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1.3 Positive and Normative Science

Whether economics is a science or a subject of the humanities; and whether it is positive or a prescriptive science is a frequently debated issue. All material sciences such as physics, chemistry, biology, mathematics are pure, abstract and positive sciences. But social sciences like economics, politics, philosophy, history, etc., attempt to analyze human behavior, actions, motives and desires. Human behavior is quite unpredictable. Therefore the degree of positivity and accuracy is expected to be lower in social sciences. Yet the science of economics enjoys the benefit of quantification. Commodities such as machines, tools, land, fruit, clothing, etc. as well as services such as those of teachers, doctors, technicians, etc. which create utility, want and satisfaction are quantifiable. Hence economics has a slight edge over other social sciences.

Though economic scientists have all along been striving to put it on a positive scientific footing, there is a limit within which this can be possible. In its initial stage, economics as a subject was introduced in the atmosphere of ’laissez-faire’ which was mainly dominated by free enterprise and individualism. But in the 20th century after the two world wars (1914-18 and 1939-44) and the period of the Great Depression (1929-33), the significance of individualism was considerably reduced. It has partly been substituted by large-scale public and governmental activity. Today all over the world, public authorities have been allocating 30 to 35 percent of the national income (Gross Domestic Product - G.D.P.) and national resources towards public expenditure alone. Since a great deal of public expenditure should follow the basic criterion of economic efficiency, this has led to an ever increasing interest in the analysis of the economic policy. Some of the goals that the economic policy aims at can be listed as follows:

  1. Output and employment: maintaining high levels of output and employment. All able-bodied citizens who desire to work should be provided with job opportunities.

  2. Aggregate Demand: maintenance of the high levels aggregate demands so as to avoid any fluctuation in economic activities and avoid the dangers of an economic depression.

  3. Steady Growth: direct the economy in a manner that will enable steady growth conditions. In order to ensure this large-scale public investment programs should be undertaken.

  4. Price Stability: maintaining fairly stable levels of prices and to check if the average annual growth rate of prices is compatible with the growth rate of productivity. Controlling inflation is a major challenge faced by modern public authorities.

  5. Redistribution of Income: Usually, market-place distribution of income is likely to be faulty. It may result in economic injustice by aggravating income and wealth inequalities. Public authority holds the responsibility of reallocating a part of the resources from better-off sections (with progressive taxation) into the hands of the poorer sections of the society.

A variety of such goals of economic policy clearly suggest that a market place profit- maximizing criterion is not adequate to satisfy these objectives. Therefore public authority has to pursue egalitarian measures: thus the process of determining the norms of economic activity bring in normative considerations. Apart from matters of policy, economists often indulge in value judgments. This is precisely because economists themselves are economic agents or ’actors’ and they have their own ideological commitments. An economic researcher is himself involved in the activities that he is supposed to observe and analyze. By way of example, if he is confronted with a choice between some percent rise in the inflation rate and a rise in the rate of unemployment then he is less likely to prefer the increase in the rate of unemployment. Even otherwise, various statements of economic importance contain an element of value judgment. This can be illustrated by the following statements:

  1. 'Perfect competition is a just form of the market.'

  2. 'Workers must receive minimum wages.'

  3. 'Wage cut solution to reduce unemployment may be good economics but bad politics.'

  4. 'That government is the best which spends the least.'

All such statements with their content of value judgments make the science of economics prescriptive or normative in nature and reduce its positive strength.

Index

1.1 Definition and Nature
1.2 Macro and Microeconomics
1.3 Positive and Normative Science
1.4 Positive Economic Theory And Analysis

Chapter 2

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