Positive and Normative Analysis - Online Tutor, Practice Problems & Exam Prep

Understanding the distinction between positive and normative statements is crucial in economics. Positive statements describe how the world is, such as "oil spills harm the environment," and can be tested for truth. In contrast, normative statements express opinions on how things ought to be, like "everyone should get free pizza." Key indicators of normative statements include words like "should" and "ought to." Recognizing these differences aids in analyzing economic concepts like market equilibrium, externalities, and competition, enhancing critical thinking in economic discussions.

Positive Statements vs. Normative Statements

So now we'll be dealing with a bit more of a psychological concept, the difference between positive statements and normative statements. Let's start with positive statements. Positive statements make a claim about how the world is, right, and here we're dealing with what I like to call facts. And a quick word of warning, even though I use the word "facts," they don't necessarily have to be true to be a positive statement. It's more about how it's phrased. Right? And this is a key concept here that how it's phrased is going to be crucial to determining whether it's a positive statement or a normative statement. So facts, excuse me, positive statements are phrased in a way that tells you how the world is. Let me give you an example. A statement like "pizza is delicious." Now here we know we're dealing with cold hard facts. This is just, you know, this is like an inherent truth. There's probably not one of you out there that could even argue with me on this point. Right? "The pizza is delicious." I'm telling you something about how the world is, and it is delicious. Right? So let me give you another example. Something a little more, microeconomics-y. Something, let's say, like, "oil spills harm the environment." Again, I'm telling you something about how the world is. Right? "Oil spills harm the environment," and the idea here is, remember, it doesn't have to necessarily be true or false. It's just how it's phrased. I'm saying that oil spills harm the environment. There's no kind of opinionated thing in here. I'm just telling you something about how the world is, right? I could even just to reiterate say something like "the Moon is made of cheese," and this still counts as a positive statement. Right? Even though it's probably not true, I'm sure there's a couple of you out there that will be able to refute this. I'm not going to, not so much of a science guy, so I'm not going to really get into it now. But I guess a key thing about positive statements here, one more note, is that they can be tested. Right? They can be tested. They're verifiable. Right? This is something that can almost go through the scientific process, right? We can put it through a test and see if it's true or false.

Let's compare that to a normative statement. So normative statements make a claim about how the world ought to be. So in this box, I'm going to write opinions. Right? We're now instilling some sort of, oh, things should be this way, things should be that way. So let me give you an example. So statement A, something like, you know, "everyone should get free pizza." At this point, I'm not really saying anything about the current condition. Right? I'm not saying anything about the world. I'm saying what should happen? How should things be? Right? I guess I could compare that to like a more microeconomics-y one. Let's go back to oil spills. Something like "oil spills... Oops. Oil drilling, right, should be illegal." Well, let's say "ought to be illegal" to change it up. Right? Again, I'm instilling my opinion here. I'm saying something about how the world should be, not how it actually is. So what I want to do is point out some of the keywords here. I'm going to get out of the way while I fill in this green box. There are some keywords that make it really easy to spot a normative statement, and that's words like "should" here or "ought to." So, I'm going to write those in here. Should, ought to, and another one, a good one is when someone tells you something is a good idea or a bad idea, they are instilling their opinion into the statement there. Alright? So now that we know this, why don't we do an example and try and identify some positive statements and normative statements?

Identifying Statements

Let's go ahead and do this example. Label the following statements as positive statements with p or normative statements with n. Alright. The first one: The government should provide health care to all of its citizens. Okay. So a keyword here that you should be looking for when we're doing positive and normative statements is right here: should. Right? This is telling us that it's kind of an opinionated statement. Right? It's telling us how the world should be, not how it actually is. So when you see should, automatically think normative statement. Right? Let's go on to the next one. Minimum wage laws are a bad idea because they cause unemployment. So this isn't really telling us anything about how the world is, right? It's telling us more of how it should be. It's telling us that if there are minimum wage laws, we should get rid of them because they're a bad idea, right? This is another one of our key normative statement keywords here is when you see good idea or bad idea something like that, that's a cue and it should signal you that it's a normative statement. Let's try the next one. Rising gas prices cause people to buy less gas. Okay? This statement, they're not really instilling any kind of opinion here, right? We don't see any of our keywords and what we see is it's making a statement about how the world is. In this world when gas prices go up, people buy less gas. Right? How it's phrased, regardless of it being true or false, the way it's phrased is in the form of how the world is. It's a positive statement. And remember another key with positive statements, it's something that you could test, right? So we could test what happens when gas prices rise. Do people actually buy less gas? We could do a test in the market with that. How about the next one? Minimum wage laws cause unemployment. Again, it's telling us something about how the world is, it's something that we can test. Again, we're talking about a positive statement here, right? We don't see any of our keywords, so pretty easy to know that that's a positive statement. How about the last one? The government ought to increase the minimum wage. Here we see one of our keywords, ought to. And I'm going to say 99% of the time when you see a positive, or excuse me, a normative statement, it's going to use should. You're going to see should, and when you see that word automatically think normative, but it's nice to have these other backups because the next most common ones are saying things like ought to do it this way or this is a bad idea. These are normative statements. Right? So keep your eyes open for those words, and it'll make this a lot easier.

Here’s what students ask on this topic:

What is the difference between positive and normative statements in economics?

Positive statements in economics describe how the world is and can be tested for truth. For example, 'oil spills harm the environment' is a positive statement because it can be verified. Normative statements, on the other hand, express opinions on how things ought to be. For instance, 'everyone should get free pizza' is a normative statement because it reflects a value judgment and cannot be tested for truth. Recognizing these differences is crucial for analyzing economic concepts and enhancing critical thinking in economic discussions.

Can you provide examples of positive and normative statements?

Sure! A positive statement might be 'unemployment rate is 5%,' which describes a verifiable fact about the world. Another example is 'oil spills harm the environment.' A normative statement, however, would be 'the government should reduce unemployment,' which expresses an opinion on what ought to be done. Another example is 'oil drilling ought to be illegal,' reflecting a value judgment rather than a testable fact.

Why is it important to distinguish between positive and normative statements in economics?

Distinguishing between positive and normative statements is important because it helps clarify whether a discussion is about factual information or value judgments. Positive statements can be tested and verified, making them useful for empirical analysis. Normative statements, however, are based on opinions and values, which can vary among individuals. Understanding this distinction aids in making informed decisions, developing policies, and engaging in meaningful economic debates.

How can you identify a normative statement in economics?

Normative statements in economics often include keywords like 'should,' 'ought to,' 'good idea,' or 'bad idea.' These words indicate that the statement is expressing an opinion or value judgment rather than a testable fact. For example, 'the government should provide free healthcare' is a normative statement because it reflects an opinion on what ought to be done. Recognizing these keywords can help you quickly identify normative statements in economic discussions.

Can positive statements be false? If so, how?

Yes, positive statements can be false. The key characteristic of a positive statement is that it is testable and verifiable, not necessarily true. For example, the statement 'the Moon is made of cheese' is a positive statement because it makes a claim about the world that can be tested, even though it is false. The ability to test and verify the statement is what makes it positive, regardless of its truthfulness.