Economics is a special area of public life. A person not only participates in economic relations, but also seeks to understand their nature. The normative economy, which is an economic analysis, includes judgments about the necessary actions. In this, it differs from simple theorizing.
Economic theory is designed to study the interaction of people in the search for the most effective methods of using production resources to meet the needs of individuals. Many methods of analysis contain positive (the study of forced unemployment) and normative elements (methods of effective fiscal policy to reduce this unemployment).
A normative economy is a direction of economic science, based on a number of value judgments regarding development goals and related policies, while a positive economy involves an analysis of facts, on the basis of which the basic principles of behavior are subsequently formulated.
There are a number of methods of economic theory:
- inductive - a method of inference, which are based on a generalization of facts;
- abstractions - a method of distracting from everything that does not fall under the phenomenon under study, on its basis receive such economic categories as “profit”, “price”, “product” (they together constitute the logical basis of economic theory);
- deductive - a method of reasoning in which hypotheses are verified by real facts;
- modeling - creating a simplified picture of reality.
A positive economy is everything that happens in the present tense, and normative determines what should happen in the future, therefore hypotheses and conclusions about all the relationships in the systems differ. A certain complexity of the regulatory economy is that in order to determine the most effective ways to achieve the standard (optimal economic condition), economists need to come to the same consensus, which is often very difficult. The main problem in making a single decision is that the development of economic systems is a multivariate process.
A positive economy is not only an analysis of the consequences of a particular state policy, but also a detailed description of all the activities of the public sector, as well as all the forces implementing its programs. Economists going beyond the framework of a positive analysis leads to a transition to the sphere of normative economics, which is associated with assessing the success of various programs and developing new strategies that meet certain goals. The normative economy compares the extent to which different government programs are consistent with their goals and objectives.
Positive and regulatory economies complement each other. For correct judgments about the necessary measures that should be taken by the state, it is necessary to know what consequences this or that action will bring. The ability to accurately describe the alleged events that will occur in the case of the introduction of any taxes or the provision of subsidies for certain industries is also necessary.
Discussions about the degree of economic efficiency are considered a positive economic theory, which is based only on facts and real dependencies. The discussion of economic justice is part of normative economic theory, which makes its judgments about specific economic conditions and policies. It relates not only to the issue of equitable distribution of the product. A normative economy is a science that provides value judgments about the main types of choices that an economic system makes. Regulatory issues always cover all aspects and aspects of the economy.