The Necessity of Positive and Normative Economics :: essays papers

The Necessity of Positive and Normative Economics Keynes once wrote: â€Å"The object of a positive science is the establishment of uniformities, of a normative science the determination of ideals.† (Blaug, 122) This is the dichotomy that economists recognize when approaching their field of study. The social scientist must recognize both positive and normative distinctions, means and ends, as important factors of fruitful research. Secondly, they must clearly express the conditions and assumption which theories holds in order for economics to be useful for society. Positive science is that which is a fact of nature or a fact by definition. In mathematics this is the difference between the knowledge that the angles of a triangle sum to 180 degrees, and the definition of a triangle as a two dimensional polygon with 3 sides. In economics, such facts of knowledge include that money is a store of value, or facts of definition that the UN’s Human Development Index ranks Canada above Mexico. These are all positive facts. Whether they rely or are associated with values does not reduce their factualness to a normative realm. One cannot refute positive statements by claiming they are arrived at due to values. It is up to normative science to judge the value of the HDI, a positive fact, and not mistake this action as denying the existence of the HDI. This is probably better stated with a topic from macroeconomics. Suppose that some economists agree that inflation produces the social cost of having to adjust prices to new levels. This is a completely positive statement. As long as every term has been clearly defined, one can understand the relation between inflation (as defined) and cost (as defined). Yes, the definitions have been chosen based on specific values, but this does not disaffirm the statement as a true reflection of reality. Suppose we make a true statement which denies that inflation produces this social cost, by defining inflation or the cost differently. The old positive fact of reality that the first statement asserted has not changed. By changing definitions, we have merely created a new positive statement. A statement is a true positive fact, according to Weston, when it â€Å"is consistent with definitions and axioms that define the system. We are not necessarily saying anything about what is true outside of that system.