As students of Economics, it is important to distinguish between facts and opinions. Certain statements in a news article may be the opinion of the writer, while others could posted as facts. If it is posted as a fact, we can either prove or disprove whether it is true or not. However, we cannot do so with opinions.
Positive statements are those statements which can be either proved or disproved with reference to facts. For example, 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.
Other examples of positive statements are:
- A fall in income will lead to more people buying fake products
- Increase in advertising will increase demand for luxurious goods
- A reduction in income tax will improve the incentives of the unemployed to find work
Normative statements are those statements that cannot be either proved or disproved with reference to facts.
For example, the statement, “government 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.
The extent to which governments are involved in the economy is a normative issue, ie a matter of opinion, requiring a value judgment. Economic analysis tends to be more concerned with positive issues, ie statements of fact that can be tested against real-world evidence. For example, the USA has a predominantly private healthcare system, where people have to pay directly for their treatment, whereas the UK has a predominantly publicly-provided healthcare system (the NHS). To say that the UK’s approach is ‘fairer’ is essentially a matter of opinion, ie a normative issue. To say that the amount spent per head on healthcare in the UK is less than that in the US is a positive issue.