Positive & Normative Economic Statements (Edexcel A Level Economics A)

Positive economics is concerned with objective statements of how a market or an economy works 

• These positive economic statements are based on empirical evidence and tend to be statements of fact

• They can be proven to be true or false

• These are examples of positive economic statements

  • The UK unemployment rate has fallen from 4% to 3.7% in the past three months

  • Increasing the minimum wage last year in the UK resulted in improvements to wage inequality

  • Prices in the UK have risen dramatically, partly due to the 20% increase in the price of oil

Normative economics focuses on value judgements. These judgements are built around opinions and beliefs as to what the best economic policies or solutions may be

• These judgements are called normative economic statements

• Normative economic statements are what separate political parties and the different economic agendas they put forward

• These are examples of normative economic statements

  • Every economy should aim to provide free healthcare for its citizens

  • Corporation taxes in an economy should be higher than personal income taxes

  • The best way to deal with a rise in crime is to employ more police

Value judgements influence individuals choices in the economic decisions they make

• These decisions can be related to any part of their lives, from what they eat, to where they work, to how they maintain their health

• For example, deciding not to eat meat is often a value judgement based around unethical methods of food production. By providing statistics on the harmful impact that meat production has on the environment, environmental campaigners are attempting to demonstrate that this is no longer a normative issue

• Another example is the way that many individuals choose to smoke nicotine based products.  The value judgement they make is that the benefits they get from smoking outweighs any risk of cancer.  

Value judgements influence governments choices with regards to the economic policies they choose to adopt and spend money on

• The USA spends more money on imprisoning drug users than rehabilitating them

• In the UK, the Government has recently increased its spending on rehabilitation

• To say the UK approach is better would be a normative statement

• To say that the UK government spends more per head on rehabilitation would be a positive statement