Positive economy

economic-dictionary

Positive economics is responsible for describing and explaining economic phenomena in search of laws that allow building and testing theories. This, leaving aside the value judgments.

Positive or descriptive economics then seeks to explain how the economy works based on reality, that is, empirically. Therefore, it tries to describe what it was, what it is and what it will be, investigating the consequences of different economic phenomena.

When doing positive economics, it is considered that economists act as scientists, setting aside their moral considerations on the analyzed reality. Thus, they focus on explaining the cause-effect relationships between events and economic variables objectively.

The positive economy starts from an economic phenomenon and seeks to find the origin and its consequences. To do this, it is a matter of establishing a chain of cause-effect relationships between the different events. In this way, it will be possible to know the impacts on reality of any change in the variables studied.

It should be noted that the positive economy can only tell if the means used are correct to achieve a certain end. However, nothing can be said about whether this end is desirable or not. If ethical considerations were introduced, one would be doing normative economics.

In summary, the positive economy aims to explain the way in which society makes its decisions regarding the consumption, production and exchange of goods and services. All this, based on the experience of reality, that is, on empiricism, and without assessing whether the phenomena are ethically desirable or not.

Positive economy example

Positive economics tries to explain reality and establish cause-effect relationships.

Thus, observing the following situation:

"There is an exodus from agricultural areas to urban areas."

It will look for an explanation, which could be the following:

"Salaries are higher in urban areas, and people tend to live where they can get better wages."

But positive economics will not go beyond this description and will not recommend any policies to avoid or incentivize this reality.

Difference between positive and normative economics

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