Economic methodology

• What is ceteris paribus?

  all other variables remain constant
• What are positive statements?

  • Positive economics is concerned with objective statements of how a market or an economy works 
  • These positive economic statements are based on empirical evidence and tend to be statements of fact
  • They can be proven to be true or false
• What are normative statements?

  • Normative economics focuses on value judgements
  • These judgements are built around opinions and beliefs as to what the best economic policies or solutions may be
  • These judgements are called normative economic statements
  • Normative economic statements are often the basis for the manifestos  of political parties and the different economic agendas they put forward
• What are value judgements?

  Value judgements influence governments' choices with regards to the economic policies they choose to adopt and spend money on .

  • Value judgements will impact economic decision-making because they are influenced by how the public will react to economic policies and what they see as a favourable outcome 
• What is individual decision making influenced by?

  • Individual decision-making is influenced by positive outcomes and the morality of choices
  • Postive outcomes tend to be focussed on self and not ' the benefit of society'  
  • Moral judgements are a normative concept, as 'the right thing' means different things to different people
• What is equity?

  • Equity is concerned with the idea of fairness 
  • Individuals and societies have different views on what is fair and this influences government policy
  • E.g. Some countries believe it is fair for all of their citizens to be able to access healthcare, irrespective of their ability to pay, whereas other countries believe that 'no pay, no access' is fair
• What is equality?

  • Equality is concerned with everyone being equal and having equal recognition
  • Equality is often a normative concept. When are all people equal? When do people all have equal opportunities?
  • Statistics on inequality would be considered to be positive economic statements
  • E.g. In 2018, women in the USA were paid 12% less than men in comparable jobs