Normative economics is a perspective on economics that incorporates subjectivity within its analyses. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. It is the opposite of positive economics.
Normative economics is a part of economics that expresses value or normative judgments about economic fairness, or what the outcome of the economy or goals of public policy should be. Economists normally prefer to make a distinction between normative economics ("what ought to be" in economic matters) and positive economics ("what is"). Many normative judgements are held conditionally, to be given up if facts change, so that a change of values is purely scientific. On the other hand, welfare economist Amartya Sen distinguishes basic (normative) judgments, which do not depend on such knowledge, from non-basic judgments, which do. He finds it interesting to note that "no judgments are demonstrably basic" while some value judgments may be shown to be nonbasic. This opens the possibility of fruitful scientific discussion of value judgments. Subfields of normative economics include social choice theory, cooperative game theory and mechanism design.
An example of a normative economic statement is as follows: “The price of milk should be $6 a gallon to give dairy farmers a higher living standard and to save the family farm.” This is a normative statement, because it reflects value judgments. This specific statement makes the judgment that farmers need a higher living standard and that family farms need to be saved. Normative statements are often heard in the media because they tend to represent a theory or opinion rather than objective analysis. Normative economics is a valuable way to establish goals and generate new ideas, but it should not be used as a basis for policy decisions. Another example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels". By contrast, a positive (or objective) economic observation would be, "Big tax cuts would help many people, but government budget constraints make that option infeasible." Contact urgenthomework.com for normative economics homework and assignment help.
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