Which of the following best summarizes Adam Smith's perspective on positive and normative analysis?

• A. Economic theories are only useful if they prescribe specific government interventions.
• B. Economists should primarily advocate for policies that promote social welfare.
• C. Economic analysis should focus on describing how markets operate without making judgments about outcomes.
• D. The role of economics is to determine the moral value of different market outcomes.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the distinction between positive and normative analysis in economics. Positive analysis describes and explains economic phenomena without making value judgments, while normative analysis involves opinions about what ought to be done based on values or ethics.
2. Step 2: Recognize Adam Smith's approach to economics, which emphasizes describing how markets function and the outcomes they produce, rather than prescribing specific policies or making moral judgments.
3. Step 3: Evaluate each option in the problem by checking if it aligns with Smith's focus on objective, descriptive economic analysis (positive analysis) rather than advocacy or moral evaluation (normative analysis).
4. Step 4: Identify that the statement 'Economic analysis should focus on describing how markets operate without making judgments about outcomes' best captures Smith's perspective, as it reflects the positive analysis approach.
5. Step 5: Conclude that Adam Smith's perspective is best summarized by the emphasis on objective description of market operations, separating economic facts from value-based judgments.