In previous sessions, we have dwelled into answering several
questions such as What is an Economy? How an Economy function? What are
economic problems a society or economy faces? What are the solutions to those
Economic Problems?
Now we know that economy faces the problem regards to
allocation of scarce resources and distribution of final goods and services.
And we discussed the solutions regarding the same which included different
mechanisms followed by different economies. These mechanisms are Centrally
Planned Economy, Market Economy and Mixed Economy. All these mechanisms adopt
different methods and approaches to solve the economic problems and all three
also results into unique ways and end results of allocation of scarce resources
and unique ways and end results of distribution of scarce resources.
It may be found that all of the above mechanisms used for
solving the economic problems may have worked and even those problems would have
been resolved but one of the most important thing that remains unanswered would
be, which of these mechanism fared better and which mechanism failed? It may
also happen that few economies or countries would have been successful in
solving the problem through one mechanism but other would have failed using the
same, may be because of lack of effective execution or may be because of
different economic environment, etc. And like these, there would be several
questions which remains unanswered.
Thus to answer these questions, comes into picture one of
the most important sub-segment of Economics which has two braches; Positive
Economics and Normative Economics.
These two braches answers the several questions that are
posed with the implementation and execution of different mechanism for solving
the economic problems.
Positive Economics
The Positive Economic Analysis is a branch of economics which
deals with a phenomenon to answer about What it is and how it functions and
dwells into decoding the crux of the same.
If we throw light on Positive Economic Analysis through considering
the solution to the economic problems faced by an economy, Positive Economic
Analysis discusses how the mechanism is used to solve the problem functions. The
Positive Economics answers the following questions;
1)
What is Centrally Planned Economy?
2)
What is Market Economy?
3)
What is Mixed Economy?
4)
What is the use of these mechanisms?
5)
What are the end results achieved through these
mechanisms?
If we notice Positive Economics focusses on the What part of
the matter being discussed. It can also be found that the answers to all the
questions are meant to be completely fact based and not opinionated. So
positive economics always discusses the matter itself and also tries to answer
about What the matter is and is based on real facts and figures arrived from
practical implementation. It directly seeks to answer about the meaning and
crux of something that is the What part of it.
Normative Economics
Normative Economics is a branch of economics which deals
with a phenomenon to discuss How it should be, that is what is desirable as an
outcome or simply which phenomenon can be a best outcome.
The normative economics rather acts as a guide path to
execute the decision as to which mechanism can be implemented as it always
throws light on what should be the ideal scenario or what should be the
desirable outcome or what should be or ought to be the ideal state of that
particular phenomenon being discussed.
The normative economics answers the following questions;
1)
How should be the healthcare facilities in a
society?
2)
How should be the education infrastructure in a
society?
3)
How should be the social welfare framework in a
society?
4)
How should be the developmental policies in a
society?
5)
How should be the welfare policies in a society?
From the above questions, it can be summarized that the
basis of normative economics is opinionated and its central focus is to
describe and discuss how should be the ideal state of a particular phenomenon,
how should be the mechanism to be adopted in an economy, how should be the welfare
policies in an economy, etc. It is not based on any facts as it talks about
things which should be or ought to be but are not as of now. So there are
opinions and ideas about how should be something.
Now in the light of the idealistic or desirable scenario,
the current mechanism in working can be evaluated through the light of normative
economics. If the mechanism in functioning in an economy successfully matches
and fulfils the above criteria as per the questions, then it will be considered
good in normative economics. Hence normative economics in its roots is focused
on the evaluation of the particular frameworks by always showing and throwing
light on desirable outcomes or ideal outcomes and then comparing it with the
actual scenario and then helping in spot the gaps and finally igniting the required
changes needed to be implemented to achieve the idealistic state.
So the crux of normative economics is evaluation of current scenario
by comparing it with the desirable or ideal scenario, as normative economics
always focusses on how it should be or ought to be.
Conclusion
Which one Positive Economics or Normative Economics is
better? In real world, for an effective mechanism to be achieved in any
society, integration of both sciences that is Positive Economics and Normative
Economics are required. Because to analyze any mechanism, facts and figures
from the past implementation are always helpful for better implementation in
current scenario. But if decided and acted on past data without any progressive
scope in mind regarding how it should be made better and what should be the
ideal and desirable state, the progress and development will come to a halt. So
for continuous improvement even normative economics is required. Thus if both Positive
Economics or Normative Economics are used in an integrated manner, will result
in development of most efficient mechanism that would be capable of solving the
economic problems in an economy or society in best possible manner.
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