Positive economics is the study of economics based on objective analysis. Most economists today focus on positive economic analysis, which uses what is and what has been occurring in an economy as the basis for any statement about the future. Positive economics stands in contrast to normative economics which uses value judgments.
‘Positive Economics’
Unlike normative economics, positive economics focuses on causes and effects, behavioral relationships, and facts involved in the evolution and development of economic theories.
- Positive economics is often called “what is” economics, while normative economics is referred to as “what should be” or “what ought to be” economics.
The Importance of Positive Economics
A clear understanding of positive economics leads to better decisions on economic policies since positive economics is not dependent on value judgments.
Positive Statements
Positive statements provided by positive economics are objective
- These statements can be defined and tested and amended depending on the evidence available
- Examples: “lowering the price of cigarettes has increased the demand for cigarettes among teenage consumers,” “the rise of crude oil prices lessens the use of cars,” and “brewer profits will drop if the government taxes alcohol.”
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