A) Distinction between positive and normative economic statements

A positive economic statement is one that can be tested using evidence. For example, the statement that inflation increased by 1% in the last quarter can be checked using economic data. It does not depend on somebody’s personal opinion.

This is in contrast to a normative economic statement. For example, saying that monetary policy is ineffective at getting an economy out of a recession involves an opinion about how effective the policy is.

Normative statements may therefore be disputed between different economists, as people may have different views about what is desirable or what should be done.

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

A value judgement is a judgement that is made based on a person’s values, beliefs and opinions. Governments make judgements based on their own priorities and values, meaning that many policy decisions are normative.

This is one reason why different political parties may support different economic policies. An example of this is the extent to which a government should intervene in the economy.

For example, some people may favour a more classical or hands-off approach, whereas others may favour a more Keynesian or hands-on approach. These views depend partly on their beliefs about the role that government should play within the economy.

This is in contrast to positive economic analysis. For example, if the economy grew by 2% in the last quarter, this can be tested using economic data and is therefore a positive statement.

Overall, economic decisions made by individuals and policy decisions made by governments will often be influenced by value judgements.