The Normative Economics basically deals with subjectivity in analysing an economic scenario. This means that rather objective analysis (factual and data studies) the normative economics relies heavily on the value judgement and theory of the experts. A majority of predictive statements in media about economy are based on normative economics for example increasing tax rate by 5% will boost economic growth by 0.5%. In this example it is based on a value judgment and theory rather than a past experience of the country.
The normative economics is opposite of positive economics which obviously is based on objective analyses involving available data and insights.
What is normative economics?
- Some economists think that economics is a normative science. It tells that weather a particular thing is describable or not. The aim of economics is to promote human welfare so it studies the factors relating to what out to be00
- Normative economics (as opposed to positive economics) is a part of economics that expresses value or normative judgments about economic fairness or what the outcome of the economy or goals of public policy ought to be.00
- Normative economics is judgement based. Its more like telling some one "What ought to be? " instead of "What is" (positive economics). For example : Poverty can be elevated if there is equal distribution of income among the population. You you are passing a judgement about it. Its not implemented but something that must be considered. While positive economics discusses about the facts that are happening in the society . example: why is the salary of an certified accountant greater than a graduated ? . Simple! the amount of education and knowledge the former has is more than the later. So its fact ! Its something happening already .00
- Normative economics is closely aligned with politics.
It asks questions and provides answers using the words "ought,"should," "could," "shouldn't," "must," and so on.
In other words it is concerned with opinions and political beliefs or dogma.
For example, "...the Government should not allocate taxes to matters of personal health, family-planning, child-rearing..."
Another example, "...private industry is best at making industrial decisions and Government ought to encourage that sector to be imaginative and not lay down any controls..."
In a socialist society, an example could be "...Government must ensure that all citizens have equal opportunities in education, training, employment, healthcare, family-support..."
The opposite of normative economics is usually called positive economics.
That does not concern itself with right or wrong or should or ought.
Positive economics asks and answers questions about facts and expectations.
An example would be, "...what would be the taxation-cost of providing free healthcare across the country?"
Another example could be, "...if we pull back our armed forces from all foreign engagements, what would be the public cost of supporting redundant military personnel and their families?"
You see the difference?20
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