Normative economics focuses on what should be, involving value judgments and opinions about economic policies or outcomes. It’s prescriptive, dealing with subjective goals like fairness or equality (e.g., “The government should raise taxes to reduce income inequality”).
Positive economics focuses on what is, analyzing objective facts and cause-and-effect relationships in the economy. It’s descriptive, aiming to explain how things work without judgment (e.g., “Raising taxes reduces disposable income by X%”).
Key Differences:
- Nature: Normative is subjective and opinion-based; positive is objective and fact-based.
- Purpose: Normative prescribes policies; positive describes and predicts economic phenomena.
- Examples: Normative: “Minimum wage should be $15 to ensure a living wage.” Positive: “A $15 minimum wage increases unemployment by 2% in this sector.”
Both are used in economics but serve different roles: positive provides the data, while normative guides policy recommendations.
