Economics as a Positive Science
The Distinction between Positive
and Normative Statements
• Positive Statements
• Statements which tell as what was, what is and
what will be are called positive statements.
• Positive statements are basically about matters of
fact. Disagreements over positive statements can
be settled by an appeal to the facts, i.e. by
observation of the real world.
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Examples
I was born in Beijing.
Helen is studying economics in the library.
I will get an A in AL economics
examination two years later.
• How can we know whether the above
statements are right or wrong?
• Normative Statements
• Statements about how things ought to be are called
normative statements. Thus, normative statements
involve value judgement which cannot be refuted
through reasoning or an appeal to facts.
• Examples
• You should be good to your parents.
• You should respect your Economics teacher, Mr
So.
• Progressive tax system is good because it can help
the poor.
• How can we know whether the above statements
are right or wrong?
• Positive Economics
• Positive economics only describes and
relate observable facts without saying
whether they are good or bad. In other
words, it only deals with positive statements.
• Examples
• If the price of a good increases, the quantity
demanded will increase, other things being
constant.
• If money supply increases, inflation rate
will increase.
• If the supply of a good decreases, the price
of the good will increase, other things being
constant.
Economic Theory
• Example: Demand Theory
• If the price of a good increases, the quantity
demanded of it will decrease, other things
being constant.
• A theory consists of:
1. variables (dependent and independent)
2. assumption(s)
3. hypotheses
4.prediction(s)
Characteristics of Scientific Theories
• What are the uses of theories?
• What are the differences between scientific
theories and superstition?
• Is it possible to prove that a theory is always
right?
• Testable
• (If you are kind to you parents, you will go
to heaven after you die.)
• Refutable
• A scientific theory must be potentially
refutable.
• If I were the Manager, I would earn more
profit for the company than Mr Lee.
• If I were the Chief Executive of Hong Kong,
I could do better than Mr Tung.
Tautology
• My father is a man.
• (My father is a good man)
• I like it because I like it.
• (I like it because it is very tasty.)
• Our employment problem will be solved if
the unemployed find jobs.
Quiz
• What is the difference between positive
statements and normative statements?
• What are the uses of scientific theories?
• What are the 4 basic elements of a scientific
theory?