Text 3 Normative economics vs. positive economics Economists analyze what people actually do and advise what people should do. The first approach is descriptive and the second is advisory. Descriptions of what people actually do are objective statements that can be tested or confirmed with data. Recommendations, based on personal feelings, tastes or opinions, are subjective judgments that advise individuals and society on their choices. The first of the two types refers to positive economics. The second is related to normative economics. Positive economic analysis uses scientific principles to arrive at objective, testable conclusions. It uses step-by-step procedures to validate statements. Normative economic analysis consists of creating a hypothesis, gathering data, testing the hypothesis, making predictions or forecasts, and making recommendations. Normative statements use factual evidence as support, but they are not by themselves factual.
G. Now read the text ‘Normative economics vs. positive economics’ again and decide whether these sentences are true or false. Correct the false statements.
1. Economists call factual statements about the world positive statements.
2. Economists call value-based statements normative statements.
3. The process of making recommendations about what action should be taken is related to normative analysis.
4. The description of what has happened or prediction of what will happen lie within the domain of normative economics.
5. Positive economics advises people on their choices.
6. Normative analysis depends on personal feelings, tastes, or opinions.
7. You can use normative economic analysis to predict other people’s behavior.
