Running head: Positivism vs Normativism in Economics 1

A Critical Assessment of Positivism and Normativism In Economics

Sailesh S

1ECOHA (2133321)

BECH141: Introduction To The Philosophy Of Economics

CHRIST (Deemed to be University)

Positivism vs Normativism in Economics 2

Table of Contents

Abstract..........................................................................................................................3

A Critical Assessment of Positivism and Normativism In Economics..........................4

Positivism...................................................................................................................4

Normativism...............................................................................................................4

Positivism Vs Normativism.......................................................................................5
Positivism vs Normativism in Economics 3

Abstract

This paper gives a brief description and a critical assessment of Positivism vs Normativism in

Economics. The author discusses the methodological problem present in the aforementioned

topic along with their views and opinions as well as the distinction between Positive and

Normative economics and their inter-relativity in economics

Keywords: Positivism, Normativism, Economics, Methodology.

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A Critical Assessment of Positivism and Normativism In Economics

For the formation of its rules, concepts, and hypotheses, every science follows a set of

procedures. Economics, being science, uses particular procedures to find and formulate its

laws and principles. As a result, there are certain methodological challenges in economics.

Some theorists acknowledge economics' claim to be regarded as a science on the basis that it

employs scientific methodology in its theoretical tools and weaponry. One such

Methodological problem discussed in this paper is the division of Economics into Positive

and Normative and the flaws based on the views and opinions of each economist and the

vague distinction between ‘facts’ and ‘values’ as well as their inter-relativity.

Positivism

Positivism in Economics is defined as the concept that scientific interpretation of

observable evidence produces human understanding, it is any system that is limited to

empirical data and excludes a priori or metaphysical ideas. (Feigl, 2020). Positive economics

is devoted to the development and verification of objective and verifiable positive assertions

about the world. Positivism is a philosophy that holds that only "factual" information

received by observation, including measurement, is reliable. The researcher's function in

positivist studies is confined to data gathering and objective interpretation. The study

outcomes in these sorts of investigations are frequently apparent and quantitative.

Normativism

Normativism is the phenomenon in which some behaviours or results are labelled as

good, desirable, or permissible while others are labelled as evil, unwanted, or impermissible

in human society. A standard for assessing or making judgements about conduct or results is

referred to as a norm. Normative can also indicate pertaining to a descriptive standard:

performing what is generally done or what most people are expected to do in practice, which
Positivism vs Normativism in Economics 5

can be misleading. In this view, a norm is not evaluative, serving as a foundation for judging

behaviour or outcomes; rather, it is a fact or observation about behaviour or outcomes that is

free of judgement. Many scientists and philosophers try to limit the term normative to the

evaluative sense, referring to descriptions of conduct and results as positive, descriptive,

predictive, or empirical.

Positivism Vs Normativism

Milton Friedman and John Keynes were the first to define and distinguish Positive

and Normative Economics. Keynes distinguishes between the 2 as “Positive Science, a body

of systematized knowledge concerning what is” and “A Normative or regulative science, a

body of systematized knowledge discussing criteria of what ought to be” (Keynes, 1891).

Friedman mentions that the confusion between the both is somewhat inevitable. Positive

Economics is unconstrained by any particular ethical attitude or normative judgments. It is

concerned with "what is." Its purpose is to develop a set of generalizations that can be utilized

to generate accurate predictions about the effects of any change in circumstances (Friedman,

1953).

Present Day Economists frequently distinguish between positive and normative

economics and they’re widely used across theories and policies. In layman’s terms, Positive

Economics is concerned with the creation and verification of objective and verifiable

assertions about the world. Normative Economics is derived from a point of view or an

opinion. As a result, the words “ought to” is frequently used. It is nearly impossible to assess

the validity of normative assertions because they can be far-fetched or even have many

variations due to the various views and opinions in general. On the other hand, Positive

Assertions can be tested in practice or at least in theory because they involve facts.

The methodological issue present in this theory is that it is possible to rephrase

normative statements in a way that they become positive assertions. This only leads to
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furthermore confusion and policymakers are forced to make their interpretations. For

example, a normative assertion “The subsidies given to the agriculture sector in India should

be removed” can be paraphrased to a positive assertion “Removing agricultural subsidies in

India would raise the farm prices”. The 2nd statement could be tested at least in theory.

Whether or not increasing farm prices in India is a good thing is a separate discussion. But to

say that “raising farm prices in India is a good thing” is a normative statement. Whereas, the

assertion that “raising farm prices in India would improve rural income” is a positive

statement because it can be tested. It does not state that India's rural incomes should be

increased; rather, it states that higher farm prices will have that impact. (SOAS University of

London, n.d.) Economists have to analyze and express policymakers' aims and restrictions

like the aforementioned example which makes it ambiguous. Economics is a social science, it

is a human activity and it is governed by human values and opinions, all statements are made

from a single point of view and which doesn’t necessarily go in accordance with other views.

These values do not have to be the same as those that affect economic policy, but it is

questionable whether the values that control economists' activities can be differentiated from

those that govern policymakers. Much of Economic study has been built around normative

theories of rationality, It's debatable whether the values contained in such theories can be

distinguished from the values that influence policy. It may be difficult to hold a maximizing

view of individual rationality and also make assertions like “social policy should resist

maximizing growth, wealth or welfare in the name of freedom, rights or equality (Hausman,

2003).

Individual Perceptions of right and wrong are impacted by their views, opinions and

behaviour. An Individual focused on maximizing their interest is going to favour self-interest,

their judgements are going to be clouded by their interests. There are countless ideological

biases present due to the central nature of theories that focus on general public interest.
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Conclusion