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Home > Economics FAQs Blogs > What is the difference between a positive and a normative statement?

What is the difference between a positive and a normative statement?

Relevant Topics

This question pertains to topics in Microeconomics and Macroeconomics, both under Economic theory

Definitions:

Positive Statement: A positive statement is based on factual evidence and can be tested, confirmed or disproved. It is objective and descriptive in nature.

Normative Statement:
A normative statement expresses a value judgement about what ought to be. It is subjective and prescriptive in nature, expressing an opinion.

Detailed Explanation:

Positive economics is associated with the scientific and objective side of economic analysis. It strives to explain economic phenomena through the observation of facts and the derivation of rules and laws of economic behaviour. Positive statements are often used in the formulation of economic theories and models.

Normative economics, on the other hand, involves the use of subjective or value judgements to recommend what individuals or societies ought to do to achieve desirable economic outcomes. It's associated with policy recommendations and judgements about economic fairness or justice.

Recent:

Positive Statement: "The UK unemployment rate was 4.8% in the third quarter of 2022." This statement is a fact that can be verified by looking at the unemployment data from the UK's Office for National Statistics.

Normative Statement: "The government should increase minimum wage to reduce income inequality." This statement is a subjective judgement about what government policy ought to be to address income inequality.

Summary:

In summary, the main difference between a positive and normative statement in economics is that the former is based on facts and can be tested and verified, while the latter is based on value judgements about what should be done. Both types of statements have significant roles in economic analysis and policy-making.

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