According to free-market economist Milton Friedman, which statement best reflects the distinction between positive and normative analysis in economics?

• A. Positive analysis is based on value judgments, while normative analysis is strictly factual.
• B. Positive analysis describes what is, while normative analysis prescribes what ought to be.
• C. Normative analysis focuses on empirical evidence, while positive analysis is concerned with ethical considerations.
• D. Both positive and normative analysis are solely concerned with policy recommendations.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definitions of positive and normative analysis in economics. Positive analysis deals with objective statements that can be tested or verified, describing 'what is'.
2. Step 2: Recognize that normative analysis involves subjective judgments about what ought to be, incorporating values and opinions rather than just facts.
3. Step 3: Identify that Milton Friedman emphasized the clear distinction where positive analysis is descriptive and fact-based, while normative analysis is prescriptive and value-based.
4. Step 4: Evaluate each statement in the problem by comparing it to these definitions to determine which one correctly reflects the distinction.
5. Step 5: Conclude that the statement 'Positive analysis describes what is, while normative analysis prescribes what ought to be' best captures the difference according to Milton Friedman.