Differences Between Positive and Normative Economy

This article is based on describing differences between positive and normative economy. What are those differences based on and what they mean. This article also includes examples so as to make it understandable.

Differences Between Positive and Normative Economy

Differences Between Positive and Normative Economy

The economy as a social science deals with numerous areas and problems at the same time developing various theories of human behavior in terms of decision making. In terms of research of the main economic rules and appearances the whole economic science can be classified into two categories:

  1. positive
  2. normative


Positive Economy

A positive Economy deals with the research of aims and scientific explanations. The goal of a Positive Economy is to find an explanation and to understand how society acts upon consumption, production, distribution, and exchange of goods and services. At the same time economy delivers explanations on why some business acts the way they do while it also allows possible predictions on how the business might react on implemented changes.

Positive Economy is similar to social sciences - it wants to know how the business would act without any moral or political influences. It does not leave any space for the promotion of personal assumptions and decision-making.


Normative Economy

Normative Economy on the other hand offers recommendations in terms of business functioning based on personal opinion. For example, when government imposes taxes on valuable goods the price of the goods increased. Then the question of normative nature arises - if the increased price is desirable from the economic point of view. Therefore it can be summed up that Normative Economy is based on personal assumptions not on some research.


Positive economy deals more with what should morally and ethically be done within the market for example cheaper medications price for retired people. On the other side normative economy deal with the overall good for the economy of the whole having on mind administration and profit included in the overall picture. Thereafter sustaining a good stable economy would be probably the balance between the two.

References

BOOK: Ekonomija - Petar Vaselinović, 8 ... 9788679122773

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