Positive v. Normative Analysis
Categories: Econ
When you're talking positive economics, you're talking objective data and facts. You're quantifying things with numbers, analyzing potential causal relationships with rigorous statistical analysis, and pointing out the way things are in everyone’s shared reality.
When you're talking normative economics, you're talking opinions and ideology. Maybe you think it's unfair some people are working two jobs on minimum wage, barely getting by, while a handful of people are rolling in dough. Or maybe you think it's unjust to redistribute money that people earned, no matter their income. Maybe you think more government regulation and social programs will make things better, or maybe you think small government...or no government...is the key to making things better, depending on whatever “better” looks like for you.
Assuming we're all in the same universe and talking about reality, positive economic statements are things everyone should be willing to agree on. For instance, "inflation in the U.S. in 1946 was 18.1%" is a positive economic statement, derived from positive analysis. You can think "positively correct" to help you remember.
If you also thought, "An inflation rate of 18.1%? Wow...that blows..." that's a normative economic analysis you just did there. Think, "it's normal to have opinions." Because it is, with our monkey brains.
So why is knowing the difference between positive and normative economic statements so important?
You can think of positive economic analysis as the tools that people use (you know, the facts) to try to implement what they want to see, based on their normative economic opinion.
Liberal Congressmen will seek out liberal positive economics that supports their normative ideology, just as conservative congressmen seek out positive economics that supports their conservative ideology. To make sure you know the facts that are positively true, it's good to know where they're coming from.
For instance, would you trust a study that was funded by the Coca-Cola company that says excess sugar is actually good for your health?
Hey, we wouldn’t blame you for wanting to believe it was true, but hopefully all of the other positive analysis that’s been done out there on the health problems caused by having a sugar party all day, everyday, would raise your skepticism, even if you didn’t know who funded the study.
Don't worry...you can totally have a normative economic ideology. Just make sure your economic evidence is in the positive economic realm.
And know that, when you’re talking to someone on the “other side” (someone from a different political economic tribe), positive analysis might get you somewhere, while normative statements...probably won’t. Which is just how our monkey brains roll.
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All right people when you're talking positive economics you're talking
objective data and facts You're quantifying things with numbers analyzing
potential causal relationships with rigorous statistical analysis and pointing out
the way things are in everyone's shared reality When you're
talking normative economics you're talking opinions and ideology Maybe you
think it's unfair Some people are working two jobs on
minimum wage barely getting by while a handful of people
are rolling in dough Or maybe you think it's unjust
to redistribute money that people earned no matter what their
income is Well maybe you think Mohr government regulation and
social programs will make things better Or maybe you think
small government or no government is the key to making
things better depending on the well whatever better looks like
for you assuming we're all in the same universe and
talking about reality while positive economic statements are things everyone
should be willing to agree upon for instance inflation in
the United States in nineteen forty six was eighteen point
one percent That's a positive economic statement derived from positive
analysis You can think positively correct to help you remember
right If you also thought an inflation rate of eighteen
point one percent Wow that blows That's a normative economic
analysis You just did there because well you're thinking well
it's normal toe have opinions because it is with are
you know monkey brains So why is knowing the difference
between positive in normative economic statements so important you can
think of positive economic analysis as the tool that people
use you know the fax To try to implement what
they want to see based on their normative economic opinion
liberal congressman will seek out liberal positive economics that support
their normative ideology Just as conservative congressman seek out positive
economics that support their conservative ideology to make sure you
know the facts that are positively true it's good to
know where they're coming from right For instance would you
trust a study that was funded by the Coca Cola
Company that says excess sugar is actually good for your
health Well we wouldn't blame you for wanting to believe
all of this is true whoever you're rooting for But
hopefully all the other positive analysis that's been done out
there on the health problems caused by having a you
know Coca Cola Sugar Party all day every day That
would raise your skepticism even if you didn't know who
funded the study So don't worry You can totally have
a Norman of economic ideology Just make sure your economic
evidence is in the positive economic realm And just know
that when you're talking to someone on the other side
unquote someone from a different political economic tribe positive analysis
might get you somewhere while Norman of statements probably won't
And again this is just how our monkey brains role 00:02:52.6 --> [endTime] keeping it real Who