{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

1Normative - 1 Normative economics value judgements Pareto...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1. Normative economics, value judgements, Pareto optimality: basic concepts 1. Economics as the logic of choice. Allocation of scarce means between competing ends. Rational choice requires comparisons of costs and benefits of the options available. These can be divided into two classes: positive propositions, the truth of which can, in principle, be established by reference to facts, and value judgements, that cannot be settled by appeal to facts. 2. Normative and positive propositions . This distinction is related to David Hume’s distinction between ‘is’ propositions (positive propositions about the facts of any situation), and ‘ought’ propositions that have a prescriptive – as distinct from descriptive – character. Positive economics comprises the study of how economies are likely to behave given some assumptions about the behaviour of individual agents and some technological assumptions about the process of production. Positive propositions do not require any input from value judgements. But normative economics requires some comparison between the predicted operation of markets provided by positive economics with some goals or objectives of society provided by value judgements , which may apply to both the ends of policy and the means that could be adopted to pursue those ends. 3. The ubiquity of value judgements in welfare economics. This course concentrates on these value judgements. The early lectures discuss them in general terms and in later lectures we shall show how they arise in a few selected specific policy issues – such as the valuation of life, or environmental policy, or concern for future generations. 4. Dependence of welfare propositions on value judgements. Meanwhile, we give some particular examples of how certain common policy objectives can only be justified, in the end, by appeal to some high-level value judgement, though the precise route by which one arrives at it may vary according to which positive assumptions one adopts. 5. Welfare economics and Pareto optimality. Welfare economics builds on certain micro-economic assumptions about agents’ behaviour (e.g. as consumers or producers) and certain very plausible technological assumptions in order to demonstrate what conditions have to be satisfied if the economy is to maximise its contribution to economic welfare. These conditions define the optimal – or ‘efficient’ - allocation of resources. Such a position is referred to as a Pareto optimal situation, which is one at
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}