what is positive economics 
positive economics refers to objective analysis in the study of economics most economists look at what has happened and what is currently happening in a given economy to form a basis for future predictions this process is known as positive economics positive economics is different from normative economics which is a form of study that uses value judgments to form a basis for future predictions understanding positive economicsa cornerstone of positive economics is the development of theories through fact based examination of causes and effects many will refer to this study as what is economics due to its use of fact based determinations and thinking normative economics in contrast is called the study of what should have been or what ought to be history of positive economicsthe history of positive economics dates back to the 19th century it was during this time that the idea of what is and what should be were first identified by early economists like john neville keynes and john stuart mill 1keynes believed that logic and methodology were imperative in the study of economics while mill was an economist who blended economics with philosophy 23 mill approached economics from data such as the relationship between supply and demand rather than from an approach of value perspective 3these early economists developed theories to back up their economic observations they used factual evidence from economic conditions to prove these theories to be true 1these ideas were later adapted by contemporary economists such as milton friedman friedman is considered to be one of the most influential economists of the 20th century he held a firm belief in the free market capitalistic system and his theories became known as monetarism friedman was a strong proponent of monetary policy and opponent of fiscal policy and deficit spending saying that they played a big role in the great depression 4although a combination of normative and positive economics helps policymakers devise solutions positive economics is key to investment decisions because it relies on hard facts testing positive economic theoriesconclusions drawn from analyses based on positive economics can be verified and supported by data for example the prediction that more people will save money if interest rates rise would be based on positive economics because past behaviors support that theory this analysis is objective in nature as opposed to normative statements and theories which are subjective most of the information provided by the news media is a combination of positive and normative economic statements or assumptions positive economic theory can help policymakers implement normative value judgments for example it can describe how the government can impact inflation by printing more money and it can support that statement with facts and analysis of behavioral relationships between inflation and growth in the money supply but it doesn t say how to properly enact and follow specific policies regarding inflation and money printing both positive and normative economics provide a clear understanding of public policies when studied together these theories cover both the actual and real facts and statements combined with an opinion based analysis when making policy decisions it is best to understand the positive economic background of behavioral finance and the causes of events as you include normative value judgments on why things happen advantages and disadvantages of positive economicsthere are distinct benefits and drawbacks that are associated with positive economics here we list some of the main advantages and disadvantages of this stream of economics positive economics is based on objective data rather than opinions and value judgments there are facts we have at our disposal to back up any of its claims for instance we can use historical data to determine the relationship between interest rates and consumer behavior higher interest rates lead consumers to stop borrowing because it means they have to spend more on interest since it s based solely on facts and data there are no value judgments in positive economics this allows policymakers to formulate the appropriate measures necessary to tackle any economic conditions to move the economy in a certain direction for example the federal reserve can lower interest rates to prevent a recession individual opinions and emotions can have a big impact on economic policies and procedures for instance people often make decisions in their personal financial lives based on emotions rather than facts this can lead people to make some bad choices but if they follow the data they may be able to make wiser decisions with their personal economic decisions not everyone is concerned with the facts and certain economic conditions are based on emotions as in the example above people often choose to overlook data when they make certain choices experts may suggest saving during times of economic weakness but individuals may decide they want to make a big purchase instead in essence it s hard to take the emotion out of economics just because you have a history of data it doesn t mean that you can come with up a fool proof solution or conclusion that s because economics whether positive or normative isn t an exact science and there are other considerations that often come into play that can change the outcome similarly positive economics may not be a one size fits all approach for instance policymakers often use data to come up with a policy or a solution that affects people differently what works for one segment of the population doesn t affect others the same way raising interest rates may be necessary to help slow growth and is a boon for lenders but it doesn t bode well for borrowers especially those who are already strapped for cash 