Positive economics

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Positive economics is the branch of economics that concerns the description and explanation of economic phenomena (Wong, 1987, p. 920). It focuses on facts and cause-and-effect relationships and includes the development and testing of economics theories. Earlier terms were value-free economics and its German counterpart wertfrei economics. These terms were challenged as persuasive rather than descriptive.

Positive economics as science (Robbins, 1932) concerns analysis of economic behavior. A standard theoretical statement of positive economics as operationally meaningful theorems is in Paul Samuelson (1947). Positive economics as such avoids economic value judgements. For example, a positive economic theory might describe how money supply growth affects inflation, but it does not provide any instruction on what policy ought to be followed.

Still, positive economics is commonly deemed necessary for the ranking of economic policies or outcomes as to acceptability (Wong, 1987, p. 921), which is normative economics. Positive economics is sometimes defined as the economics of "what is", whereas normative economics discusses "what ought to be". The distinction was exposited by John Neville Keynes (1891) and elaborated by Milton Friedman in an influential 1953 essay.

The methodological basis for a positive/normative distinction has its roots in the fact-value distinction in philosophy, the principal proponents of such distinctions being David Hume and G. E. Moore. The logical basis of such a relation as a dichotomy has been disputed in the philosophical literature. Such debates are reflected in discussion of positive science and specifically in economics, where critics, such as Gunnar Myrdal (1954) dispute the idea that economics can be completely neutral and agenda-free.

To illustrate, an example of a positive economic statement is as follows:

• The price of milk has risen from $3 a gallon to $5 a gallon in the past five years.

This is a positive statement because it can be proven true or false by comparison against real world data. In this case, the statement focuses on facts.

[edit] See also

• Normative economics
• Philosophy of economics
• Consumer theory
• Production possibilities frontier
• Supply and demand
• Distribution (economics)
• Economic methodology
• Austrian School

[edit] References

• Milton Friedman (1953). "The Methodology of Positive Economics," Essays in Positive Economics
• Daniel M. Hausman and Michael S. McPherson (1996). Economic Analysis and Moral Philosophy, "Appendix: How could ethics matter to economics?", pp. 211-20:

A.2: Objection 2: Positive economics is value-free

A.3: How positive economics involves morality

• John Neville Keynes (1891). The Scope and Method of Political Economy
• Richard G. Lipsey (2008). "positive economics." The New Palgrave Dictionary of Economics. Second Edition. Abstract.
• Gunnar Myrdal (1954 [1929]). The Political Element in the Development of Economic Theory, trans. Paul Streeten (Cambridge, MA: Harvard University Press).
• Lionel Robbins (1932). An Essay on the Nature and Significance of Economic Science
• Paul A. Samuelson (1947, Enlarged ed. 1983). Foundations of Economic Analysis
• Stanley Wong (1987). “positive economics," The New Palgrave: A Dictionary of Economics, v. 3, pp. 920-21

[edit] External links

• Essays in Positive Economics by Milton Friedman
• Milton Friedman ([1953] 1966). "The Methodology of Positive Economics," excerpts from Friedman's essay