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Positive Economics and Normative Economics

These are the two branches of economics – Positive Economics and Normative Economics, which we will be studying here one by one and then we will see how they are different from each other.

Positive Economics

Let’s start with an example.

If I say that India has 28 states, can you check it and verify it for its truthfulness?

Definitely YES. You will go to this site knowindia.gov.in or just surf online and can check that I am right.

So, when a statement whether related to past, present, or future is verifiable by facts and figures, such statements come under positive economics. 

Let me give you more clarity on this. Have a look at these 3 statements –

  • Past – “At the time of independence, India was an underdeveloped country.”
  • Present – “The number of medical colleges in India increased to 529 in FY19 from 381 in FY13.” (FY = Financial Year)
  • Future – “The Government of India aims to increase healthcare spending to three percent of the Gross Domestic Product (GDP) by 2022.”

(Source – https://www.ibef.org/industry/healthcare-india.aspx)

If you will analyse all the 3 statements, you will find that you can easily verify them from newspaper clippings or government documents. It means they all come under positive economics.

Normative Economics

Another example comes your way. If I say that the lockdown should not have been implemented as it has ruined the livelihood of many.

But at the same time, some of you would say that if this decision was not taken by the Government, then it would have turned into severe destruction of human life.

Have you noted one thing?

On this particular topic, every individual will be having a different opinion. And when such issues on which every economist has a different opinion, such statements are termed as normative economics which cannot be verified. They are totally based on value judgement.

Now the question arises – “What is Value Judgement?

If we go by the dictionary meaning of it, it means “an assessment of something as good or bad in terms of one’s standards or priorities.” Means it is totally based on individual life experiences and on their perspective for the things. 

So here are the differences between the two-

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