Basic Principles of Economics
Positive and Normative Analysis
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Positive Statements vs. Normative Statements
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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 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 how it's phrased, right? And this is a key concept here, that how it's phrased is gonna be crucial to determining whether it's a positive statement or a normative statement. So facts. Excuse me, 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 micro economics. See 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. Um and the idea here is remember it doesn't have to necessarily be 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 would be able to refute this. I'm not gonna not so much of a science guy, so I'm not gonna really get into it now. Um but I guess a key thing about positive statements here. One more note is that they can be tested, right? They can be tested their 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. Um 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 gonna write opinions, right? Um we're now instilling some sort of, oh, things should be this way. Things should be that way. Uh 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? Um I guess I could compare that to like a more micro economics. Let's go back to oil spills. Something like oil spills oil spills. Excuse me? 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 um of how the world should be, not how it actually is. So what I wanna do is point out some of the key words here. I'm gonna get out of the way while I fill in this green box. Um there's some key words that are making it really easy to uh to spot a normative statement and that's words like should hear or ought to. So I'm gonna write those in here. Should ought to another one. A good one is uh 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 and identify some positive statements and normative statements
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Let's go ahead and do this example, label the following statements as positive statements with P or normative statements within the end. 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 write this is telling us that it's kind of an opinionated statement, right? It's telling us how the world should be, not how it actually is. So when you see should automatically think normative statement, right? 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 how it should be telling us that if there are minimum wage laws, we should get rid of them because they're a bad idea. Right? This is another one of our key uh normative normative statement keywords here is when you see good idea or bad idea, something like that. Uh that's a cue. It should signal you that It's a normative statement. Let's try the next one. Rising gas prices rising. Excuse me, rising gas prices. Cause people to buy less gas. Okay, this statement, they're not really instilling any kind of opinion in 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, right? 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, it's something that you could test, right? So we could test what happens when gas prices rise? Do people actually buy less gas? We could do 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. It's something that we can test. Again, we're talking about positive statement here, right? We don't see any of our keywords. So pretty easy to know that that's a positive statement. How about the last one? The government ought to increase the minimum wage here. We see one of our key words ought to and I'm gonna say 99% of the time when you see a positive or excuse me, A normative statement, it's gonna use should you're gonna see should And when you see that word automatically think normative. But it's nice to have these other backups because these are the next most common ones. Is seeing things like ought to do it this way or this is a bad idea. These are normative statements. Right? So keep your eyes open for those words and it'll make this a lot easier