2.2 The Economist as Policy Adviser

2.2 a. Positive versus Normative Analysis

Positive economics is the study of economics based on objective analysis. ^[16] Normative economics is a perspective on economics that reflects normative judgments or opinionated reactions toward economic projects, statements, and scenarios. ^[17]

Example: Increasing the interest rate would encourage more people to save can be considered a positive economic statement as its accuracy can be tested and does not contain any judgements [16]. The statement disposable income levels can be increased by cutting taxes in half is normative as it mirrors value judgement which assumes that disposable income levels must be increased. ^[17]

^{Positive and Normative Statements [18]}

2.2 b. Economists and the Government

Economists who work for government agencies assess economic conditions in the United States and abroad and estimate the economic effects of specific changes in legislation or public policy. ^[19]

Example: Economists in the U.S. Department of Commerce study domestic production, distribution, and consumption of commodities or services. ^[19]

^{Economists and the Government [20]}

2.2 c. Why Economists’ Advice is Not Always Followed

Accepted cause and effect relationships, or estimates of the existence of a fact from the known existence of other fact(s). ^[4]

Example: Economists have wide opinions on the need of carbon taxes but it is hard to sell to the politicians. ^[22]

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^{Why Economists’ Advice is not always followed [23]}