Behavioral economics has also been accused of being normative in the sense that cognitive psychology is used to deceive (“push”) people to make desirable decisions by developing their electoral architecture. A clear understanding of the difference between positive and normative economics is crucial for business students. Apart from that, to learn more about other chapters of economics, students can visit the official website of Vedantu. Any positive savings statement can be scientifically tested and proven or ignored. However, normative economic statements cannot be scientifically verified. It depends entirely on an individual`s faith. Positive statements (and positive thinking in general) are objective. As such, they can be tested. These can be divided into two categories. One is an assumption such that “unemployment is caused by a decline in GDP.” This claim can be empirically verified by analyzing data on unemployment and GDP. The other category is a statement of fact, such as “It`s raining” or “Microsoft is the world`s largest computer operating system manufacturer.” Like assumptions, such claims can be proven true or false.
A statement of fact or assumption is a positive statement. Also note that positive statements can be false, but as long as they are testable, they are positive. We all have our opinions on topics and situations, especially those we are most passionate about. Take Kelly, for example. Kelly is an animal lover who breeds and trains dogs. Every time she passes a dog on the street, she immediately bends down to pet it, which brings her a lot of wet dog kisses. Kelly`s business card also expresses her feelings for dogs, which reads, “A house without a dog is a house without love.” In her promotional article, Kelly simply expresses an opinion, not a fact. He makes a subjective or normative statement about the advisability of owning a dog. Positive economics offers a more scientific and calculated clarification of an economic question. However, normative economics also offers such solutions, but they are based on personal values. An example of normative economics is: “The government should provide basic health care to every citizen.” You can understand that this statement is based on a personal perspective and addresses the need for “should be” or “should be”.
A remark illustrating normative economics might be similar to “Everyone should have the chance to play in the stock market.” The study of positive economics focuses on “what is”. Normative theory is usually associated with the realization of morality that controls evil and righteous behavior. Normative economic statements typically contain keywords such as “should” and “should.” The statement that “emerging economies should only embrace democracy when their entire population is educated and emancipated” is a prime example. An example of a normative economic statement is that investors should be more socially responsible and refrain from investing in vice stocks. This is because it contains the keyword “should”. Normative economic statements are subjective and rely heavily on values that come from an individual opinion. These statements are often very rigid and clever. Therefore, they are considered political or authoritarian. Therefore, normative statements cannot be confirmed by scientific methods. In economics, here are some examples of normative statements: more should be done to help those who need help.
U.S. citizens need to set aside more money for their retirement. Statements such as “what should be” and “everyone should play in the stock market” are rather examples of normative economic statements. The perspective of these two concepts is a significant difference between them. Positive economics is objective, while normative economics is subjective. Positive economics focuses on presenting relevant and more targeted statements supported by real data. Positive economics is a branch of the economy that takes a more objective approach and presents more data and factual statements. Although people often disagree on positive statements, such disagreements can ultimately be resolved through research. However, there is another category of claims where the investigation can never resolve disputes. A normative statement is a statement that makes a value judgment.