Economics as a Positive and Normative Science

A positive science only explains ‘what is’ and normative science tells ‘what ought to be’, i.e., right or wrong of a thing.

Positive economics is objective and thus akin to pure science. It explains the phenomenon under study with the help of a theory. It also predicts the impact of change in one economic variable to other interrelated variables. Thus, positive economics is related to the explanation of economic events as what they are. More strictly, positive economics operates by use of economic models, logically deduction, and statistical testing. Hence, positive economics deals with the questions such as: Why do doctors earn more than janitors (gatekeepers)? Does free trade raise or lower wages? What are the effects of higher taxes on cigarette?

Normative economics, on the other hand, deals with ethical considerations and value judgments. In other words, normative economics involves ethical precepts (principles) and norms (standards) of fairness. Hence, it deals with the questions such as: Should poor people be required to work if they are to get government assistance? Should unemployment be raised to ensure the price inflation does not become too rapid? Whether government should raise taxes on cigarettes? There are no right or wrong answers to these questions because they involve ethics and values rather than facts. They can be resolved only by political debate and decisions, not by economic analysis alone.