Economics, 3rd Edition

Positive statements

 are descriptive. They make a claim 

about how the world is. Positive statements have the property that the claims in them can be tested and 

confirmed, refuted or shown to not be provable either way. A second type of statement, such as Sophie’s, 

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24  PART 1  INTRODUCTION TO ECONOMICS

is normative. 

Normative statements

 are prescriptive. They make a claim about how the world ought to 

be. Normative statements have the property that they include opinion; it is not possible to test opinions 

and confirm or reject them.

Positive statements

 claims that attempt to describe the world as it is

Normative statements

 claims that attempt to prescribe how the world should be

In studying economics (and in everyday life) you will come across many examples of positive and normat-

ive statements. In conducting analysis it is important to distinguish between the two. It is perfectly possible 

to conduct both positive and normative analysis. For example, the statement: the government should reduce 

the deficit as this will benefit the economy, is a normative statement – it contains an opinion that the govern-

ment ought to reduce the deficit. A reduction in the government deficit will benefit the economy is a positive 

statement, it is capable of being tested. Economists could engage in positive analysis to test whether there 

is any evidence to support the statement but equally could engage in normative analysis on the basis that 

there are many people who believe that reducing the deficit will benefit the economy.

A key difference between positive and normative statements, therefore, is how we judge their validity. 

An economist might evaluate Pascale’s statement by analysing data on changes in minimum wages and 

changes in unemployment over time. By contrast, evaluating normative statements involves values as 

well as facts. Sophie’s statement cannot be judged using data alone. Deciding what is good or bad policy 

is not merely a matter of science; it also involves our views on ethics, religion and political philosophy.

Of course, positive and normative statements may be related. Our positive views about how the world 

works affect our normative views about what policies are desirable. Pascale’s claim that the minimum 

wage causes unemployment, if true, might lead us to reject Sophie’s conclusion that the government 

should raise the minimum wage. Yet our normative conclusions cannot come from positive analysis alone; 

they involve value judgements as well. Normative analysis has its value but it may be necessary to carry 

out positive analysis first in order to inform the normative.

As you study economics, keep in mind the distinction between positive and normative statements. 

Much of economics just tries to explain how the economy works. Yet often the goal of economics is to 

improve how the economy works. When you hear economists making normative statements, you know 

they have crossed the line from scientist to policy advisor.