A seemingly minor, but more and more relevant and important topic in an introductory economics course is the distinguishing between positive and normative statements. A positive statement is a statement that's a factual-based statement. It's an attempt to describe the world as it is. For example, the grass is green.
I can walk outside and verify, yes, in fact, the grass is green. Or I can verify that that statement is not true. I can see that the grass is maybe brown, for example. Either way, I'm able to observe and either confirm or contradict that statement.
Normative statements, on the other hand, are opinion-based statements. How I think the world should be or ought to be. The grass should be purple. In other words, that's my personal preference. I have no way to prove that.
I have no way to quantify that. It's just my personal preference. Other people might think the grass should be red or green or blue.
But... When we think about, in economics, the ability for us to create effective recommendations for economic policy, the idea of distinguishing between positive and normative statements is very, very important. Even more important in the current trend of fake news that's really starting to sort of blur the lines between positive and normative statements. When we look at the COVID-19 pandemic, for example, there's been a lot of blurring of the lines of of positive versus normative statements.
But let's take an economic concept. The minimum wage has long been argued that it is an important component of the economy to maintain a certain rate in order to maintain a certain standard of living for those who earn that wage. So, of course, the most recent argument that's been going on for at least a few years now is that we should increase the minimum wage, possibly up to $15 an hour. Well, economists debate the impacts of this, and they use the past data that we have in order to make an argument of whether that is or is not a good policy.
But in the framework of positive or normative statements, I could, for example, say an increase in the normative wage will increase unemployment. That is a positive statement. Now, it's positive in the sense that I can go back and I can look at the data for the rates of unemployment. and the past minimum wages, and I can see what the relationship between those two variables are. Now on the other hand, if I said an increase in the minimum wage ought to happen in order to improve the living standards of those who earn that wage, is in effect a normative statement.
Why? Because how are we quantifying that? If we're talking about living standards, we may be able to quantify that. But if I simply say the minimum wage ought to be increased because it's the right thing to do, that's a normative statement. How do we quantify right thing to do?
Or another way to phrase that is simply to use the word fair. An increase in the minimum wage ought to happen because it's fair. How do you define fair? How do I define fair?
It's likely not identical. And so when, as economists, when we're making economic policy implications and recommendations, we have to consider whether the recommendations are our personal opinion or whether we can base them in fact and data using that scientific method. And that's important to be able to do in order to really support any sort of argument that you're making.
One thing I'd encourage you to do is whatever news source that you receive your news from, go through and see if you can figure out the headlines. Are they positive statements? Are they normative statements?
Is your particular outlet of choice trying to sway you by how they write the headlines in any given news article? Are they stating GDP increased in the fourth quarter? That's a fact-based statement.
We can verify that. Normative-based statement, though, the economy is headed towards recession again. We're likely to see these things happening in the future.
Much more about normative. It's about an opinion based on interpretation. And that's where it's important as economists to be able to distinguish between those different types of statements.