Loading the player...
A:

The distinction between positive economics and normative economics may seem simple, but it is not always easy to differentiate between the two. Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements must be able to be tested and proved or disproved. Normative economic statements are opinion based, so they cannot be proved or disproved. In fact,  many widely accepted statements that people hold as fact are actually value based.

Example of Positive Economics vs Normative Economics

For example, the statement, "government should provide basic healthcare to all citizens" is a normative economic statement. There is no way to prove whether government "should" provide healthcare; this statement is based on opinions about the role of government in individuals' lives, the importance of healthcare, and who should pay for it.

The statement, "government-provided healthcare increases public expenditures" is a positive economic statement, as it can be proved or disproved by examining healthcare spending data in countries like Canada and Britain, where the government provides healthcare.

Disagreements over public policies typically revolve around normative economic statements, and the disagreements persist because neither side can prove that it is correct or that its opponent is incorrect. A clear understanding of the difference between positive and normative economics should lead to better policy making if policies are made based on facts (positive economics), not opinions (normative economics). Nonetheless, numerous policies on issues ranging from international trade to welfare are at least partially based on normative economics.

RELATED FAQS
  1. What are some of the limitations and drawbacks of economics as a field?

    Find out why the field of economics is full of controversy. Policy decisions, political campaigns and personal finances are ... Read Answer >>
  2. How are the three major financial statements related to each other?

    Learn why investors analyze a company's financial statements, and how the income statement, balance sheet and cash flow statement ... Read Answer >>
  3. How do you find a company's P&L statement?

    Learn how to find a company's profit and loss statement, along with the other financial statements that companies regularly ... Read Answer >>
  4. How do the income statement and balance sheet differ?

    The balance sheet shows a company’s total value while the income statement shows whether a company is generating a profit ... Read Answer >>
  5. What is the relationship between human capital and economic growth?

    Learn what human capital and economic growth are, how human capital is related to economic growth and see examples of the ... Read Answer >>
  6. How does neoclassical economics relate to neoliberalism?

    Read about neoliberalism and neoclassical economics, two political and economic movements that argued for lower taxes, less ... Read Answer >>
Related Articles
  1. Investing

    12 things you need to know about financial statements

    Before investing, discover 12 characteristics of financial statements that can help you evaluate companies and increase your chances of choosing a winner.
  2. Investing

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  3. Insights

    Why Can't Economists Agree?

    Learn the many reasons why economists can be given the same data and come up with entirely different conclusions.
  4. Investing

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  5. Insights

    Is Infinite Economic Growth on a Finite Planet Possible?

    While the finite nature of Earth's resources limits the direction of economic growth, it does not mean that infinite economic growth is impossible.
  6. Insights

    Pros and Cons of Capitalist vs Socialist Economies

    Capitalism relies on the markets. Socialism, on government planning. Each system has its pros and cons.
  7. Insights

    Countries With The Highest Healthcare Spending

    Spending big doesn't necessarily mean it's the best. We take a look at the big spenders in healthcare.
RELATED TERMS
  1. Economic Growth Rate

    An economic growth rate is a measure of economic development, ...
  2. Happiness Economics

    Happiness economics is the formal study of the relationship between ...
  3. Mathematical Economics

    Mathematical economics is a form of economics that relies on ...
  4. Income Statement

    An income statement is one of the three major financial statements ...
  5. Financial Economics

    Financial economics is a branch of economics that analyzes the ...
  6. Continuation Statement

    A continuation statement is an amendment attached to a borrower's ...
Trading Center