Economic science makes a distinction between positive and normative economics. While the former is the branch of economics that focuses in the description and explanation of economic phenomena, the latter is concerned with the application of positive economics with the purpose of giving advice on practical problems including those regarding public policy.
We can easily make the distinction between positive and normative economics by asking two very different questions: “What is?” and “What ought to be?”. As stated before, positive economics focuses on analysing economic phenomena, on answering the question “What is?”. Normative economics wants to answer the question “What ought to be?”. In other words, how can I apply something I found out (positive economics) to the real world (normative economics).
The distinction was first made during the nineteenth century, by some of the most renowned economists of the classical school, such as John Stuart Mill or John Neville Keynes (John M. Keynes’ father). In their analysis, these economists first observed an economic phenomenon, and then postulated a hypothesis aiming at explaining the phenomenon. This hypothesis would then tested against factual observations of economic behaviour, in order to determine the theories’ scope of applicability.
Thus, we can think of positive economics as being the purely scientific part of the economic discipline being objective and fact-based, while normative economics is more subjective to values and hence considered non-scientific. As a result, only positive economic statements can be tested and accepted or disregarded, however as normative economics statements are opinion based they can neither be right nor wrong.
