Science and Policy

This means that economists practice both:

• Positive economics, which uses the scientific method to uncover the mechanism of the economy. It seeks to describe the way this world IS.


• Normative economics, which seeks policies suggested by scientific knowledge to "fix" the world. It seeks to prescribe the way the world SHOULD BE.

Description versus Prescription

• Positive economics uses the scientific method to uncover the mechanism of the economy, to lay out the rules, to take it apart and see how it ticks. Positive economics seldom has room for debate. Either it is or it is not. Just the facts, which can be verified or refuted.


• This is not true for normative economics--the policy side of economics. While positive economics seeks to describe the way it is, normative economics seeks to prescribe the way it should be. Normative economics is used to recommend ways to change the world, to improve it, to make it a better place.


• There is a lot of room for debate over normative economics and what constitutes a better world. A better world for Pollyanna Pumpernickel, might not be a better one for Winston Smythe Kennsington III. In most markets. a better world for sellers is higher prices, while a better world for buyers is lower prices. There are no absolutely right or wrong normative actions.

Working Together

Normative Economic Statements

1. The price of wheat should be $5 a bushel to give farmers a higher living standard and to save the family farm.


2. The United States would be better off spending $10 billion more on national defense than higher education.


3. A market-based economy is clearly the best possible economic system.

These are all normative statements, the practice of normative economics, because they depend on value judgments and cannot be proven true or false by comparison against real world data.

1. Statement (1) makes the judgment that farmers need a higher living standard and that family farms need to be saved. Maybe so, maybe not. Consumers who purchase more expensive wheat products (bread, tobuoli, snack cakes) might argue otherwise.


2. Statement (2) makes the value judgment that national defense is more deserving of this $10 billion than education. Maybe it is, maybe it is not. Students, professors, and others in higher education who suffer from less funding might think otherwise.


3. Lurking somewhere behind statement (3) is a hidden value about what constitutes the "best" economic system. Is it a system that achieves the economic goal of efficiency better than other systems? But what if society would rather achieve the goal of equity? Or stability? Maybe it is the best system, maybe it is not.