judgment. It seeks to answer the question "What should it be?" or "What should be done?"

Examples of normative economics

Next, we propose different conclusions in which normative economics was applied:

• GDP growth during 2017 was very low.
• Due to the small amount of work in the rural areas, there was an increase in the population of the urban area.
• Retirements should be increased by 10%.
• The increase in the new tax hurts the lifestyles of low-income people.
• Few improvements were made to public highway works in the past year.
• The development of the planting of fruits and vegetables will contribute to the economy of producers and consumers.

Difference between positive and normative economics

Let's look at the main differences between positive economics and normative economics:

Main difference between positive economics and normative economics.

• The positive economy it is specific and shows what happens in the economy. Normative economics gives personal opinions about what it should be.
• Positive economics focuses on determining everything that could affect the economy from an objective vision and a verifiable point of view. Normative economics is rather subjective and is issued based on value judgment.
• The positive economy predicts the consequences. Normative economics does not predict, but is based on how the economy should work.