Positive Economics

Reviewed by Anjaneyulu | Updated on Aug 27, 2020

Introduction

Positive economics is the branch of economics concerned with describing and explaining economic phenomena. It focuses on facts and behavioural relationships of cause and effect and includes the development and testing of economic theories.

What is Positive Economics?

Positive economics as science concerns the study of economic behaviour. In Paul Samuelson's Foundations of Economic Analysis (1947), the standard theoretical definition of positive economics uses operationally valid theorems.

Positive economics as such prohibits judgements on economic value. For example, a positive economic theory might explain how the growth of the money supply influences inflation, but it does not guide what policy should be pursued.

Nonetheless, for the rating of economic policies or results as acceptability, which is normative economics, positive economics is widely deemed necessary.

Positive economics is sometimes described as "what is" economics. In contrast, normative economics discuss "what should be". The distinction was laid out by John Neville Keynes (1891) and was elaborated by Milton Friedman in an influential essay in 1953.

What Methodologists Say?

The methodological basis for a positive distinction has its roots in the philosophical difference of fact-value, with David Hume and G.E. Moore, being the main proponents of such distinction.

In the philosophical literature, the logical basis of such a relationship as dichotomy has been disputed. These controversies are reflected in the discussion of positive science in economics, where opponents are Gunnar Myrdal (1954) and a group of feminist Economic advocates. The feminist economists, such as Julie A. Nelson, Geoff SchneiderJean Shackelford, and Diana Strassmann, challenge the notion that economics can be neutral and without bias.

Positive economics is about "what is". An example of a positive economic argument is as follows: An increase in government spending will reduce the unemployment rate. In contrast, a normative statement is, for example, "Government spending should be increased".