The Necessity of Positive and Normative Economics
Keynes once wrote: “The object of a positive science is the establishment of uniformities, of a normative science the determination of ideals.” (Blaug, 122) This is the dichotomy that economists recognize when approaching their field of study. The social scientist must recognize both positive and normative distinctions, means and ends, as important factors of fruitful research. Secondly, they must clearly express the conditions and assumption which theories holds in order for economics to be useful for society.
Positive science is that which is a fact of nature or a fact by definition. In mathematics this is the difference between the knowledge that the angles of a triangle sum to 180 degrees, and the definition of a triangle as a two dimensional polygon with 3 sides. In economics, such facts of knowledge include that money is a store of value, or facts of definition that the UN’s Human Development Index ranks Canada above Mexico. These are all positive facts. Whether they rely or are associated with values does not reduce their factualness to a normative realm. One cannot refute positive statements by claiming they are arrived at due to values. It is up to normative science to judge the value of the HDI, a positive fact, and not mistake this action as denying the existence of the HDI.
This is probably better stated with a topic from macroeconomics. Suppose that some economists agree that inflation produces the social cost of having to adjust prices to new levels. This is a completely positive statement. As long as every term has been clearly defined, one can understand the relation between inflation (as defined) and cost (as defined). Yes, the definitions have been chosen based on specific values, but this does not disaffirm the statement as a true reflection of reality. Suppose we make a true statement which denies that inflation produces this social cost, by defining inflation or the cost differently. The old positive fact of reality that the first statement asserted has not changed. By changing definitions, we have merely created a new positive statement. A statement is a true positive fact, according to Weston, when it “is consistent with definitions and axioms that define the system. We are not necessarily saying anything about what is true outside of that system.
Alfred A Knopf, of New York publishing house fame, once stated “An economist is a man who states the obvious in terms of the incomprehensible”. For being someone who is just learning the basics of economics, this elucidation speaks volumes to this branch of the social sciences. From my basic understanding, economics is the study of scare resources that determine the supply, demand, and consumption for a said good. Wherein the simplification of multifaceted issues is used to make predictions that can be used to serve a society’s needs. Although this may seem like a simple concept, Knopf’s comment illustrates the complexity and involvedness of economics within a given society. Ultimately, from this definition, economics is a tool that aims to
Classical economists such as, Jean Baptiste Say, Adam Smith, David Ricardo, and Thomas Robert Malthus, had a different view about the role of the government in a capitalistic society. The classical economists believed in a laissez-faire economy. They believed that the government should keep their hands off the nation’s economy. They felt that the market will be able to keep itself stable, without the intervention of the government. Jean Baptiste Say believed that supply would create its own demand. The classical economists had an assumption that the aggregate production of goods and services in the economy generate enough income to purchase all output. They also had the assumption that savings by the household sector matches investment expenditures on capital goods by the business sector.
Wildlife tourism has become a particularly popular trend over the years. Riding on elephants, taking pictures with lions, swimming with dolphins are only a few of the adventurous and thrilling activities that wildlife tourism provides. Even my own school is planning a trip to South Africa to participate in several of the enthralling ventures.
The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions. The ideas of economists and politicians, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." (John Maynard Keynes, the General Theory of Employment, Interest and Money p 383)
Expertise, in the academic world, is based on ideas. They are the basis of hypotheses and theories that try to provide explanations of how particular phenomena work . But hypothesis and theories in economics cannot be definitively established as in sciences such as physics. For one thing, economists cannot put forward a hypothesis, and then do controlled experiments to determine whether the hypothesis is right or not. They are forced, instead, to rely on models, or historical information or cross-country evidence to suggest, not ascertain, a possible outcome or result. In addition, ideological and political viewpoints of economists make their theories imprecise and biased. As a result, expertise in economics is marked by significant explanatory failures, and the models are useful under some set of conditions and not others.
...social science cannot do. It can only answer questions at the same level of relevancy that they are asked. Typically, very general questions are asked by the regulators, for example “which instrument should I use?" or “which method should I use?”. These questions can be precisely answered if the question is: “which instrument should I use for the X problem, in the Y region, and in the Z sector?” Additionally, social sciences cannot provide appropriate results if information is not available.
2.2 Assumption about the nature of social science: the functionalist perspective including the objective approach to social science will be used to analyse the ontology, epistemology, human nature and methodology under the literature of social philosophy (Burrell and Morgan,
But if economic sociologist begins with the assumption that “history is not sufficient”, there will be plenty of reasons are left to explain. Economic sociologist have to explain not only why nations vary in modern world in their economic practices, but also why they have variation in multiple paths in the
Keynesian method and world-systems theory deserve special attention. It is Keynesianism that makes possible for the radical political economists to apply the bipolar model, centered on
My main concern that the idea of the greatest good for greatest number. I personally believe that human life cannot not be converted into monetary values, due to the idea that our life is priceless. Ray Robins (2000) discussed the cost benefit analysis in the health care system and he wrote that cost benefit analysis “ ignores the non-financial costs of pain, suffering, and grief which are often associated with illness [and] is not based on an individual person 's valuations of benefits.”(p. 924) The problem is that “ a third party view is taken about people 's "worth" to the society in terms of their productive potential”(p.924) Even though we live in the society where money can play a huge role, especially in a political decisions, there should be values that cannot have a price tag. Another problem with the cost benefit analysis is usually conducted by wealthy social class. Robert H. Frank(2000) argued that "that using unweighted willingness to-pay measures virtually assures a mix of public programs that are slanted in favor of preferences of high-income persons." R. Frank discussed another problem " they give too much weight to current costs and benefits, too little weight to those that occur in the future, as a result it often generates misleading prescriptions.
Today, more than ever, there is great debate over politics and which economic system works the best. How needs and wants should be allocated, and who should do the allocating, is one of the most highly debated topics in our current society. Be it communist dictators defending a command economy, free market conservatives defending a market economy, or European liberals defending socialism, everyone has an opinion. While all systems have flaws and merits, it must be decided which system is the best for all citizens. When looking at the financial well being of all citizens, it is clear that market economies fall short on ensuring that the basic needs of all citizens are met.
The word ‘Economy’ is derived from the Greek word ‘okinomous’ which means one who manages a household. Economics is the study of how society manages to run its scarce resources. Scarcity means that society has limited or finite resources and therefore cannot produce all of the goods and services people desire to have. God has created man with innumerable desires and wants. So, unlimited wants surround man throughout his life without having an end till the death of his life. But if the human wants were limited, he would have been able to satisfy them easily and the society would be getting optimal benefits from its scarce resources which is called ‘Efficiency’ in economics. Economics also assumes that normally people are rational and they weigh their costs and benefits before doing any action. But to know how people preferences and decisions change, economists give them incentives. An incentive is something that persuades a person to react. So in economics scarcity, efficiency and incentives play a very important role in making conclusions and decisions.
Often, scientists are tasked with the role of providing evidence to support theories or to predict future outcomes based on scientific research. This methods or research are usually accepted in natural sciences like chemistry and physics. This is because unlike social science, they usually use formulas, well laid out structures and methods (Guttin, 2012). However, when it comes to social science, researchers usually work using theories by formulating hypothesis, and researching to prove or disapprove the theories. When doing this, social science researchers usually become advocates in certain circumstances. This paper highlights some of the pros and cons of scientists becoming advocates, and gives examples of when social scientists become advocates and situations where they observe objectivity.
Through generalisation, one gains the advantage of being able to see the whole picture and being able to carry out comparisons with ease whilst a focus on individual cases allows complexity and detailed analysis. The conduct of social science relates more to measurement and the academic use of knowledge. In contrast, the use of social science is based more on the policy making implications of social science research. By ignoring the whole picture and only focusing on individual cases, the conduct of social science research can be negatively affected. However, in the case of using research in the social sciences, it is more useful to consider individual cases rather than generalise. This is beneficial for policy making since it is important to identify and understand the causes of things before a detailed plan can be created.