Chapter 2 : Economic methodology

• Positive statements in economics are objective, can be tested with factual evidence, and can be rejected or accepted based on results
• Positive statements often include words like 'will' and 'is'
• Example of a positive statement: "Raising the tax on alcohol will lead to a fall in the demand of alcohol and a fall in the profits of pub landlords"
• Normative statements in economics are based on value judgements, subjective, and rely on opinion rather than factual evidence
• Normative statements often include words like 'should' and suggest one action is more credible than another
• Example of a normative statement: "The free market is the best way to allocate resources" because it is based on opinion and suggests one method of resource allocation is better than another
• Value judgements can influence economic decision making and policy, leading to different conclusions from the same statistic by different economists