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Difference between Positive Economics and Normative Economics

Main difference

Economics is the branch of knowledge that deals with the production, consumption and transfer of wealth. The other famous definition of economics says that it is the relationship between the scarcity of goods and their demand. Following it, we can determine that the economy is the broader concept, since it is the knowledge that has the basic essence of the arts and sciences. Even if we are not accounting or banking students, we come across the concepts of economics in daily life when we have to choose between spending and saving. The economy is mainly divided into two types, here we will discuss two other different types of economy; Positive economics and normative economics. Positive economics is the branch of economics that is based on facts. In addition, its validity can be tested using appropriate scientific techniques. On the other hand, normative economics is based on opinion, point of view, or simply estimation. However, the validation of normative economics cannot be verified by scientific or other techniques.

Comparison chart

positive economy Normative economics
Definition Positive economics is the branch of economics that is based on facts. Normative economics is the branch of economics that is based on opinion, viewpoints, or mere estimates.
Validity The validity of statements in positive economics can be verified using scientific technique. The validity cannot be checked in the case of normative economics.
Explain Positive economics explains what the economic world is like. Normative economics explains how the economic world should be.
Nature Positive economics is descriptive in nature. Normative economics is prescriptive in nature.

What is positive economics?

Positive economics is the branch of economics that is based on facts. Statements made in this type of economy can be proven true or false, after checking their validation through scientific techniques. The descriptive type of economics narrates the reality or what is happening in relation to the economy. Positive economics is based on reports, news, scientific methods, audiovisual evidence and surveys. It has a goal-oriented approach that makes it directly related to the topic or issue being addressed. Different decisions and policies are made in accordance with them as they are based on facts and their validity can also be checked. Economic issues are also addressed in positive economics as it explains the cause and effect relationship between variables.

What is normative economics?

Normative economics is the branch of economics that is based on opinions. The validity of the statements cannot be verified by the scientific method or any other technique. It is prescriptive in nature and simply issues the value judgment made by the individual or even the group. Normative economics is primarily concerned with concepts of ideas about what economic activities should look like in order to stabilize the economy. It says ‘what should be’, on the other hand positive economics says what is happening in the economic world. The normative economics statement can be based on opinion, point of view, or simply on estimates. In other words, we can say that normative economics is about suggestions to improve economics. In some cases,

Positive vs. Normative Economics

  • Positive economics is the branch of economics that is based on facts. On the other hand, normative economics is the branch of economics that is based on opinion, views, or mere estimates.
  • The validity of statements in positive economics can be verified using scientific technique. Although, the validity cannot be checked in the case of normative economics.
  • Positive economics explains what the economic world is like. Contrary to this, normative economics explains how the economic world should be.
  • Positive economics is descriptive in nature while normative economics is prescriptive in nature.

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