What is Positive Economics?

Positive economics is a branch of economics that describes and explains economic happenings just the way they are and not the way they ought to be. Positive economics is otherwise called "what is" economics, while the normative counterpart is regarded as "what should or ought to be" study of economics. 

How is Positive Economics Used?

When explaining an economic phenomenon, positive economics focuses on things as they are and uses obtainable facts to explain what happened or what is currently happening in an economy. 

Positive economics entails investigating the occurrences in an economy and explaining them just the way they are. Facts and verifiable information derived from the investigations can be used to make future projections for an economy.

Positive Economics is Different that Normative Economics

Positive economics is different from normative economics, given that the latter makes a value judgment about occurrences in an economy and describes how situations should be or ought to be. Future predictions are also made in this type of economics using value judgments. 

Central Premise of Positive Economics

Positive economics is built on one sole tenet, which is to focus on facts and consider cause-and-effect behavioral relationships to explain situations in an economy and also make future projections. The facts obtained as well as the cause-and-effect relationships are helpful when developing economic theories. 

Testing Positive Economic Theories

Conclusions made in positive economics can be verified given that they are backed with facts and numbers. 

When testing positive economic theories, it is important to know what this branch of economics does not seek to render advice or tell policymakers what should be done, rather, it only describes and explains things the way they are and according to findings. 

Positive economics entails an objective analysis of an economy. It makes future projections using facts and cause-and-effect behavioral relationships between factors of the economy. Understanding the positive economics studies and analysis of an economy is important when making crucial decisions.

Real-World Example of Positive Economics

This illustration will enhance a proper understanding of how positive economics work in real-life situations:

Country A is experiencing labor congress tussle over an increase in the minimum wage. In this situation, Normative economics will give a value judgment on why the proposed minimum wage should be approved or otherwise, using the "what should have been" or "what ought to be" approach. 

Positive economics, on the other hand, would describe the economic situation and explain the proposed increment in minimum wage backing it up facts, verifiable data, actual numbers, and empirical research.

Related Topics

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