ECON 295 Lecture 4: Econ chapter 2
3 Apr 2016
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Normative statements depend on value judgements and opinions - they cannot be settled by recourse to facts. They are statements about what is, was, or will be. Economists often disagree with each other public discussions often because of poor communication to failure to acknowledge the full state of their ignorance. Perhaps the biggest source of public disagreement is based on positive/normative distinction. Economists must differentiate normative proffered advice from positive facts. A theory is tested by confronting its predictions with evidence. If a theory is in conflict with facts, it will usually be amended to make it consistent with those facts, or it will be discarded to be replaced by a superior theory. The scientific approach is central to the study of economics. A hypothesis can be tested and may be rejected by the data. This rejection brings the value of the theory into question. An alternative is to search for confirming evidence for a theory.
