![]() Policy makers should be cognizant of the full range of consequences of the policies they recommend. But if economic policy making is to be effective in improving economic performance, it must be rooted in sound positive economic analysis. Economic policymaking – conscious intervention in economic activity with the intent of altering the course that it will take – is essentially normative in nature. Value judgments must necessarily be made that is, possible objectives to be achieved must be ranked, and choices made among these objectives. Economists, for instance, may argue about the type of economic system or the standard of living in society they would like to see which is all about what ought to be and usually settled by choice for example, should a free port encourage beneficial increase in economic activity or should government spending on defence increase or decrease and by what percentage or does taxation allocate resources more efficiently? All these questions have no predetermined answers and are therefore subject to value judgments and discussions. While positive economics deals with the various economic phenomena, normative economics focuses on what economics should be and the value of its fairness. These judgments can be argued about but they cannot be settled by referring to predetermined principles which give predictable results (science) or reference to facts. It is concerned with expressions of value judgment(s) as to what one would like to happen (what ought to be). A normative statement involves ethics and value judgments whose explanations are based on deeply held values or morals. ![]()
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