Positive economics

Positive economics focuses on the description, quantification and explanation of economic phenomena. It deals with empirical facts as well as cause-and-effect behavioral relationships and emphasizes that economic theories must be consistent with existing observations and produce testable, precise predictions about the phenomena under question. Positive economics as a science concerns analysis of economic behavior to determine what is true. Examples of positive economic statements are "the unemployment rate in France is higher than that in the United States," or “an increase in government spending would lower the unemployment rate.” Either of these is potentially falsifiable and may be contradicted by evidence. Positive economics as such avoids economic value judgments. For example, a positive economic theory might describe how money supply growth affects inflation, but it does not provide any instruction on what policy ought to be followed. Positive economics is based on facts which can or cannot be approved. It provides an "objective" system of generalisations. However, due to economics being directly related with human beings, achieving objectivity can be hard. On the other hand, normative economics is based on judgments which they are either good or bad. For example, “Government spending should be increased” is a normative statement.

Definitions

The scientific or positive aspects of economics were emphasized by many 20th century economists in order to show that economic theories could answer questions with the same scientific methodology as the physical sciences.

John Neville Keynes's The Scope and Method of Political Economy defined positive economics as the science of "what is" as compared to normative economics, the study of "what ought to be". Keynes was not the first person to make these distinction between positive and normative economics but his definitions have become the standard in economics teaching.

Lionel Robbins's 1932 book An Essay on the Nature and Significance of Economic Science stated that economics should take as its subject matter attempts by individuals to achieve ends with limited resources. Given that any end was "dependent on scarce means", it should not take a point of view on which ends should or should not be pursued. It is believed that Robbins was instrumental in promoting the fact-value distinction in economics and insisting that ethical or value judgments should not be a part of the discipline, however Robbins' views on this subject were not entirely clear.

Paul Samuelson's Foundations of Economic Analysis (1947) lays out the standard of operationally meaningful theorems through positive economics. Positive economics is commonly deemed necessary for the ranking of economic policies or outcomes as to acceptability.

Milton Friedman, in an influential 1953 essay, elaborated on the distinctions between positive and normative economics. He defined the aim of positive economics as developing theories that give “valid and meaningful” predictions which are precise, testable and in accordance with the available empirical evidence. To do this, economists must create a model that simplifies reality.

Friedman also emphasized that positive and normative economics could never be entirely separated because of their relationship with economic policy. Disagreements about economic policy are primarily due to an inability to agree about the likely consequences of a piece of legislation. As economics developed, Friedman believed that it would become increasingly possible to derive undisputed results about positive economic statements and that this would help to make clear judgments about the best ways to achieve normative goals such as minimum wage legislature.

However. as positive economics continuously progressed, economist' that believe in normative concept tended to disconnect from their positive beliefs.