ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos

Econ: What is Positive v. Normative Analysis? 6 Views


Share It!


Description:

What is Positive v. Normative Analysis? Positive analysis defines parts of the economy using actual facts and analysis while normative analysis defines parts of the economy by looking at the behavior of consumers. Basically, one way of defining economic phenomena is more scientific and mathematical and the other is more psychological.

Language:
English Language

Transcript

00:00

And finance Allah shmoop What is positive versus normative analysis

00:09

All right people when you're talking positive economics you're talking

00:12

objective data and facts You're quantifying things with numbers analyzing

00:18

potential causal relationships with rigorous statistical analysis and pointing out

00:23

the way things are in everyone's shared reality When you're

00:26

talking normative economics you're talking opinions and ideology Maybe you

00:31

think it's unfair Some people are working two jobs on

00:34

minimum wage barely getting by while a handful of people

00:37

are rolling in dough Or maybe you think it's unjust

00:40

to redistribute money that people earned no matter what their

00:43

income is Well maybe you think Mohr government regulation and

00:46

social programs will make things better Or maybe you think

00:50

small government or no government is the key to making

00:52

things better depending on the well whatever better looks like

00:55

for you assuming we're all in the same universe and

00:58

talking about reality while positive economic statements are things everyone

01:02

should be willing to agree upon for instance inflation in

01:06

the United States in nineteen forty six was eighteen point

01:09

one percent That's a positive economic statement derived from positive

01:13

analysis You can think positively correct to help you remember

01:17

right If you also thought an inflation rate of eighteen

01:20

point one percent Wow that blows That's a normative economic

01:24

analysis You just did there because well you're thinking well

01:27

it's normal toe have opinions because it is with are

01:30

you know monkey brains So why is knowing the difference

01:33

between positive in normative economic statements so important you can

01:37

think of positive economic analysis as the tool that people

01:40

use you know the fax To try to implement what

01:43

they want to see based on their normative economic opinion

01:47

liberal congressman will seek out liberal positive economics that support

01:51

their normative ideology Just as conservative congressman seek out positive

01:56

economics that support their conservative ideology to make sure you

02:00

know the facts that are positively true it's good to

02:03

know where they're coming from right For instance would you

02:05

trust a study that was funded by the Coca Cola

02:08

Company that says excess sugar is actually good for your

02:12

health Well we wouldn't blame you for wanting to believe

02:14

all of this is true whoever you're rooting for But

02:17

hopefully all the other positive analysis that's been done out

02:20

there on the health problems caused by having a you

02:22

know Coca Cola Sugar Party all day every day That

02:25

would raise your skepticism even if you didn't know who

02:28

funded the study So don't worry You can totally have

02:31

a Norman of economic ideology Just make sure your economic

02:34

evidence is in the positive economic realm And just know

02:38

that when you're talking to someone on the other side

02:41

unquote someone from a different political economic tribe positive analysis

02:45

might get you somewhere while Norman of statements probably won't

02:49

And again this is just how our monkey brains role 00:02:52.6 --> [endTime] keeping it real Who

Up Next

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Related Videos

Fake News
11938 Views

How do you tell fake news from real news?

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

Finance: How Are Risks and Rewards Related?
589 Views

How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...