1. Part A-III Microeconomic Theory Review
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2. Positive Science, Normative Analysis and Policy Development
In this section
Economics as a positive science
Normative analysis
Policy development
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3. ‘At the most general level’
Economics is a positive science
Society has normative goals
Economics can help make policy proscriptions nonetheless
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4. Economics as a positive science
Positive Science: An analytical approach is said to be positive if it represents an attempt to describe and/or explain some phenomenon.
This description and/or explanation should be independent of the personal value system of the scientist.
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5. An economist should be working towards a description and understanding of what is
The results of the economic analysis should be independent of what the particular economist believes should be (free of the economist’s personal ethics or values)
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6. It is difficult for social scientists to remain as objective as is required of a positive science
It is important for a scientist to make explicit any normative (personal values) that enter into his/her analysis
Example: if a social scientist is hired as a consultant by, or has some relationship with, a ‘special interest’ group, then this should be known to all before they begin to discuss their area of expertise
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7. Normative analysis
Normative analysis is concerned with what ought to be.
It is by definition premised on some set of personal values or social standards
Values are essentially a personal characteristic, sometimes shared across members of a society
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8. Philosophy, Theology, Civics
The development of such values, standards or criteria represents normative studies
Philosophy, Theology, Civics
It is important that society (political/social systems) work towards the development of normative objectives (consensus ?)
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9. Example: the use by economists of ‘normative’ concepts of efficiency
To make a meaningful contribution to social debate, economics must at times ‘cross the line’ and become a normative science
Example: the use by economists of ‘normative’ concepts of efficiency
Economic efficiency criteria are used by economist but they do represent a particular value system (Pareto, Kaldor-Hicks Efficiency)??
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10. Policy development
Society (an individual member or group within the society) decides on some particular normative objective
Positive science is applied in order to achieve that objective
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11. Policy can be thought of as a set of rules to be applied in order to attain a given objective
It is through positive science that we can develop the ‘best’ (most efficient) ‘set of rules’
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12. An Example of policy development in action: Child Labour Laws
Firstly, some sort of ‘normative’ analysis would be necessary
Is child labour desirable or undesirable?
What exactly constitutes child labour (what age, hours of work, etc.)?
Are we only concerned with child labour in Canada?
and so on
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13. Secondly, ‘positive’ economic analysis can help answer relevant questions
Where does it occur?
How wide spread is it?
Why does it exist in some countries, industries or firms and not others?
How does it affect the individuals involved (children, families, firms, consumers)?
and so on
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14. and the results of ‘positive’ analysis of the phenomenon:
Finally, given the ‘normative’ objectives of society (what we like and do not like about child labour)
and the results of ‘positive’ analysis of the phenomenon:
What should the our policy on child labour be?
What is the optimum policy (set of rules - laws, regulations, public information programs, etc.) that best attains the ‘normative’ objectives of society?
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15. Unintended Consequences?
Policy development
Concensus?
Unintended Consequences?
It ain’t easy
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