Normative economic analysis
Also called: Normative economics · Topic: Scarcity, Choice and Economic Systems · NCERT: Class 12, Ch 1 "Introduction (Microeconomics)"
Meaning
Normative economic analysis asks whether economic mechanisms and their outcomes are desirable. It deals with "what ought to be", so it involves value judgements, meaning personal or social views about what is good or fair. Data alone cannot prove a normative statement right or wrong. The line between normative and positive analysis is not sharp. Good policy advice needs both.
Example
Each of these statements is normative:
- "MSP should be made a legal right."
- "Farm power subsidies should be scrapped."
- "The RBI should cut rates further."
The prescriptions in India's Economic Survey are normative.
Don't confuse with
- Positive economic analysis: Positive analysis describes "what is" and can be tested with data. For example, "free power leads to over-use of groundwater" is a positive statement.