In the field of economics, there exist two major schools of thought: Positive Economics and Normative Economics. Positive economics is objective and fact based and must be able to be tested and then proven or disproven. Normative economics is subjective and value based and consequently, cannot be proven or disproven. In other words, positive economics is "what is," while normative economics is focused on "what ought to be."
While this distinction may appear simple, it is not always easy to differentiate between the positive and the normative. In his book, "The Scope and Method of Political Economy," John Neville Keyes comments that, "confusion between them is common and has been the source of many mischievous errors." Many widely accepted statements that people hold as fact are actually value based.
For example, the statement, "governments should provide basic healthcare to all citizens" is a normative economic statement. There is no way to prove whether government "should" provide healthcare; this statement is based on opinions about the role of government in individuals' lives, the importance of healthcare and who should pay for it. However, the statement, "government-provided healthcare increases public expenditures" is a positive economic statement, because it can be proved or disproved by examining healthcare spending data in countries like Canada and Britain where the government provides healthcare.
There are countless arguments for each way of thinking and it is not possible within the scope of this essay to present and debate each one; therefore it will only focus upon two benefits of positive economics. First, one benefit to positive economical thinking is the invaluable role it plays in normative economics. While posi...
... middle of paper ...
...e complete agreement about its desirability, for differences might still remain about its political or social consequences but, given agreement on objectives, it would certainly go a long way toward producing consensus” (Friedman, 3).
Friedman believed that although the doubts about the social and political consequences may still remain, by using positive thinking, there is hope for agreement on policy. Focusing on “what ought to be” will not change “what is.” Instead, what are needed are calculations and facts to help make smart economic decisions; a calculated decision cannot be made without calculations. Positive economics is exactly that, proven evidences, and therefore is vital in the economic-policy-planning process. Only through a concentrated focus upon provable facts can intelligent economic policies be formed, not by paying attention to debatable opinions.
i. The economy is said to be ‘booming’ when demands for certain products and services rise. When demand rises, the prices will also increase. Increase in price can boost up the company’s profit. This enables companies to hire more workers thus increasing the numbers of employments. The increase in company’s profit also allows employers to raise the employees’ wages. When companies have more workers, they would be able to produce more products. Overtime, these outputs will then be sold to the people with jobs at a higher price because of the scarce amount of resources available.
Regardless, in regards to applying Keynesian economic policies toward the Great Depression, Former Federal Reserve Governor Ben S. Bernanke said “You 're right, we did it. We 're very sorry. … we won 't do it again” (Federal Reserve Board, 2002). Other economic theory must be developed to address some of the shortcomings of the Keynesian economic
(3) Adam, Elga (2007) “Reflection and Disagreement” Princeton University Copyright the Authors Journal compilation, Blackwell Publishing, Inc. Pg. 478 – 502.
“In addition to theses endless pleading of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences” (Hazlitt p15-16).
Common Sense Economics: What Everyone Should Know About Wealth and Prosperity, written by James Gwartney, Richard Stroup, Dwight Lee and Tawni Ferrarini, explains the foundation of economics and how it all works in all aspects of our lives from the role of the government trickling down to personal credit cards and savings. This book was written with clear language for the audience to understand and comprehend the large amount of information within its condensed size. The authors’ target audience for this book seemed to be for those individuals wanting to learn the mechanics of economy including economic growth and stability. Gwartney separates his book into four parts: Part I, Twelve Key Elements of Economics, Part II Seven Major Sources of Economic Progress, Part Three Economic Progress and the Role of Government, and Part IV Twelve Key Elements of Practical Personal Finance.
Answer: In economics there are two main theories, Classical economics and Keynesian economics. In our essay we will compare between this two theories.
Classical economic theories are the priority themes in this video. It mainly emphasizes the causes and effects of a classical theory principle. Also, generalizing what economics beliefs are and what impacts they have on society. Refers to the economy as being vulnerable. A Scottish philosopher, by the name of Adam Smith examines society relating it to a world of business affairs. He writes a book called “Wealth of Nations”, which is known as the starting point for classical economist’s theories. According to Wealth of Nations, (Adam Smith book) he believes that price wages and interest rates are considered to be flexible. Classical economists strongly believe that the economy is self- regulating. If there is an increase in spending, aggregate
Although the author does raise some very interesting and provoking questions in the beginning of the article, unfortunately, some of them are very difficult to answer, or just can’t be answered. While the article doesn’t solve any problems, it does raise awareness and creates some interesting connections with the present and the past. The overall question the author wishes to answer is "how can economists understand and explain the nature of societal change?"
The emergence of this political philosophy started around the end of the nineteenth century with John Stuart Mill's ideas in his book Principles of Political Economy. The philosophy became an ideology in the twentieth century with the main points of enh...
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)
In this class we constantly talked about the free market place and how it truly made a government different. How it made a country different. How it made a people different. Today, we are going to explore the ideas of economics and how the economic greats, Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill, Karl Marx, John Maynard Keyes, and Milton Friedman changed the ways we would forever do business.
...hould accept the inconvenient truth that the markets sometimes do not function properly. Second, economists should re-embrace Keynesian practice because it does offer a legitimate answer for economic downturns. Finally, they should consider the realities of finance in the world of macroeconomics (Krugman 2009). As an upcoming economist from George Mason, primarily a “freshwater” school, I find the first suggestion a bit difficult for me to accept. I think the best option right now is to stay neutral and open-minded because I still have a lot to learn about economics.
To begin we must first understand what Neoclassical Economics actually covers and is all about. Thorstein Veblen first brought up the term neoclassical economics in the early 1900’s. What many economics believe that follow neoclassical economist believe is that everyone wants to maximize there own personal utility and will make all of there decisions based on this concept. It is thought that everyone essentially thinks like this to maximize his or her personal satisfaction. Also, that everyone makes this decision when they have fully
Economics studies the monetary policy of a government and other information using mathematical or statistical calculations (Differences). Classical and Keynesian are two completely different economic theories. Each theory takes its own approach on monetary policy, consumer behavior, and government spending. There are a few distinctions that separate these two theories.
Economics is basically the understanding of how different economies function. Economics is the study of how to best allocate scarce resources among competing uses. Scarcity in the economy is the main problem. There are not enough resources to keep up with the demand for them. Within the discipline of economics, there are two areas of study: Micro and Macro Economics.