Which of the following is an example of a normative as opposed to positive statement?

Video transcript

- [Instructor] What we're going to do in this video is discuss the difference between normative statements and positive statements, and you'll see these words used usually in an economic context, sometimes a philosophical one. A normative statement is one that really is a matter of opinion, maybe a matter of ethics, something that someone thinks is how the world should be. While a positive statement is something that, it doesn't necessarily have to be true but it's something that can be tested. So what we're going to do in this video is look at a bunch of statements around economics and think about whether they would be classified as normative statements, things that are opinions, that are a matter of ethics or morals, or whether they are positive statements, things that can be tested. So let's look at our first statement. This says, "Paying people who aren't working, "even though they could work, is wrong and unfair." So regardless of whether or not you agree with this statement, is it a normative statement or a positive statement? Well the fact that someone's saying it's wrong and it's unfair, this is pretty clearly a matter of opinion so this would be a normative statement. You can't test whether this is wrong or unfair, you would just have to believe that it is wrong and unfair. Now let's look at another statement. Programs like welfare reduce the incentive for people to work. Is this a normative statement or a positive statement? Well it might feel a little normative, it might feel like this is an opinion, but it actually can be tested. You could institute some welfare program on some small scale and compare it to a comparable place where there isn't a welfare program and see what it does for incentives to work, you survey people, you see how many people work in one situation or another. It might be a false statement, it might be a true statement, but either way, it actually can be tested, so this would be a positive statement so I'll put it in this category right over here, this is a positive, positive statement. Alright, let's look at another one. This say, "Raising taxes on the wealthy to pay "for government programs grows the economy." Is that a normative statement or a positive statement? Well once again, this can be tested. It might be true, it might be false, maybe your test is even inconclusive, but it can be tested, you could try to run a simulation, you could look at case studies of countries that did do this and see what happens to their economy versus ones that didn't do it. And so this is, even though it looks like something that someone who favors raising taxes on the wealthy maybe out of fairness arguments, something that they would say, this statement itself is not normative, the statement can be tested, so this is a positive statement. A good giveaway for normative statement, if it said something like it is fair to raise taxes on the wealthy to pay for government programs, that would have been a normative statement or we should do this, that would have been a normative statement but here, this is something that's testable. Now the next statement, "Raising taxes on the wealthy "slows economic growth." Is that a normative statement or a positive statement? Well, once again, this might feel like someone who is against raising taxes, who think it's unfair to raise taxes on the wealthy, something that they would say but the statement itself can actually be tested. So this is also a positive statement, even though in some ways it's the opposite statement as the one that we just did. Because once again, we could look at countries that did this and countries that didn't do this, we could run a computer simulation to try to understand whether this statement is true. Let's do one last statement. This says, "The government should raise taxes "on the wealthy to pay for helping the poor." Is this normative or positive? Well in this situation, the word should is a pretty big giveaway, should, or it's fair or unfair, this is someone's opinion, it's not something that's testable, you can't test whether this statement is right or wrong, it's based on, do you believe ethically, morally, that this is true? And so this is a normative statement, so I'll put it in the normative column. So big picture, these words normative and positive, these are fancy words but all they mean is normative is a matter of morals or opinion and can't really be tested while a positive statement, whether they're right or wrong or whether you agree or disagree with them, these are things that in theory could be tested.

Learning Objectives

• Distinguish between positive and normative statements

Economists engage in two distinct, but related activities. They conduct research on economic issues, e.g. to determine cause and effect. For example, why did unemployment increase rapidly in 2008 and 2009? Economists also make policy recommendations. For example, what should the federal government do in response to the increase in unemployment?

The first type of activity is economic science, based on theories and evidence, where researchers attempt to determine how the world (or at least the economy) works. This is called positive reasoning, and the conclusions are called positive statements. A relevant conclusion might be that because the level of employment is based on production in the economy (i.e. GDP), the increase in unemployment was because of the slowdown in GDP over that time period. This slowdown has been called the Great Recession.

The second type of activity is more subjective, and is inevitably based on the researcher’s values. This is called normative reasoning, and the conclusions are called normative statements. A policy recommendation could be that since unemployed workers are not earning income, government should try to stimulate demand in the economy, so unemployed workers could get back to work. A different policy recommendation could be that stimulating demand could involve running a larger federal budget deficit, which future generations would have to pay back through higher taxes, so the government shouldn’t try to stimulate demand. Which of these recommendations is the right one? That depends on your subjective values.

Positive Statements

Positive statements (and positive reasoning more generally) are objective. As such, they can be tested. These fall into two categories. One is a hypothesis, like “unemployment is caused by a decrease in GDP.” This claim can be tested empirically by analyzing the data on unemployment and GDP. The other category is a statement of fact, such as “It’s raining,” or “Microsoft is the largest producer of computer operating systems in the world.” Like hypotheses, such assertions can be shown to be correct or incorrect. A statement of fact or a hypothesis is a positive statement. Note also that positive statements can be false, but as long as they are testable, they are positive.

Normative Statements

Figure 1. Positive statement: it’s raining.

Although people often disagree about positive statements, such disagreements can ultimately be resolved through investigation. There is another category of assertions, however, for which investigation can never resolve differences. A normative statement is one that makes a value judgment. Such a judgment is the opinion of the speaker; no one can “prove” that the statement is or is not correct. Here are some examples of normative statements in economics:

• We ought to do more to help the poor.
• People in the United States should save more for retirement.
• Corporate profits are too high.

These statements are based on the values of the person who makes them and can’t be proven false.

Because people have different values, normative statements often provoke disagreement. An economist whose values lead him or her to conclude that we should provide more help for the poor will disagree with one whose values lead to a conclusion that we should not. Because no test exists for these values, these two economists will continue to disagree, unless one persuades the other to adopt a different set of values. Many of the disagreements among economists are based on such differences in values and therefore are unlikely to be resolved.

It’s not uncommon for people to present an argument as positive, to make it more convincing to an audience, when in fact it has normative elements. Opinion pieces in newspapers or on other media are good examples of this. That’s why it’s important to be able to differentiate between positive and normative claims.

Try It

Watch It

Watch this short video to review the distinctions between positive and normative analysis.

You can view the transcript for “Episode 5: Positive vs Normative” here (opens in new window).

glossary

normative statement: conclusions based on value judgments that cannot be testedpositive statement: conclusions based on logic and evidence that can be tested

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