Positive vs.

Normative Statements Reviewer

Here is a matrix to help you distinguish Positive and Normative Statements.

Positive
Meaning  focus more on data, facts, and
figures
 statements are to the point and
supported by relevant
information
 deals with the various economic  deals with prospective or theoretical
phenomena
Perspective  objective data approach/analysis  subjective approach
 presenting relevant and focused  presenting statements that may or may
statements backed by actual
data
 Rely on facts and figures
 Has a considerable value
judgement involved that can be
proven or disproven
Function  describes cause and outcome of  provides value judgment
relationship among variables
Area of  study of “what is”
study  Factual approach supported by
data
Testing  can be tested scientifically
 can be proven or disregarded
Economical  more scientific and calculated
Clarification clarification on an economic
issue
Importance  needed to provide objective
approach
 provides facts and analyses
effects of decisions in the
society and then provides a
statement that comprises
necessary information to make a
decision
 Precise
 Descriptive
 Measurable
 Cause and effect relationship
 Can be quantified with respect
to noticeable evidence and
historical references
Normative
 focus more on personal perspectives and
opinions
 statements are based on an individual’s
point of view and ample data is always
available to support such claims
situations, value of economic fairness or
what the economy should be
not be possible in future
 in some cases, statements may not have
any credible data to back it up
 Rely on values originating from an
individual opinion
 described “what should be” or “ought to
be”
 personal opinions rather than actual data
 cannot be tested scientifically
 depends on the belief of an individual
 provides such solutions but ones that are
based on personal values
 Acts as the platform of out-of-the-box
thinking
 Provide foundation for ideas that have
the power to reform an economy
 Rigid
 Perspective
 Ideological
 Considered political or authoritarian
 Perspective-based
 Opinion-oriented statements towards
economic activities
 Examples  Monopolies have proved to be
inefficient.
 The desired rate of return on
gambling stocks are higher
compared to others
 The relationship between wealth
and demand is inverse in the
case of inferior goods
 House prices reduce once the
interest rate on loans get higher
 Car scrap page schemes can
result in a fall in the prices of
second hand cars
 An increase in tax rates
ultimately results in a decrease
in total tax revenue
 The government should implement
strict wealth tax laws to decrease the
uneven distribution of wealth
 No individuals should be entitled to
inheritances as it belongs to society
 Import duties should be increased on
goods coming from nations with humble
human rights record
 Investors ought to be more socially
responsible and stop investing in vice
stocks
 Developing countries should only
accept democracy when their entire
population is educated and liberated
 Unemployment harms an economy
more than inflation

Note: Most public policy is based on a combination of both positive and normative economics.
A clear understanding of the difference between positive and normative economics may lead to
better policy-making if policies are made based on balanced mix of facts (positive economics)
and opinion (normative economics).

Sample Midterm Test Questionnaire (Part 2)

Test III. Objective Test. Most public policy is based on a combination of both positive and normative economics.
A clear understanding of the difference between positive and normative economics may lead to better policy-
making.

Identify from the economic analysis below which among the underlined statement uses POSITIVE and
NORMATIVE analysis. Write the NUMBER of the corresponding statement on their respective category.

Choose ten (10) POSITIVE and ten (10) NORMATIVE from the number (n) underlined statements.

Positive Normative
1. ___________________ 1. __________________
2. ___________________ 2. __________________
3. ___________________ 3. __________________
4. ___________________ 4. __________________
5. ___________________ 5. __________________
6. ___________________ 6. __________________
7. ___________________ 7. __________________
8. ___________________ 8. __________________
9. ___________________ 9. __________________
10. ___________________ 10. __________________
 [ANALYSIS] End of growth: How the pandemic ruined PH economy beyond recognition
Author: JC PUNONGBAYAN (April 2020)

(1) 'It feels as if the economic managers don’t want to rescue the economy at all.... It’s like
they’re trying to put out a burning house using a watering can.' NORMATIVE STATEMENT
because it is an opinion. It still provides foundation for more discussion because it is not
descriptive.

Our worst fears have been realized.

On Thursday, August 6, the Philippine Statistics Authority (PSA) released its grimmest report
yet on the economy.

(2) The country’s output, as measured by gross domestic product or GDP, shrank by a record
16.5% in the second quarter of 2020 (April to June) compared with the same period in 2019.
POSITIVE STATEMENT because it is descriptive and it is backed by an empirical data .

This is very, very bad for several reasons.

First, (3) we’ve never seen a GDP drop this big since the earliest quarterly data in 1981 (Figure
1). POSITIVE STATEMENT because it can be refuted and it describes a quantitative data, i.e.,
GDP.

(4) This collapse even overshadows the nadir of the previous worst post-war recession during
Marcosian martial law. Back then we suffered 9 consecutive quarters of negative growth from
1983 to 1985 – but nowhere in the vicinity of 16.5% in a single quarter. Both are POSITIVE
STATEMENTS because it is backed by quantifiable data. It is descriptive in nature. Both can
still be proven wrong or refuted by empirical data.

In fact, you might say we haven’t seen a collapse this big since World War II.

Still in the red

Second, (5) this recession breaks almost 3 decades of uninterrupted growth. POSITIVE because
it can be scientifically tested and data can be quantifiable.

(6) When the economy shrinks for two consecutive quarters in a row, it’s called a recession.
POSITIVE because it is stating a fact and is describing a recession. (5) We’re officially in one
because our economy also dropped by 0.7% in the first quarter. POSITIVE because it is
descriptive, meaning it describes the amount dropped which is 0.7%
(7) The last time we experienced a recession – using this strict definition – was in 1991, when a
string of natural disasters, a power crisis, and political unrest pummeled the economy.
POSITIVE

But if you look at the record, it takes a lot to bring our economy to its knees. (6) Even during
previous international crises – like the Asian financial crisis and the more recent global financial
crisis – the Philippine economy didn’t fall into a recession. POSITIVE

(7) Our economy has proven quite resilient for decades…until COVID-19 came along. Our
economy finally met its match. POSITIVE because it is backed by empirical data and can be
proven wrong.

Third, (8) you might say this crisis wiped out much of the economic gains during the Duterte
administration. NORMATIVE because it is an opinion statement. It also uses the word “might.”

(9) If you distribute GDP among all Filipinos, each of us will get P38,328 in the second quarter.
POSITIVE (This is also called GDP per person.)

(10) That sum is 17.4% lower than the P46,534 each of us got in the same period in 2019. More
tellingly, it’s almost equal to the average income each of us already enjoyed back in 2017. Both
are POSITIVE.

In short, (11) the average Juan today is no more prosperous than he or she was 3.6 years ago.
POSITIVE because it can be tested scientifically if correct or wrong.

Fourth, (12) our performance in the second quarter is also dismal relative to our ASEAN
neighbors (Figure 2). POSITIVE

Presidential Spokesperson Harry Roque tried to sugarcoat the situation by saying we’re (13) “not
the only nation facing this situation. COVID-19 has had an adverse economic impact on
countries like Singapore, Indonesia, the United States, France, Spain, Mexico.” Even if it feels
like a biased statement, it is still POSITIVE in nature. Again, it can be refuted with credible
source.

But Figure 2 shows that so far we took the worst hit among our neighbors.

Heck, (14) Vietnam – one of the countries that acted most promptly and efficiently against the
pandemic – even grew by 0.4% in the second quarter. POSITIVE

Catastrophic and depressing as these statistics may seem, they were in fact hardly surprising.
(15) If you look carefully at the spreadsheets, the pandemic is really largely to blame.

Which sectors were hurt the most?

(16) No matter how you parse the data, the pandemic ruined our economy beyond recognition.

To see why, (17) GDP can be understood as total spending in the economy. Figure 3 shows that
consumption spending plummeted, dragging down growth by 10.7 percentage points. Both are
POSITIVE

(18) As people hunkered down in their homes, refrained from going to the malls, stopped eating
at restaurants, and began cutting their hair at home, spending on consumer items like clothes,
meals, and haircuts took a hit – along with the incomes of the salesladies, waiters, and barbers
that provide such goods and services. POSITIVE because it describes a cause and effect
relationship in an economic situation.

(19) This is key because for the longest time about two-thirds of our economy was made up of
consumption spending. POSITIVE because quantifiable data is the amount of consumption
spending over a period of time.

(20) Unless the virus goes away and people feel safe to go out and spend, our consumption-
driven economy will continue to be in a rut – no matter how loose quarantine restrictions are.

(21) Disturbingly, health and education spending constituted the biggest drop in consumer
spending – as millions of students stopped going to school and people with all manner of health
problems stopped availing themselves of various healthcare goods and services. POSITIVE
because it is descriptive in nature.

(22) Investment spending crashed as well (pulling down growth by 13.9 percentage points) as
construction projects and production lines for durable goods such as machinery and equipment at
factories were halted. POSITIVE

(23) Exports and imports plunged by 37% and 40%, respectively, as supply chains around the
world got disrupted and orders for various tradable goods dried up. (The only reason net exports
– exports less imports – “contributed” positive growth in Figure 3 is because exports plummeted
less than imports.) POSITIVE

(24) Only government spending contributed any growth at all (at 3.1 percentage points). Even so,
this pales in comparison with the combined 24.6 decline of both consumption and investment
spending.

A second way to dissect GDP is to see which sectors contributed value to it.

(25) Figure 4 shows there was a surprise but minuscule growth of agriculture in the second
quarter. POSITIVE
(26) But the main drivers of our economy – services and industry – tanked and dragged down
overall growth by 9.8 and 6.7 percentage points, respectively. POSITIVE

(27) Services suffered the most. They were the first to go, being the most reliant on face-to-face
interactions through which the virus spreads and thrives. POSITIVE

(28) All sorts of services collapsed, including transportation, storage, hotels, restaurants, real
estate, education. Only government services, financial and insurance services, and ICT sectors
saw any growth at all (for instance, services where work from home is at all possible).
POSITIVE because it can be backed by empirical data. It can be refuted.

(29) Meanwhile, in industry, manufacturing and construction were the biggest losers as factories
closed and construction projects got derailed.

Disproportionately small response

(30) All in all, the recession wiped out about P820 billion in output in the second quarter, relative
to last year.

(31) The sheer magnitude of the recession we’re currently in exposes the absurdity of the
response of Duterte’s economic managers. NORMATIVE because it is opinionated. The main
idea here is the absurdity of the response.

(32) For one thing, the economic managers continue to be obsessed with matters that should not
at all be the key features of the pandemic response, such as credit ratings and big-ticket
infrastructure projects. NORMATIVE

(33) More importantly, it feels as if the economic managers don’t want to rescue the economy at
all. NORMATIVE. (34) Their proposed solutions are disproportionately small compared to the
extent of the crisis. POSITIVE

It’s like they’re trying to put out a burning house using a watering can.

(35) To be specific, the economic managers’ brainchild, the Bayanihan to Recover as One Act, is
an economic rescue package that includes just about P140 to P162 billion in economic aid.
POSITIVE

By stark contrast, (36) the economic losses we suffered in the second quarter were 4 to 5 times
that amount. POSITIVE

(37) The size of the proposed aid won’t be nearly enough for all the things we have yet to spend
on, including emergency cash for poor families (there has been no follow-up to the 2-month
emergency subsidy program in April and May), wage subsidies to replace the lost incomes of
displaced workers, and zero interest loans for businesses (especially small ones). POSITIVE

(38) For some reason the economic managers, led by Finance Secretary Carlos Dominguez III,
are being overly, unreasonably stingy. NORMATIVE (39) Using a boxing analogy, Secretary
Dominguez claimed during a joint briefing on August 6 that the country must “conserve”
resources for the upcoming “rounds” of economic recovery. NORMATIVE

(40) But this fiscal conservatism is grossly misplaced. It will put us in more trouble.
NORMATIVE

The more businesses we allow to die and the more workers we allow to be laid off, the longer it
will take for our economy to bounce back.

(41) It’s bad enough that the Duterte government failed to contain the virus early on.
NORMATIVE (42) It’s worse that government officials, safe and secure in their own lifeboats,
are unwilling to throw life preservers out to all the Filipinos who’ve been cast into the sea.
NORMATIVE because there is value judgement.

Worst of both worlds

Finally, the economic managers are still laboring under the dangerous, misguided notion there’s
a trade-off between health and the economy – that somehow we can cheat our way out of this
crisis by reopening the economy quickly.

In fact, there’s no such trade-off: the fate of the pandemic dictates the fate of the economy.

This point is perfectly illustrated by the recent reinstatement of modified enhanced community
quarantine (MECQ) in Metro Manila and nearby provinces.

Recall that government, invoking the economy’s plight, loosened quarantine restrictions in June
despite the continued rise of new COVID-19 cases.

But now hospitals are overwhelmed and medical frontliners are exhausted. (n) We’ve had no
choice but to go back to stricter quarantine measures amid the loud and desperate plea of myriad
health workers. NORMATIVE

The drawback, of course, is that this will invariably hurt many sectors of our economy again,
including retail and transportation.

Until new cases are minimized or brought to zero, the next wave of cases is just waiting around
the corner, and more and more of these extremely costly lockdowns will be unavoidable.
The intricate link between health and the economy was further underscored by another milestone
on August 6. Not only did we learn then about the recession, but we also overtook Indonesia to
have the most number of COVID-19 cases in ASEAN.

Somehow, when it comes to the economy and the pandemic, we now have the worst of both
worlds.

(n) Until Duterte and his economic managers learn their lesson and prioritize Filipinos’ health
over the economy, there will be no end to our collective misery. NORMATIVE because there is
value and ethical judgment