Normative economics (as opposed to positive economics) is the part of

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

that deals with normative statements. It focuses on the idea of fairness and what the outcome of the economy or goals of

public policy Public policy is an institutionalized proposal or a decided set of elements like laws, regulations, guidelines, and actions to solve or address relevant and real-world problems, guided by a conception and often implemented by programs. Public ...

''ought to be''. Paul A. Samuelson and

William D. Nordhaus William Dawbney Nordhaus (born May 31, 1941) is an American economist, a Sterling Professor of Economics at Yale University, best known for his work in economic modeling and climate change, and one of the 2 recipients of the 2018 Nobel Memori ...

(2004). ''

Economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

'', 18th ed., pp. 5-6 & ndGlossary of Terms, "Normative vs. positive economics." Economists commonly prefer to distinguish normative economics ("what ought to be" in economic matters) from positive economics ("what is"). Many normative (value) judgments, however, are held conditionally, to be given up if facts or knowledge of facts changes, so that a change of values may be purely scientific. On the other hand, welfare economist

Amartya Sen Amartya Kumar Sen (; born 3 November 1933) is an Indian economist and philosopher, who since 1972 has taught and worked in the United Kingdom and the United States. Sen has made contributions to welfare economics, social choice theory, economi ...

distinguishes ''basic (normative) judgements'', which do not depend on such knowledge, from ''nonbasic'' judgments, which do. He said, "no judgments are demonstrably basic" while some value judgments may be shown to be nonbasic. This leaves open the possibility of fruitful scientific discussion of value judgments. Positive and normative economics are often synthesized in the style of

practical idealism Practical idealism is a term first used by John Dewey in 1917 and subsequently adopted by Mahatma Gandhi (''Gandhi Marg'' 2002). It describes a philosophy that holds it to be an ethical imperative to implement ideals of virtue or good. It further h ...

. In this discipline, sometimes called the "art of economics," positive economics is utilized as a practical tool for achieving normative objectives, which often involve policy changes or states of affairs. An example of a normative economic statement is as follows: ::''The price of milk should be $6 a gallon to give dairy farmers a higher living standard and to save the family farm.'' This is a normative statement, because it reflects value judgments. This specific statement makes the judgment that farmers deserve a higher living standard and that family farms ought to be saved. Normative economics predicates itself upon maximizing both an agents social and political utility, recognized as "aggregating interests". Subfields of normative economics include social choice theory, cooperative game theory, and mechanism design. Some earlier technical problems posed in

welfare economics Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being (welfare) at the aggregate (economy-wide) level. Attempting to apply the principles of welfare economics gives rise to the field of public ec ...

and the

theory of justice Justice, in its broadest sense, is the principle that people receive that which they deserve, with the interpretation of what then constitutes "deserving" being impacted upon by numerous fields, with many differing viewpoints and perspective ...

have been sufficiently addressed as to leave room for consideration of proposals in applied fields such as

resource allocation In economics, resource allocation is the assignment of available resources to various uses. In the context of an entire economy, resources can be allocated by various means, such as markets, or planning. In project management, resource allocatio ...

, social indicators, and inequality and poverty measurement.Marc Fleurbaey (2008). "Ethics and economics," ''

The New Palgrave Dictionary of Economics ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is a twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Dictio ...

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Notes

References

Andrew Caplin Andrew S. Caplin (born 15 June 1956 in London, England) is a British economist, now living in the United States, where he received his Ph.D. from Yale University in 1983. He is a professor of economics at New York University, co-director of the ...

and Andrew Schotte, ed. (2008). ''The Foundations of Positive and Normative Economics: A Handbook'', Oxford
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* Marc Fleurbaey (2004). "Normative Economics and Theories of Distributive Justice," ''The Elgar Companion to Economics and Philosophy'', J.B. Davis and J. Runde, ed., pp
132-58.
* _____ (2008). "Ethics and economics," ''

''
Abstract.
* Milton Friedman (1953). " The Methodology of Positive Economics," ''Essays in Positive Economics'' * John C. Harsanyi (1987), “Value judgments," ''The New Palgrave: A Dictionary of Economics'', v. 4, pp. 792–93 * Daniel M. Hausman and Michael S. McPherson (1996). ''Economic Analysis and Moral Philosophy'', Cambridge: Cambridge University Press. * Phillipe Mongin (2002). "Is There Progress in Normative Economics?" in Stephan Boehm ''et al.'', eds., ''Is There Progress in Economics?'', pp
145-170.
* Amartya K. Sen (1970), ''Collective Choice and Social Welfare''. "5.3 Basic and Nonbasic Judgments" & "5.4 Facts and Values," pp. 59–64. * Stanley Wong (1987). “Positive economics," The ''New Palgrave: A Dictionary of Economics'', v. 3, pp. 920–21.
Silvestri P. (ed.), L. Einaudi, ''On Abstract and Historical Hypotheses and on Value judgments in Economic Sciences'', Critical edition with an Introduction and Afterword by Paolo Silvestri, Routledge, London - New York, 2017. DOI: https://doi.org/10.4324/9781315457932.
{{DEFAULTSORT:Normative Economics Welfare economics Economic methodology

See also

Notes

References