Notesecon - THE METHOD OF ECONOMICS Positive economics an...

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THE METHOD OF ECONOMICS Positive economics- an approach to economics that seeks to understand behavior and the operation of systems without making judgments. It describes what exists and how it works Does not make judgments about whether outcomes are good or bad I.e. What would happen if we abolished corporate income tax? What determines the wage rate for unskilled workers? Normative economics- an approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. Aka policy economics I.e. should medical benefits to the elderly under Medicare be available to those with incomes below some threshold? Should we reduce or eliminate inheritance taxes? Most normative questions involve positive questions. I.e. if we lower import fees, will there be more competition and lower prices? Some argue that positive analysis is impossible b/c people are always bias and influenced by political, ideological, and moral views Important to distinguish b/w analyses that attempt to be positive and those that are intentionally normative Normative questions should be forced to specify their grounds for
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