Positive and normative economic statements

A) Distinction between positive and normative economic statements

A positive economic statement is one that is fact such as inflation has increase by 1% in the last quarter. This is not an opinion and therefore cannot be contested. This is in contrast to normative Economic statements such as monetary policy is ineffective at getting an economy out of a recession. This is an opinion rather than a fact and therefore may be disputed between different economists.


B) The role of value judgements in influencing economic decision making and policy

A value judgement is a decision that is made based on a person’s values and opinion. The government makes judgements based on their own opinions and values, as a result of this, the decisions that they make are normative. This is why there is more than one political party and that their policies are different. An example of this may be the extent to which a Government intervenes in the Economy. For example, some people may believe in a more classical/hands off approach whereas others may believe in a more Keynes/hands on approach. This is in contrast to Economic analysis which is often positive. For example, if the economy grows by 2% in the last quarter then that is a positive statement. Overall, economic decisions made by individuals and policy decisions made by Governments will be based upon their value judgements (normative).