5 - The distinction between positive and normative economics

Summary

Hume's guillotine

The distinction between positive and normative economics, between “scientific” economics and practical advice on economic policy questions, is now 150 years old, going back to the writings of Nassau Senior and John Stuart Mill. Somewhere in the latter half of the nineteenth century, this familiar distinction in economics became entangled, and almost identified with, a distinction among philosophical positivists between “is” and “ought,” between facts and values, between supposedly objective, declarative statements about the world and prescriptive evaluations of states of the world. Positive economics was now said to be about facts and normative economics about values.

Then in the 1930s, the new welfare economics came along to provide a normative economics that was allegedly free of value judgments, after which it appeared that the distinction between positive and normative economics was one between noncontroversial facts and values, on the one hand, and controversial values, on the other. The result was to enlarge traditional, positive economics to include the whole of pure welfare economics, leaving normative economics to deal with specific policy issues, where nothing much can be said about values or ends apart from what politicians tell us. What is involved here are some horrible, logical confusions that laid economists open to wholesale attack on the very idea of value-free, positive economics.