Question

It is said that if you laid all the economists in the world end to end, you still would not reach a conclusion. In fact, two economists can agree that raising taxes creates unemployment yet one might argue that raising taxes is a good policy and the other argues that it is a bad policy. How can this difference exist? Be sure to use the terms positive economics and normative economics in your answer.

thank you for your help.

Answer 1

Positive economics is that they try to understand the behaviour of policy rather than making judgements.

Normative economics is that they comes to conclusions basing on the analysis and they propose a course of action for the outcome.

Economy is dependent on many factors like inflation, unemployment, price level and taxes etc. Any change in policies will have both positive and negative effect on the economy. These policies are made basing on how economy should work in future.

No two economists come to same conclusion because some understand the behaviour of policy where as some understand the outcome of the policy.

Ex: Taxation

Government started raising taxes one economist say that unemployment rate will grow up where as another economist say that government will get more revenue from taxes which in turn they spend for people by creating jobs and welfare programs.

Here the first economist understand the behaviour of policy that raising taxes will raise unemployment rate which is positive economics.

The second economist came to a conclusion that due to these taxation government earn more tax revenue which will inturn be injected in the economy. This is normative economics.

So one thing is that every economist have their own perspective on any policy that is why they don't come to a common conclusion.