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Econ: What is Positive v. Normative Analysis? 6 Views
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Description:
What is Positive v. Normative Analysis? Positive analysis defines parts of the economy using actual facts and analysis while normative analysis defines parts of the economy by looking at the behavior of consumers. Basically, one way of defining economic phenomena is more scientific and mathematical and the other is more psychological.
Transcript
- 00:00
And finance Allah shmoop What is positive versus normative analysis
- 00:09
All right people when you're talking positive economics you're talking
- 00:12
objective data and facts You're quantifying things with numbers analyzing
- 00:18
potential causal relationships with rigorous statistical analysis and pointing out
- 00:23
the way things are in everyone's shared reality When you're
Full Transcript
- 00:26
talking normative economics you're talking opinions and ideology Maybe you
- 00:31
think it's unfair Some people are working two jobs on
- 00:34
minimum wage barely getting by while a handful of people
- 00:37
are rolling in dough Or maybe you think it's unjust
- 00:40
to redistribute money that people earned no matter what their
- 00:43
income is Well maybe you think Mohr government regulation and
- 00:46
social programs will make things better Or maybe you think
- 00:50
small government or no government is the key to making
- 00:52
things better depending on the well whatever better looks like
- 00:55
for you assuming we're all in the same universe and
- 00:58
talking about reality while positive economic statements are things everyone
- 01:02
should be willing to agree upon for instance inflation in
- 01:06
the United States in nineteen forty six was eighteen point
- 01:09
one percent That's a positive economic statement derived from positive
- 01:13
analysis You can think positively correct to help you remember
- 01:17
right If you also thought an inflation rate of eighteen
- 01:20
point one percent Wow that blows That's a normative economic
- 01:24
analysis You just did there because well you're thinking well
- 01:27
it's normal toe have opinions because it is with are
- 01:30
you know monkey brains So why is knowing the difference
- 01:33
between positive in normative economic statements so important you can
- 01:37
think of positive economic analysis as the tool that people
- 01:40
use you know the fax To try to implement what
- 01:43
they want to see based on their normative economic opinion
- 01:47
liberal congressman will seek out liberal positive economics that support
- 01:51
their normative ideology Just as conservative congressman seek out positive
- 01:56
economics that support their conservative ideology to make sure you
- 02:00
know the facts that are positively true it's good to
- 02:03
know where they're coming from right For instance would you
- 02:05
trust a study that was funded by the Coca Cola
- 02:08
Company that says excess sugar is actually good for your
- 02:12
health Well we wouldn't blame you for wanting to believe
- 02:14
all of this is true whoever you're rooting for But
- 02:17
hopefully all the other positive analysis that's been done out
- 02:20
there on the health problems caused by having a you
- 02:22
know Coca Cola Sugar Party all day every day That
- 02:25
would raise your skepticism even if you didn't know who
- 02:28
funded the study So don't worry You can totally have
- 02:31
a Norman of economic ideology Just make sure your economic
- 02:34
evidence is in the positive economic realm And just know
- 02:38
that when you're talking to someone on the other side
- 02:41
unquote someone from a different political economic tribe positive analysis
- 02:45
might get you somewhere while Norman of statements probably won't
- 02:49
And again this is just how our monkey brains role 00:02:52.6 --> [endTime] keeping it real Who
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