Positive and normative statements
Telling claims about how the world is from claims about how it should be, and why economists disagree.
FinanceEveryday economicsAbout 6 min: 3 reading, 3 practiceUpdated
General education, not financial advice.
- Tell a positive statement from a normative one
- Explain how each kind of claim is tested
- Give Mankiw's two reasons economists disagree
Builds toward: Run your own money. Budget so there's room to save, spot and clear costly debt, compare savings and loan offers, and see what interest and inflation do to your money.
Everyday economics: news, prices and choices: lesson 4 of 11
- Everyday economics
- Trade-offs and opportunity cost 5 min
- Thinking at the margin and incentives 5 min
- Models and the circular flow 5 min
- Positive and normative statements 6 min
- Demand and what shifts it 5 min
- Supply, equilibrium and shifts 6 min
- What money is 5 min
- What GDP counts 6 min
- Real and nominal GDP 5 min
- Measuring unemployment 5 min
- The costs of inflation 6 min
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Pairs with any introductory economics textbook; for example N. Gregory Mankiw, Principles of Macroeconomics (6th ed.), chapter 2
What it is
Economists play two roles. As scientists they try to explain the world; as policy advisers they try to improve it. The two roles produce two kinds of statement:
- Positive statements describe how the world is. They can, in principle, be checked against evidence. Example: "Minimum-wage laws cause unemployment."
- Normative statements say how the world ought to be. They involve values as well as facts. Example: "The government should raise the minimum wage."
A positive claim may be wrong, but evidence can settle it. A normative claim cannot be settled by data alone: it also depends on views about ethics, politics and what matters most.
Quick check
Tap an answer to check it.
"Higher petrol taxes reduce how much people drive." Positive or normative?
- It says nothing about what should be done
Show answer
Positive: it is a claim about cause and effect that evidence could test. Positive statements describe; normative ones prescribe.
Why it matters
The two are often tangled together. A positive view affects a normative one: if you believe the minimum wage causes a lot of unemployment, you may oppose raising it. But a normative conclusion always needs a value judgement too. Two people who agree on every fact can still disagree on policy.
Why economists disagree. Mankiw gives two reasons:
- Different scientific judgements. They may disagree about which positive theory is right, or about how large an effect is. For example, they may disagree about how strongly saving responds to tax changes.
- Different values. They may want different things: more weight on equality, say, or on efficiency.
But they agree more than it seems. Mankiw reports surveys showing large majorities of economists agreeing on many points. For example, 93% agreed that a ceiling on rents reduces the quantity and quality of housing available, and 93% that tariffs and import quotas usually reduce general economic welfare. Policies sometimes go against such majorities, Mankiw suggests, because of the political process, or because economists have not yet convinced enough of the public.
Clear language helps. When you read economic writing, ask of each claim: is this a statement of fact that evidence could test, or a judgement about what is better?
Worked example
Sort the parts of one argument: "Rent controls lead landlords to cut maintenance, so the quantity and quality of housing falls. We should not harm tenants this way, so the city should end rent controls."
- "Rent controls lead landlords to cut maintenance": positive, a claim about behaviour that evidence can test.
- "So the quantity and quality of housing falls": positive, a predicted effect, also testable.
- "We should not harm tenants this way": normative, a value judgement.
- "The city should end rent controls": normative, a policy recommendation.
The recommendation rests on both the facts and the value. Someone who accepts the facts but values low rents for current tenants more highly might reach a different conclusion.
Common mistake
Treating any statement with numbers as positive and any statement with feeling as normative. The test is not tone but whether evidence alone could settle it. "Unemployment is too high" sounds factual but is normative: "too high" is a judgement.
Key terms
- positive statement
- a claim about how the world is, which evidence can test
- normative statement
- a claim about how the world ought to be, which involves values
- policy adviser
- an economist's role in recommending how to improve the world
- value judgement
- a view about what is better or worse, which facts alone cannot settle
Practise the key terms
Tap a card to turn it over. 4 cards.
| Front | Back |
|---|---|
| positive statement | a claim about how the world is, which evidence can test |
| normative statement | a claim about how the world ought to be, which involves values |
| policy adviser | an economist's role in recommending how to improve the world |
| value judgement | a view about what is better or worse, which facts alone cannot settle |
Practice
Sort it
Which group does this belong to?
A higher minimum wage reduces jobs for young workers
A testable claim about effectsShow answer
Positive. A testable claim about effects
The minimum wage should rise to help low-paid workers
A recommendation based on valuesShow answer
Normative. A recommendation based on values
Unemployment is too high
"Too high" is a judgementShow answer
Normative. "Too high" is a judgement
Unemployment rose by 1 point last year
A fact that data can checkShow answer
Positive. A fact that data can check
Tariffs usually reduce general economic welfare
A claim economists test with evidenceShow answer
Positive. A claim economists test with evidence
The country ought to protect its farmers
A judgement about what should be doneShow answer
Normative. A judgement about what should be done
Quick quiz
Tap an answer to check it.
How is a normative statement judged?
- That is how positive statements are judged
Show answer
With facts and values: data alone cannot settle it. Normative statements say what ought to be.
What are Mankiw's two reasons economists disagree?
- Mankiw's reasons are about theories and values
Show answer
Different scientific judgements and different values. They may disagree about how the world works, or about what policy should aim for.
What share of economists in Mankiw's survey agreed that a ceiling on rents reduces the quantity and quality of housing?
- Agreement on this point was very high
Show answer
93%. Economists agree on more than their public arguments suggest.
In short
- Positive statements say what is, and evidence can test them.
- Normative statements say what ought to be, and need values as well as facts.
- Economists disagree because of different scientific judgements and different values.
- On many questions, large majorities of economists agree.
Mastery check
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Check yourself
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Is "The government should cut taxes" positive or normative?
Show answer
Normative: it recommends what ought to be done.
Can a positive statement be wrong?
Show answer
Yes; it is positive because evidence can test it, not because it is true.
Why can two economists who agree on all the facts still disagree on a policy?
Show answer
Because they hold different values.
Further reading
- N. Gregory Mankiw, Principles of Macroeconomics, 6th ed. (South-Western Cengage, 2012), chapter 2.
- On this site: Models and the circular flow.
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