Part of being an economist is making positive statements - get a fake smile ready. If you have a coworker or group member who hasn't done their part of a project, you should make a positive statement to them. As an economist, a positive statement you can say to them is, "your productivity is abysmal, and you have contributed nothing." Well, that is the most economically positive statement one can say. Why is everyone acting like that was rude? It was positive, right? In economics terms, what exactly are positive statements, and where do normative statements come into play? Read this explanation to figure out the difference.
Positive and Normative Statements Definition
Why are positive and normative statements even something we need to learn the definition of? Economists are practitioners of social science, and like all scientists, they can struggle to communicate effectively with the general public. An economist can find it difficult to explain theories to an audience unfamiliar with the underlying concepts that make a theory function.
There are many forms in which information and thoughts can be conveyed. If it is calling out an unproductive group member, it can be approached factually or encouragingly.
Imagine you are in a group for a work or school project, and just your luck, they put Ryan in your group. That guy always submits his work late, and his work is blatantly done poorly. Ryan clearly doesn't care about his performance, but now it affects yours. You have had enough and decide it's time someone steps up and says something to him. But what can you say that will help the situation?
One of the ways you could approach Ryan in the example above is by saying something factual like: "Hey Ryan, this is a group project, and we share in success and failure collectively."
That is what economists call a positive statement. Obviously, there was no kindness in that statement, so how is it positive? In economic terms, a positive statement explains the situation as it is, a factual account.
Telling Ryan the stakes of the group project is a verifiable fact and doesn't imply that he needs to change his behavior. That is what makes the statement a positive statement in economic terms.
Despite the nature of positive statements, economists may disagree on theories of how the world works.
A positive statement is a factual account of how the world is. A description of real and verifiable aspects of the current scenario.
What is the other kind of statement an economist can make to Ryan? Well, Ryan ought to contribute to his group as it's the right thing to do. So you approach Ryan and say: "you have an obligation to complete your part of the project; it's the right thing to do." This is what economists call a normative statement, a prescriptive statement of how the world ought to be. Normative statements express desires to change things for the better.
Normative statements are based on how a situation could be different or improved upon. It is a prescriptive idea of how the world ought to be.
Difference between Normative and Positive Statements
The difference between normative and positive statements is how their validity is judged. Economists strive to make positive statements. Economists use theories and principles founded on the results of research to make their decisions. However, economists are also people, and people generally try to change the world for what they believe is better, which is normative.
A positive statement is rooted in data and quantifiable pieces. Statements that have provable and real outcomes are positive.
The statement, "the air has oxygen in it," can be verified with a microscope. Scientists have researched air and analyzed the elements that are floating around us at all times.
A positive statement provides a clear description of what has happened or is currently happening.
A normative statement is not verifiable but aligns with personal values of morality. Statements that have uncertain outcomes are normative. These can be aligned with facts but not directly enough to guarantee the result.
The statement, "workers will be better off if the minimum wage is increased," is partly true. However, the exact effects won't be universal, some may lose their job as companies cut staff, or prices of goods may rise, negating the change in purchasing power.
Nobody wants workers to struggle to pay their bills; however, policy actions to address them may not have an equitable effect on all workers. That is what makes this statement normative. It has a just moral basis; however, it may hurt some workers more than no change.
Fig. 1 - 2021 G20 Summit Italy1
Politicians are infamous for making grandiose normative statements of their vision on how to improve everyone's lives. The G20 summit is a gathering of political leaders to do precisely that. The real effects of their policies may differ, however.
As economists, it's important to monitor how we communicate and make it clear when we talk normatively or positively. That way, we are not misunderstood when discussing theory and proven outcomes, as well as equitable aspirations for the world.
Normative and Positive Statements in Economics
So how do positive and normative statements play a role in economics? Any profession has a responsibility to separate optimistic advice from factually proven instructions. As economists, we must be mindful of existing studies and data that show exactly how policy changes impact the world.
In a simpler sense, an economist who is mindful of normative and positive statements speaks carefully. Implying that they share moral ideals, not facts, no matter how ideal the outcome. Using quantifying words with normative statements can clue listeners that the statements are a possibility but not a guarantee.
Words like: possible, may, some, and likely can help differentiate normative statements from what the world will actually do.
Similarly, empirical evidence and data describe the world as close to accurate as it can be. We can't ignore positive statements even when they get in the way of morally just ideals. Consider the scenario in the deep dive below.
The case of minimum wage
Advocates for workers being paid fairly will not want to admit that raising the minimum wage will create more unemployment. However, the outcome can be verified by analyzing how firms have acted in the past or looking at current financial reports to determine how they will react.
So what is the proletariat to do in the face of this fact? The answer is not to ignore the data but to alter the strategy using data. This tells us that a minimum wage increase alone isn't enough to raise workers' living standards. As an economist, a positive statement would be to recommend strategies such as unionization that can be applied to secure higher wages and maintain employment.
When it comes to normative statements, economists may have different values, which will lead to different normative views on public policy and how to accomplish its goals. This can be most easily observed by the fierce battling of ideologies that occur in your country and the global political landscape.
Imagine a country with two political parties, an owl party and a dog party. Both share the goal of improving the well-being of the country.
The owl party wants to maintain economic growth and believes that economic growth is the best way to raise the standard of living for all citizens. So the owl party prioritizes policies, such as corporate tax breaks, that support business growth.
The dog party wants to raise the standard of living for all citizens. They believe providing public services such as education, job training, and healthcare is the best way to achieve that. Building up citizens by giving them growth opportunities, as well as maintaining their health, results in them being more productive workers.
This example above demonstrates the perils of normative statements. Both political parties intend the same goal but pull in opposite directions on how to get there. Economists can help sort through ideals to find positive facts that can achieve those goals. In this example, both parties are factually correct, and their proposals will achieve their goal. The difficulty comes with choosing who receives the benefits, which determines how and where the funding is applied.
Positive and Normative Statements Examples
To clarify what positive and normative statements are, read these examples.
A famous quote from United States senator Bernie Sanders:
In America today, the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.2
This is a positive statement as the wealth distribution is both a measurable quantity and has been measured to show significant wealth inequality.
Some statements are hard to qualify depending on the content of the statement.
Turkish President Recep Tayyip Erdogan said:
We are lowering interest rates, and we will lower them. Know that inflation will fall too then, it will fall more.3
This state is descriptive and can be proved with data. However, the data implies this statement is false. When interest rates increase, the cost of borrowing money increases. This decreases the amount of money circulating, which lowers inflation. This statement is normative because it describes how Erdogan wants the world to be, not how it is.
Some statements have positive and normative elements mixed together, and this gets complicated in determining the validity of the statements. In the following example, we will dissect a statement made by a politician and separate the portions of the statement that are normative or positive.
Statement: To help out hardworking citizens, we need to unleash the power of our businesses by cutting regulations.
So is this statement normative or positive? Well, in this case, it is a combination of both. This statement is shaped as if it is a positive statement; however, its actual effects are a bit more indirect than the statement implies. See below for which portions of the statement are normative or positive.
Positive: Reduced regulation is proven to increase business growth by removing costs imposed by the regulation.
Normative: Business growth can indirectly help citizens; however, the effects can be unequally distributed. Workers who lose protective regulations may be at health risk.
Fig. 2 - Workers demonstrating for safety regulations4
Through economics, we can have a deeper understanding of how policies and changes affect the world around us. Even for policies we want to be true, it's important to recognize what is normative and positive.
Consider the following statement made about progressive climate policy. Is the statement normative, positive, or does it have elements of both?
Statement: The green new deal is about creating economic security for everyone and doing it quickly.
The statement above is a short snappy quote with good intentions. However, it doesn't give a specific strategy or policy on how to achieve this; therefore, the statement is predominantly normative. Well, which part is normative and which is positive?
Positive: Climate change policy will increase long-term economic security.
Normative: Implementing climate action will disrupt long-standing cultures and customs, as well as many established industries. Jobs incompatible with climate action will be lost, and it will be difficult to find a job for everyone affected. While policymakers who support climate policy intend to maintain employment, "economic security for everyone" can not be guaranteed.
Importance of Positive and Normative Statements in Economics
Positive and normative statements play an important role in how we communicate economic concepts. As economists, we must adhere to established economic principles and proven concepts. Whether we agree with it or not, it's still a proven outcome that should be respected.
So why do economists need normative statements if they aren't factually provable or directly fix anything? Even the greatest economists spouting correct facts and theory is nothing if no one will listen to them. Solving an equation paper proves something; it doesn't make people believe or act on it. The challenge becomes convincing others to believe in the economic theory to make it a reality.
Great economists and persuasive speakers use a mixture of both normative and positive statements due to this. Normative statements are great for captivating listeners and inspiring them. Positive statements allow us to dictate how it will happen. Consider a public speaker can say one of the following:
"We need to secure economic stability by increasing the minimum wage."
It's short and to the point, but it's not guaranteed that everyone's economic stability will be secured. This is a normative statement.
"Every hardworking citizen should find success in their lives. Workers deserve a fair portion of the profit they generate. That is why we must pass legislation supporting labor unions and collective action to give workers more bargaining power."
This speech uses two normative statements to catch listeners' interest, then finishes with a call to action or a positive statement of proven ways to get it done.
The best we can all hope for is to aim for morally good economic outcomes that are driven by positive statements to achieve those good outcomes.
Normative and Positive Statements - Key takeaways
- A normative statement is prescriptive of how the world ought to be.
- A positive statement is a description of how the world is.
- A normative statement is based on each individual's subjective morals;these shape their aspirations for how to improve the world.
- A positive statement is based on verifiable facts from research and analysis.
- A savvy economist speaks carefully, encouraging listeners through normative statements but directing action through positive statements.
References
- Figure 1, Family photo G20 Italy 2021, Government of Brazil - Planalto Palace, https://commons.wikimedia.org/wiki/File:Family_photo_G20_Italy_2021.jpg, Creative Commons Attribution 2.0 Generic.
- At DNC, Bernie Sanders repeats claim that top one-tenth of 1% owns as much wealth as bottom 90%, https://www.politifact.com/factchecks/2016/jul/26/bernie-sanders/dnc-bernie-sanders-repeats-claim-top-one-tenth-1-o/, Lauren Carroll and Tom Kertscher,July 26, 2016
- Erdogan says interest rates will be lowered and inflation will fall too, https://www.reuters.com/world/middle-east/erdogan-says-interest-rates-will-be-lowered-inflation-will-fall-too-2022-01-29/, Tuvan Gumrukcu, Jan 29, 2022
- Figure 2, Occupational Safety and Health Administration - Job Safety and Health Quarterly Magazine, Department of Labor. Office of Public Affairs. Division of Audiovisual Communications. ca. 1992, https://commons.wikimedia.org/wiki/File:Occupational_Safety_and_Health_Administration_-_Job_Safety_and_Health_Quarterly_Magazine_-_DPLA_-_f9e8109f7f1916e00708dba2be750f3c.jpg, public domain
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