Positive and Normative Statements: Videos & Practice Problems

Positive statements describe how the world is, focusing on verifiable claims, such as "oil spills harm the environment." These statements can be tested and do not require truthfulness. In contrast, normative statements express opinions on how things ought to be, using terms like "should" or "ought to," exemplified by "oil drilling should be illegal." Understanding the distinction between these types of statements is crucial for analyzing economic theories and policies, as it influences the interpretation of data and the formulation of fiscal and monetary policies.

Positive Statements vs. Normative Statements

So now we'll be dealing with a bit more of a psychological concept, the difference between positive statements and normative statements. Let's start with positive statements. Positive statements make a claim about how the world is, right, and here we're dealing with what I like to call facts. And a quick word of warning, even though I use the word facts, they don't necessarily have to be true to be a positive statement. It's more about how it's phrased. Right? And this is a key concept here: how it's phrased is going to be crucial to determining whether it's a positive statement or a normative statement. So, positive statements are phrased in a way that tell you how the world is. Let me give you an example. A statement like "Pizza is delicious." Now here we know we're dealing with cold hard facts. This is just, you know, this is like an inherent truth. There's probably not one of you out there that could even argue with me on this point. Right? "The pizza is delicious." I'm telling you something about how the world is, and it is delicious. Right?

So let me give you another example. Something a little more, microeconomics-y. Something, let's say, like, "Oil spills harm the environment." Again, I'm telling you something about how the world is. Right? "Oil spills harm the environment," and the idea here is remember, it doesn’t have to be necessarily true or false. It's just how it's phrased. I’m saying that "Oil spills harm the environment." There's no kind of opinionated thing in here. I’m just telling you something about how the world is, right? I could even, just to reiterate, say something like "The Moon is made of cheese," and this still counts as a positive statement. Right? Even though it's probably not true, I'm sure there's a couple of you out there that will be able to refute this. I'm not so much of a science guy, so I'm not going to really get into it now. But I guess a key thing about positive statements here, one more note, is that they can be tested. Right? They can be tested. They're verifiable. Right? This is something that can almost go through the scientific process, right? We can put it through a test and see if it's true or false.

Let's compare that to a normative statement. So normative statements make a claim about how the world ought to be. So in this box, I'm going to write opinions. Right? We're now instilling some sort of, oh, things should be this way, things should be that way. So let me give you an example. So statement a, something like, you know, "Everyone should get free pizza." At this point, I'm not really saying anything about the current condition. Right? I'm not saying anything about the world. I’m saying what should happen? How should things be? Right? I guess I could compare that to like a more microeconomics-y one. Let’s go back to oil spills. Something like, "Oil drilling, right, should be illegal." Well, let’s say "ought to be illegal" to change it up. Right? Again, I’m instilling my opinion here. I’m saying something of how the world should be, not how it actually is.

So what I want to do is point out some of the keywords here. I'm going to get out of the way while I fill in this green box. There's some keywords that make it really easy to spot a normative statement, and that's words like "should," "ought to," and another one, a good one, is when someone tells you something is a "good idea" or a "bad idea," they are instilling their opinion into the statement there. Alright? So now that we know this, why don't we do an example and try to identify some positive statements and normative statements?

Identifying Statements

Let's go ahead and do this example. Label the following statements as positive statements with p or normative statements with n. Alright. The first one. The government should provide health care to all of its citizens. Okay. So a keyword here that you should be looking for when we're doing positive and normative statements, it's right here. Should. This is telling us that it's an opinionated statement. It's telling us how the world should be, not how it actually is. So, when you see should, automatically think normative statement.

Let's go on to the next one. Minimum wage laws are a bad idea because they cause unemployment. So, this isn't really telling us anything about how the world is, right? It's telling us more about how it should be. It's telling us that if there are minimum wage laws, we should get rid of them because they're a bad idea. This is another one of our key normative statement keywords here; when you see 'good idea' or 'bad idea' something like that, that's a cue, and it should signal you that it's a normative statement. Let's try the next one.

Rising gas prices cause people to buy less gas. This statement is not really instilling any kind of opinion here, right? We don't see any of our keywords, and what we see is it's making a statement about how the world is. In this world, when gas prices go up, people buy less gas. How it's phrased, regardless of it being true or false, the way it's phrased is in the form of how the world is. It's a positive statement. And remember, another key with positive statements is something that you could test. So, we could test what happens when gas prices rise. Do people actually buy less gas? We could conduct a test in the market with that.

How about the next one? Minimum wage laws cause unemployment. Again, it's telling us something about how the world is, and it's something that we can test. Again, we're talking about a positive statement here, right? We don't see any of our keywords, so it's pretty easy to know that it's a positive statement.

How about the last one? The government ought to increase the minimum wage. Here we see one of our keywords, ought to. And I'm going to say 99% of the time when you see a normative statement, it's going to use should. When you see that word, automatically think normative, but it's nice to have these other backups because the next most common ones say things like 'ought to do it this way' or "this is a bad idea." These are normative statements. So, keep your eyes open for those words, and it'll make this a lot easier.

Here’s what students ask on this topic:

What is the difference between positive and normative statements in economics?

Positive statements describe how the world is, focusing on verifiable claims. For example, 'oil spills harm the environment' is a positive statement because it can be tested and verified. These statements do not need to be true but must be phrased in a way that they can be tested. In contrast, normative statements express opinions on how things ought to be, using terms like 'should' or 'ought to.' An example is 'oil drilling should be illegal.' Normative statements are subjective and cannot be tested for truthfulness. Understanding this distinction is crucial for analyzing economic theories and policies.

Can you provide examples of positive and normative statements?

Sure! A positive statement might be 'The unemployment rate is 5%.' This is a verifiable claim about the current state of the economy. Another example is 'Oil spills harm the environment,' which can be tested for its accuracy. On the other hand, a normative statement could be 'The government should provide free healthcare to all citizens.' This expresses an opinion on what ought to be done and cannot be tested for truthfulness. Another example is 'Taxes on the wealthy should be increased to reduce income inequality.'

Why is it important to distinguish between positive and normative statements in economics?

Distinguishing between positive and normative statements is crucial in economics because it helps clarify whether a statement is based on empirical evidence or personal opinion. Positive statements can be tested and verified, making them useful for objective analysis and policy-making. Normative statements, however, are subjective and reflect personal values and beliefs. Understanding this distinction aids in interpreting data accurately and formulating effective fiscal and monetary policies. It also helps in debates and discussions by clearly separating facts from opinions.

How can you identify a normative statement?

Normative statements can be identified by the presence of keywords that indicate an opinion or value judgment. Common keywords include 'should,' 'ought to,' 'good idea,' and 'bad idea.' For example, 'The government should reduce taxes' is a normative statement because it expresses an opinion on what the government ought to do. These statements are subjective and cannot be tested for truthfulness. Recognizing these keywords helps in distinguishing normative statements from positive statements, which are objective and verifiable.

Can a statement be both positive and normative?

No, a statement cannot be both positive and normative simultaneously. Positive statements are objective and verifiable, describing how the world is. Normative statements are subjective and express opinions on how the world ought to be. However, a single discussion or argument can contain both types of statements. For example, 'The unemployment rate is 5% (positive statement), and the government should create more jobs (normative statement).' Understanding the distinction helps in analyzing and interpreting economic discussions accurately.