1.1.2 Positive & Normative Statements

Specification Coverage: Edexcel unit 1.1.2 - Postive & normative economic statements. Students must learn the distinctions between positive and normative economic statements and the role of value judgements in influencing economic policy.

Postitive Economic Statements

Positive statements:Objective statements that describe'what is', 'what was', or 'what will be' in the economy.

Key Features:

  • They are based on empirical evidence (facts and data).
  • They can be tested or falsified (proven true or false).

Normative Economic Statements

Normative statements:Subjective statements that express an opinion or a value judgement about what ought to be.

Key Features:

  • They are based on opinions, ethics, morals, and beliefs.
  • They cannot be tested or proven false because they are a matter of debate.

Examples of Positive and Normative Statements:
Positive Statements (Fact-Based) Normative Statements (Value-Based)
  • "The UK's inflation rate is 3.2%."
  • "A rise in interest rates will lead to a fall in consumer spending."
  • "Government spending on education was £100bn last year."
  • "The government should increase spending on the NHS."
  • "Corporation tax ought to be lower to encourage investment."
  • "Income inequality is unfair and must be reduced."

The Role of Value Judgements

Value Judgement: a view about what is morally or subjectively important. These judgements underpin all normative statements.

They influence economic decision-making at all levels:

  • Individuals: e.g., Choosing a job based on ethical values rather than just the salary.
  • Governments: e.g., Prioritising spending on defence over welfare, or vice versa, based on political beliefs.
Value judgements determine the goals that economic policies aim to achieve. For instance, whether a government prioritises economic efficiency or equality a value judgement.

Exam Preparation

  • Spot the Difference: Positive statements deal with facts (e.g., "Unemployment is 5%"). Normative statements deal with opinions and use words like 'should', 'ought
  • MCQ Strategy: In multiple-choice questions, immediately eliminate any option that is a subjective value judgement (normative) if the question asks for a positive statement, and vice versa.
  • Evaluation: Recognise that much of economic policy debate is normative. Political parties disagree because they have different value judgements about what the key economic priorities should be. Positive statements provide the data used to inform these normative debates.