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Deciphering the Economics


Positive and Normative science explained

Meaning of Positive Economics

Positive statements/ Science/ Economics: – they are that statements in which analysis is confined to cause and effect relationship but it does not pass any value judgment. It deals with what are the economic problems and how are they actually solved. In other words, it states ‘what was, what is and what will be under the given state of circumstances.

Robbins emphasized that economics is purely a positive science. According to him, economics should be neutral between ends. Therefore, positive statements are objective statements that can be tested amended or rejected by referring to the available evidence.
For example:
India is a developing country, The USA has the highest GDP, The level of consumption in an economy depends on income, wealth, expectations about future prices, etc., A rise in average temperature will increase the demand for sunscreen products.

Meaning of Normative Economics

A normative science, Economics involves value judgments. It is prescriptive in nature and describes ‘what ought to be’. Its objective is to examine real economic events from moral and ethical angles and to judge whether certain economic events are desirable and undesirable. As their statements indicate opinions and are, therefore not verifiable for truth, often their statements lead to controversies and debates.

For example, Pollution is the most serious economic problem, we should grow more and more trees to combat ecological problems, Resources are best allocated by allowing the market mechanism to work freely.

Note: Positive statements can be verified as true or false with the available data while normative statements are just opinions of individuals hence cannot be verified or prove to be the best solution to the economic problems.

Difference between Positive and Normative economics

Positive and Normative science
Positive and Normative science

Methods of study

Deductive method/ Deduction method: In this method, certain assumptions are made and by using logical reasoning. We arrive at certain logical deductions.

From these deductions, certain economic laws or themes are formulated. This logic proceeds from general to particular. This method is called obstruct or a priori because it is based on abstract reasoning and not on facts.
Abstract: – Dictionary meaning: the quality of dealing with ideas rather than events.
In Economics: Simplifying the complexities of the real world by ignoring unimportant details while doing economic analysis.
Priori: Pre-existing
Deduction involves four steps: [ Positive and Normative science]
Selecting the problem.
The formulation of hypothesis through the process of logical reasoning whereby inferences are drawn
The formation of assumptions based on which the problem is yet to be explored.
Verifying the hypothesis.
For example, it is assumed that man is rational, and based on this, it is deduced that he will buy cheap and sell dear.

Inductive method: Under this method, a mass of data is collected from experience concerning the economic phenomenon, and based on these collected observations certain generalizations are made and conclusions are drawn therefrom. The logic in this care proceeds from the particular to the general.

Steps involved in the Inductive method
Perception of the problem.
Collection classification and analysis of data by using appropriate statistical techniques
Finding out the reasons for the relationship established through statistical analysis i.e., observation

Based on observation, generalization is logically derived which established a general truth from particular facts.
Marshall rightly pointed out “induction and deduction are both needed for scientific thought as the right and left foot are both needed for walking”.

Theoretical Economics: It is the process of building economics models’ laws to explain economic phenomena. For example, to combat COVID-19-The government introduced 20 lakh crore packages.
Empirical Analysis/ Economics: it is based on evidence drawn from observation or experience. In other words, it’s about measuring the impact of policy change or models on real economic problems.

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