Positive v. Normative Analysis

When you're talking positive economics, you're talking objective data and facts. You're quantifying things with numbers, analyzing potential causal relationships with rigorous statistical analysis, and pointing out the way things are in everyone’s shared reality.

When you're talking normative economics, you're talking opinions and ideology. Maybe you think it's unfair some people are working two jobs on minimum wage, barely getting by, while a handful of people are rolling in dough. Or maybe you think it's unjust to redistribute money that people earned, no matter their income. Maybe you think more government regulation and social programs will make things better, or maybe you think small government...or no government...is the key to making things better, depending on whatever “better” looks like for you.

Assuming we're all in the same universe and talking about reality, positive economic statements are things everyone should be willing to agree on. For instance, "inflation in the U.S. in 1946 was 18.1%" is a positive economic statement, derived from positive analysis. You can think "positively correct" to help you remember.

If you also thought, "An inflation rate of 18.1%? Wow...that blows..." that's a normative economic analysis you just did there. Think, "it's normal to have opinions." Because it is, with our monkey brains.

So why is knowing the difference between positive and normative economic statements so important?

You can think of positive economic analysis as the tools that people use (you know, the facts) to try to implement what they want to see, based on their normative economic opinion.

Liberal Congressmen will seek out liberal positive economics that supports their normative ideology, just as conservative congressmen seek out positive economics that supports their conservative ideology. To make sure you know the facts that are positively true, it's good to know where they're coming from.

For instance, would you trust a study that was funded by the Coca-Cola company that says excess sugar is actually good for your health?

Hey, we wouldn’t blame you for wanting to believe it was true, but hopefully all of the other positive analysis that’s been done out there on the health problems caused by having a sugar party all day, everyday, would raise your skepticism, even if you didn’t know who funded the study.

Don't worry...you can totally have a normative economic ideology. Just make sure your economic evidence is in the positive economic realm.

And know that, when you’re talking to someone on the “other side” (someone from a different political economic tribe), positive analysis might get you somewhere, while normative statements...probably won’t. Which is just how our monkey brains roll.