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ECONOMIC METHODOLOGY,

POSITIVE & NORMATIVE STATEMENTS


8 SEPT 2015

A-LEVEL ECONOMICS

Lesson Objectives
Understand that economics is a social science

Identify the similarities and differences in


methodology from natural and other sciences

Analyse the differences between positive and


normative statements and their importance in
economics

A-LEVEL ECONOMICS

What is Economics?
Come up with as many keywords which you think
represent ECONOMICS
When tackling the question What is economics? the best
starting point is the fact that economics is a social science

Social sciences involve studying the behaviour of individual,


groups and societies
Within the field of economics we obviously focus on their
economic behaviour and the economic relationship between
them
A-LEVEL ECONOMICS

Economics versus other social sciences


Other social sciences include subjects like Psychology, which studies the behaviour
and mental processes of an individual and Sociology studies the social relationships
between people in the context of society.
An example of how we study the behaviour of individuals and groups is through the
model of demand; the theory looks at the behaviour of consumers and how as
consumers we behave when we go shopping!

Why do people generally buy more of something when the price falls?

A-LEVEL ECONOMICS

Economics and scientific methodology


Observing consumer
behaviour in the market
place

Forming a hypothesis to
explain how consumers
spend their money

Developing predictions
from the hypothesis

Using evidence to test the


predictions

A-LEVEL ECONOMICS

New or revised
hypothesis
The evidence does not
support the predictions, so
the hypothesis is amended
or rejected

Concluding that the


evidence supports the
hypothesis which now
becomes the theory of
demand

Further Tests

Social sciences and natural sciences


Natural sciences (and their theories) are usually classed as hard sciences whereas
social sciences (and their theories) are referred to as the softer sciences

Research to find out what is meant by these two terms

Economists respond to this so-called criticism by arguing that they are only concerned
with positive economics, which is based on quite strict use of scientific methodology

A-LEVEL ECONOMICS

The difference between positive and normative statements


When studying economics its useful to distinguish the difference
between positive and normative statements
Recognising the difference between the two can help us appreciate the
scope and limitations of economics
In simple terms positive statements are statements of fact and can be
proved true or false e.g. The Kings Academy employs 200 teaching
staff
Whereas normative statements are statements of opinion or values,
which cannot be proved true or false e.g. The BoE should increase
interest rates at their next meeting

A-LEVEL ECONOMICS

Positive Statements

Positive statements are statements about what is and


contains no indication of approval or disapproval

Notice that a positive statement can be wrong

"The moon is made of green cheese" is incorrect, but it


is a positive statement because it is a statement about
what exists

A-LEVEL ECONOMICS

Normative Statements
Normative statements can be expressed as what should or ought to be
A normative statement expresses a judgment about whether a situation
is desirable or undesirable
"The world would be a better place if the moon were made of green
cheese" is a normative statement because it expresses a judgment
about what ought to be
Notice that there is no way of disproving this statement

If you disagree with it, you have no sure way of convincing someone
who believes the statement that he is wrong

A-LEVEL ECONOMICS

Over to you
Decide whether each statement is either a positive or normative
statement

Come up with 5 positive and 5 normative statements about The Kings Academy

Read the Extension Material and summarise the key points in 5


sentences

A-LEVEL ECONOMICS

How value judgements influence economic decision making


and policy.
As you have read and analysed in the extension material value
judgements influence economic decision making and policy
statements from the government
Politicians can confine themselves to positive statements, but few
are willing to do so because such confinement limits what they can
say about issues of government policy
Both positive and normative statements must be combined to make
a policy statement
One must make a judgment about what goals are desirable (the
normative part), and decide on a way of attaining those goals (the
positive part).

A-LEVEL ECONOMICS

Summary
Economic methodology involves applying tested theories to
help explain real-world economic behaviour

Its important to understand the differences between positive


and normative statements
Positive statements can be tested to see if they are correct or
false, whereas a normative statement includes a value
judgement that cannot be refuted purely by looking at the
evidence

A-LEVEL ECONOMICS

Looking ahead
In preparation for the next section of work find working definitions of the following economic terms

A-LEVEL ECONOMICS