What is Normative Economics?

Normative economics is the study of how the economy should be. It is also known as Policy economics wherein normative statements like opinions and judgments are used. It determines the ideal economy by discussion of ideas and judgments.

In normative economics, people state their opinions and judgments without considering the facts. They make distinctions between good and bad policies and the right and wrong courses of action by using their judgments.

Normative economic statements cannot be tested and proved right or wrong through direct experience or observation because they are based on an individual’s opinion.

Although these two are distinct from each other, they complement each other because one must first know about economic facts before he can pass judgment or opinion on whether an economic policy is good or bad.

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