DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

PROJEECT TITLE
POSITIVE AND NORMATIVE ANALYSIS AND ITS APPLICABILITY IN
ECONOMICS AND BEYOND

SUBJECT
ECONOMICS

NAME OF THE FACULTY

MR. ABHISHEK SINHA

NAME- AISHANI CHAKRABORTY

ROLL NO. - 19LLB118

SEMESTER- 1ST

Positive and normative analysis and its applicability in economics and beyond Page 1
ACKNOWLEDGEMENT-

I would like to thank Abhishek Sinha sir for giving me an opportunity for deeply studying
about ancient India. This project is a result of dedicated effort. It gives me immense pleasure to
prepare this project report on “Positive and normative analysis and its applicability in economics
and beyond”.

My deepest thanks to our Lecturer Abhishek Sir, the guide of the project for guiding and
correcting various documents with attention and care. I thank him for consultative help and
constructive suggestion in this project. I would also like to thank my parents and my colleagues
who have helped us for making the project a successful one.

Positive and normative analysis and its applicability in economics and beyond Page 2
CONTENTS-

1.COVER PAGE
2. GRAMMERLY REPORT
3. ACKNOWLEDGEMENT
4.PROJECT SUMMARY
5.CONTENTS
6.OBJECTIVE OF STUDY
7.SIGNIFICANCE AND BENEFIT OF STUDY
8. HISTORICAL BACKGROUND
9. SCOPE OF THE STUDY
10. LITERATURE REVIEW
11. RESEARCH METHODOLOGY
12. HYPOTHESIS
13. BODY OF THE PROJECT
14. CONCLUSIONS AND SUGGESTIONS

OBJECTIVE OF THE STUDY-

Positive and normative analysis and its applicability in economics and beyond Page 3
Herein the researcher through this project is studying about Positive and normative analysis and
its applicability in economics and beyond.

SCOPE OF THE STUDY-

The researcher limits the scope of the study only up to the history and the current position.

SIGNIFICANCE OF THE STUDY-

This research helps us to know more about how positive and normative economics play a vital
role in the future.

REVIEW OF THE LITERATURE-

The literature review focuses on internet articles. Various Research Papers authored under the
same scope have taken into consideration. Though studies have been done but comprehensive
study on this topic keeping in mind the ancient texts during this time has not been have not be
done. Thus, Research Gaps have been identified. To meet those Research Gaps objectives have
been framed.

RESEARCH METHODOLOGY-

This is a doctrinal research, which is based on the materials collected from different journals,
books etc.

ABSTRACT

Positive economics and normative economics are two standard branches of modern economics.

Positive economics describes and explains various economic phenomena, while normative
economics focuses on the value of economic fairness or what the economy should be.

To put it simply, positive economics is called the "what is" branch of economics. Normative
economics, on the other hand, is considered the branch of economics that tries to determine
people's desirability to different economic programs and conditions by asking what "should" be
or what "ought" to be.

Positive Economics

Positive and normative analysis and its applicability in economics and beyond Page 4
Positive economics is a stream of economics that focuses on the description, quantification, and
explanation of economic developments, expectations, and associated phenomena. It relies on
objective data analysis, relevant facts, and associated figures. It attempts to establish any cause-
and-effect relationships or behavioural associations which can help ascertain and test the
development of economics theories.

Positive economics is objective and fact-based where the statements are precise, descriptive, and
clearly measurable. These statements can be measured against tangible evidence or historical
instances. There are no instances of approval-disapproval in positive economics.

Here's an example of a positive economic statement: "Government-provided healthcare increases

public expenditures." This statement is fact-based and has no value judgment attached to it. Its
validity can be proven (or disproven) by studying healthcare spending where governments
provide healthcare.

Normative Economics

Normative economics focuses on the ideological, opinion-oriented, prescriptive, value

judgments, and "what should be" statements aimed toward economic development, investment
projects, and scenarios. Its goal is to summarize people's desirability (or the lack thereof) to
various economic developments, situations, and programs by asking or quoting what should
happen or what ought to be.

Normative economics is subjective and value-based, originating from personal perspectives,

feelings, or opinions involved in the decision-making process. Normative economics statements
are rigid and prescriptive in nature. They often sound political or authoritarian, which is why this
economic branch is also called "what should be" or "what ought to be" economics.

An example of a normative economic statement is: "The government should provide basic
healthcare to all citizens." As you can deduct from this statement, it is value-based, rooted in
personal perspective, and satisfies the requirement of what "should" be.

Positive and normative analysis and its applicability in economics and beyond Page 5
It is predominantly an economics principle and therefore has a lot of applicability and scope in
the required field. Apart from that these principles also has a lot of potential in various other
fields and can be developed there.

BODY OF THE PROJECT-

INTRODUCTION

Most of the famous introductory textbooks in economics have a discussion on the

distinction between positive and normative statements, and then between positive and
normative economies, mostly within their first chapters. It is suggested that this distinction is
very important and has vital function in almost all social sciences, and especially in economics.
Moreover, in this context, it is argued that "the success of modern science rests partly on the
ability of scientists to separate their views on what does happen from their views on what they
would like to happen”. But the function of this positive-normative distinction is not the focus of
attention in both textbooks and related methodological literature. The main argument of this
article is that methodological discussions in general and in textbooks of a specific scientific
discipline in particular (for example, in economics) have some important social functions in
legitimising and questioning the process of all kinds of human knowledge construction,
including the scientific one, other than their epistemological positions that they pose.

In this article, first, the distinction between economics and economic methodology as two
separate fields of inquiry will be clarified, since methodological problems of economics and
their suggested alternative solutions arc very different than those of economic methodology.
Secondly the difference between the term "method" and "methodology" will be examined. In this
context, it can he mentioned that there are many "methodology sciences" in almost all fields of
social science as a subdiscipline of that scientific enterprise such as methodology in sociology,
political science, history, anthropology and economics. This, it is argued, imposes some
functions besides its epistemological ones under different names of methodological attempts. So
the role of methodology as a different field of inquiry/discipline in general or as subdisciplines
of social sciences will be explored. Thirdly, because of its non-epistemological

Positive and normative analysis and its applicability in economics and beyond Page 6
implications, conception of positive and normative science in the case of economics will
be studied. Fourthly, under the "light" of the general methodological discussions within the
social science, the methodological framework of economic methodology as a strategic field
of inquiry will be delineated. And finally, the paradoxical function of positive-normative
distinction in economics and in economic methodology will be clarified.

Positive versus normative economics

At the beginning of the discussion about economics and economic methodology as two related
but distinct fields of inquiry, an important point to be clarified is concerned with the meaning of
the term "economics". In this article, the term "economics" is used to refer to the
dominant "paradigm" of economic thought, that is, neoclassical (mainstream) economics
excluding the alternative ways of thinking in economic literature that have very different
starting points, units of analysis, theoretical frameworks and methodological perspectives
such as Radical Economics, Law and Economics.
Transaction Cost Economics, "Old" and "New" Institutional Economics, etc. Since
neoclassical (mainstream) economics is the name of a very large world of knowledge, in order
to represent basic and common features, textbooks are considered cornerstones of the "paradigm"
to give definitions of the basic concepts.

Economists generally divide economics into two distinct categories as positive and
normative economics. Before examining this distinction, something must be said about the
definition and the subject matter of economics. The subject matter of economics is. as it is
known, economy. The question is, then, what is economy? Economy can then be defined as
“a set of interrelated production and consumption activities" (Lipscy et al., 1993: 49). But
this definition is not clear enough. Because the world of reality is cluttered with
innumerable interrelated facts, it is not so easy to distinguish economic facts from non-
economic ones. Furthermore, the implicit assumption of this conception that there is a separate
field in human life that can be called "economy" brings about some vital methodological
and also epistemological problems. What aspect of human practices locates them in the realm

Positive and normative analysis and its applicability in economics and beyond Page 7
called the "economy", rather than, for example, in the general matrix of social or political
life .
Economics is a social science "concerned with using scarce resources to obtain the
maximum satisfaction of the unlimited material wants of society" (McConnell and Bruc.
1993: G8). Within the framework of this type of definition, economics, as queen of social
science, has an imperialist position within contemporary social sciences. Its imperialist power, it
is argued, comes from analytic categories such as scarcity, cost, preferences, opportunities
which have universal application (Hirshleifer, 1985: 53). The commonly accepted definition
of economics has two basic features: scarcity and choice.
Scarcity implies that choices must be made, and making choices implies the existence of
cost. This brings about "economic problem" that constitutes the main part of the "hard core" of
economics.

Positive statements concern "what is", "was", or "will be"; normative statements concern
"what ought to be." This distinction about the statement leads to make the distinction
between positive analysis and normative analysis in social sciences. As a corollary to this
distinction, positive analysis in economics is considered "the science of economics" in which
economists basically describe the actual economy and study what causes what in economic life.
Normative analysis, on the other hand, "is the study of whether an outcome or policy is desirable
or undesirable and what, how, or whether to change things to achieve the "best” possible
outcome" (Henderson, and Poole, 1991: 11). While positive economics deals with what
the economy is actually like, normative economics examines whether certain conditions or
aspects of the economy arc desirable or not .

Since positive analysis which is made up of positive statements is considered as the "science
of economics", normative analysis, that is, normative economics (if it is called science), can be
categorised as somehow "inferior science" within the subdisciplines of economics. That's
why most of the economists focus not on normative but positive economics.

Positive and normative analysis and its applicability in economics and beyond Page 8
There may be an objection arguing that at a higher level of abstraction this positive-
normative distinction may lose its meaningfulness. This objection seems to be correct in
principle. But this type of conceptualisation of reality ignores the differences between potential
reality and actual reality and their implications on the statements . Of course, "what is" of
today (a positive statement) is one of the alternatives of "what ought to be" of "past" (a
normative statement) in term of its content. But these two types of statements are still
different from each other in terms of their grammatical structures and meaning implications.

Normative versus positive economic methodology

Methodology, as a general word, is often used in an extremely narrow sense to denote technical
research methods in use within scientific inquiry. This usage is synonymous with "methods",
which include an examination of data collection, sampling, survey methods, and how to use
hypotheses in an empirical research. The term, however, has a broader sense in which it means
the most general kind of examination of scientific theories and their particular methods of
investigation. In this hitter and wider sense, methodology is "the theory of scientific method and
has as its objective the epistemological and metaphysical appraisal of the theories researchers
use in pursuit of knowledge and other aims". Methodology is associated with the idea of a
'meta-narrative', a story about the constructing of stories, a normative framework for considering
the merits of particular stories, be they literary, theological, mathematical, historical or
scientific (Weintraub, 1990: 264). Within this framework, economic methodology means an
attempt to govern the appraisal of particular economic theories by an account of theorising in
general. It is to be understood simply as "philosophy of science applied to economics" (Blaug.
1993: xxv). it investigates the concepts, theories, and the basic principles
of reasoning which are part and parcel of the discipline of economics. This means that
economic methodology is a discipline which is concerned with the methods and limits of
conceptualisation of economies. So, while subject matter of economics is, economy that of
economic methodology is economics or ways of doing economies. This is the basic difference
between economics and economic methodology as two separate fields of inquiry in terms of their
subject matters.

Positive and normative analysis and its applicability in economics and beyond Page 9
Economic methodology is not, in a narrow sense, simply a science concerned with problems that
arise from using some methods instead of others in economic theorising or practising, but
it is a discourse which is part of our lives. In Weintraub's words, "it is sum of all the utterances
we produce about the economics we do and read and hear".

While economists focus on "economic" aspects of human life, i.e. economy, economic
methodologist’s locus on works of economists. So we have two different discipline in terms of
their subject matters, methods and functions in human understanding. It can be argued that,
generally speaking, methodology as an independent scientific enterprise has two basic
functions in cognitive process: legitimising and questioning. This implies that since
understanding an intellectual activity is not possible without knowledge of the context for that
activity, methodology that focuses on works or process of knowledge production of scientists
follows science, not vice versa. As Colander puts it. "I recognise that few practising
economists will heed this or any other methodological discussion: they do what they do". That is
why methodology as a discipline, not knowledge about methods that is, was, will be used,
does not matter in actual production of scientific knowledge. In the ease of economic
methodology, for example. Blaug puts this point as "there is nothing much wrong with standard
economic methodology as laid down in the first chapter of almost every textbook in economic
theory; what is wrong is that economists do not practise what they preach" (Blaug. 1993: xxvii,
emphases added). In this quotation the adjective 'they' must be understood to refer not to
economists but to economic methodologists. That's why "economic methodology has little
place in the training of modern economists" (p. xxvii). In this context, Friedman's reply to
question as to why he never answered the critics of his famous, probably the most famous, article
in the economic methodology literature: The Methodology of Positive Economics, is very
meaningful: "I decided I could use my own efforts better in doing economics than in talking
about how economics should be done" (Frazer. 1984: 794). Schumpeter's approach to
methodology implies exactly the same thing. His very first article as well as his first book were
on the methodology of economics. In order to point out the sterility of methodological debates,
he wrote: "Not the first, but the last chapter of a system should deal with its methodology" (cited

Positive and normative analysis and its applicability in economics and beyond Page 10
by Machlup, 1991: 232). It is not surprising that practising economists, who learned how to do
economics in graduate school and who have little training or interest in philosophy, find the
arguments of methodologists to be rather tiresome and boring. Furthermore, instead of
helping us to understand what economics is about and
what kinds of principles arc used by economists, methodological debates too often end up
as a confusing cacophony of competing claims.

As a result, one never in fact refutes or disallows an argument in economics by the help of
an argument in economic methodology. An economic argument, like an explanation of the
rate of inflation, is always appraised from within economics; there is no independent basis for
the appraisal. That is to say, economic methodology either (a) as a systematic pretrospective
rational reconstruction of scientific knowledge (normative/ prescriptive methodology) or (b) as a
retrospective description of scientific activity (positive/descriptive methodology), has to follow
economics.1 Then if economic methodology has to follow economics and has no independent
status outside of it, then there is no privileged and legitimate review by the methodologist which
results in a 'yes' or 'no' on practices of economists. The same relation is valid between science
and philosophy of science. More specifically; "there is no position totally apart from the
doing of economics which can inform the consideration of the doing economics". 2 For
example, "If we are a neo- Keynesian we 'see', that is, we characterise, the economy as out of
equilibrium if we observe significant unemployment, whereas our New Classical vision 'sees'
that same jobless rate as one of equilibrium. The differences arc theoretical, not
epistemological, and certainly cannot be resolved through methodological argumentation....
Methodology has no consequences for practice. Hence methodology cannot matter" 3. I share the
point with Weintraub that economic
methodology has no significant consequences on economic practice or doing economics but its
social role and dual
function in the process of legitimising or questioning of economic theorising are not deniable.

1
(Demir, 1995)
2
(Weintraub, 1990: 272)
3
(Weintraub. 1990: 273)

Positive and normative analysis and its applicability in economics and beyond Page 11
Needless to say, when social context of methodological activity in a scientific discipline
is to question the established knowledge, its discourse, the logical construction of its arguments
and their function in the process of argumentation, and therefore its social function arc very
different than that of legitimising the established knowledge. Methodological literature combines
different perspectives and arguments and perform both legitimising and questioning functions.
So it is necessary to separate or categorise those arguments according to their position:
questioning or legitimising. One can say that when everything is O.K., methodology does not
matter.4 If it matters, its role is to legitimise given or established science with its own
theoretical formulations. In this ease, methodologists try to explain which characteristics
enable that body of knowledge to be a part of science within the general accepted criteria of
being science. This necessitates, somehow, a prescription and this methodological enterprise
should be then a normative one. At this point, it can be argued that,
a positive social science which is supported by normative methodology "frequently explains the
status quo, rather than exploring alternatives for a more just and humane society".
Blaug puts this point very clearly in the case of economic methodology: "Too many
writers on economic methodology have seen their role as simply rationalising the traditional
modes of argument of economists, and perhaps this is why the average modern economist has
little use for methodological inquiries”.

When something begins to go wrong, that is, when science in general, or a subdiscipline
in particular, faces a crisis, methodologists try to question "old view" and criticise it by
methodological arguments in order to legitimise the emerging "new way of thinking." So
these two functions of methodology may be performed simultaneously by different groups
of methodologists at the same time. In the field of economics, for instance, from 1960s
onwards more and more economists are beginning to ask themselves deeper questions about
what they are doing and about the scientific status of their subject. This has brought forth a rich
economic methodology literature. We grouped different methodological perspectives according
to their major attitude to scientific activity under two main categories as prescriptive and
descriptive economic methodology.

4
(Buğra. 1989: 193)

Positive and normative analysis and its applicability in economics and beyond Page 12
Prescriptive economic methodology

In economic methodology there is a similar picture, in form but not in content, when it is
compared to economics. In the same way as positive and normative economies, economic
methodology can be divided into two parts: prescriptive (normative) economic methodology
and descriptive (positive) economic methodology. In a prescriptive perspective, methodologists
try to provide a rational reconstruction of scientific concepts and practices, the best way of
doing science, a standard that separates science from nonscience . It attempts to find rules of
inquiry, logical inference, and theory appraisal that would apply to all scientific investigation and
lead to objective knowledge, in other words, if a methodological perspective rests on a
demarcation criterion, it is a prescriptive one. In this context, we can give nine
methodological perspectives in economic methodology: Verificationism, falsificationism,
situational analysis, instrumentalism, operationalism. methodology of scientific research
program, subjectivism, hermeneutics and evolutionary economic methodology. All these share
the same supposition that there are some criteria to measure scientificity of a statement or of a
theory appraisal though they differ in characterisation of them as verifiability, falsifiability,
predictability, etc.
According to this way of methodological thinking, there is a linear, cumulative, progressive
cognitive pattern of scientific process in the history of science, a formal rationality and. in
Tianji’s words, this formal "scientific rationality does not change over time. For Tianji, this
standard conception of scientific rationality is based on four basic assumptions on scientific
method:
a) unity, universality and stability,
b) formalisabilitv
c) rationality and
d) essentiality.

According to the first assumption, there is a unified scientific method which has been used
by almost all scientists in all ages or at least from the time when real science began. This implies

Positive and normative analysis and its applicability in economics and beyond Page 13
that there is only one way of doing science or there is a norm of rational procedure which all
scientists should employ in their scientific enterprise. The second assumption suggests that this
implicit rationality can be formulated and formalised, even if we do not vet have such a
formulation at the present time.
According to the third assumption, the formal or formalisable method can be used to
achieve our objectives in science such as the discovery of truth, epistemic progress, explanation
and understanding, prediction and technological control, and problem-solving. And the final
assumption says that the formal or formalisable method also serves as a demarcation criterion
between science and other human pursuits, between science and non-science.

As it is mentioned above there are many models of prescriptive methodology. Verificationism

is the major one. Verification means "the procedure by which a scholar's conclusion is related to
empirical data for the purpose of establishing cither its acceptance (in the strong or weak case
-i.e.. confirmation), its rejection (falsification) or its modification; verification will thus be
considered to encompass 'verification','confirmation','validation', and 'modification'".

A well-known verificationist approach in prescriptive economic methodology is logical

positivism. It is an attempt to reformulate and solve the remaining problems of philosophy. It
was born out of the hope that philosophy could be as science, and could solve problems by the
use of particular methods such as methods of demarcation and verificationism. "One of the
Positivism's goals was to define the scope of scientific claims by demarcating science, or true
knowledge-generating activity, from non-science, or activity that does not count as
knowledge because it is private, non-communicable, and non-cumulative". The main
argument of this line of thinking is that "the meaning of a term is its method of
verification".
Verificationism under different names was accepted by almost all economic textbooks as a
true, acceptable methodological point of view of economics without discussing it in detail.
Parallel to the developments in the philosophy of science after 1930s, falsification as an
alternative to verification perspective, entered the scene. Because of its objection to
induction which is considered a general acceptable method of positive knowledge,

Positive and normative analysis and its applicability in economics and beyond Page 14
falsification has very important place in twentieth century philosophy of science and that's why
1930s can be considered a "turning point" in economic methodology. According to
falsification, falsifiability and not verifiability is the demarcation criterion. In this context.
Popper says that a "statement (a theory, a conjecture) has the status of belonging to the empirical
sciences if and only if it is falsifiable". There are many economic methodologists that
follow Popperian falsification and there is an important literature on falsification in
economics.

Situational analysis is also suggested by Popper and Popperians as the appropriate methodology
for social sciences, especially for economics including its own demarcation criterion.

At this point an anecdote about Popper's image of scientific method, reported by Feyerabend
who studied with him in London, is very interesting. It is interesting, because it implies that as a
founder of falsification, Popper in his lifetime tried to find out a rationality of scientific method
but he failed: "... when Popper came into his first lecture, he started out, as he did apparently
in every lecture on scientific method: 'I am a professor of scientific method. Well, somehow
this is a paradox, because I don’t believe there is such a thing'".

Imre Lakatos tries to combine Kuhn's view and that of Popper's as a new approach to
demarcation criterion problem. Institutionalism is also an influential and important
prescriptive methodology. Furthermore it can be said that from the late 1950s to the early
1970s, almost all the literature on methodology of economics centred on 'the assumptions
controversy' that started with Friedman's famous article, named The Methodology of Positive
Economics'. In this article Friedman argues that: "...the relevant question to ask about the
assumptions of a theory is not whether they are descriptively 'realistic', for they never are. but
whether they are sufficiently good approximations for the purpose in hand. And this question
can be answered only by seeing whether the theory works which means whether it yields
sufficiently accurate prediction.

Positive and normative analysis and its applicability in economics and beyond Page 15
The instrumentalist way of methodological conceptualisation gives priority to predictive capacity
of a theory not realism of its assumptions or descriptive power. Here the demarcation criterion is
predictive capacity.

Prescriptive methodology has been challenged as inconclusive for resting ironically on

subjective meta-epistemological foundations and misrepresenting the actual practice of science.
Descriptive methodology began to emerge as new way of describing actual practice of scientific
activity as a part of postmodern discourse.

Descriptive economic methodology

At the end of the 1960s it has been generally agreed that there was something wrong with
this prescriptive conception of science in methodological literature. Several different lines of
thought have emerged to overcome this "crisis". One school of thought has focused on scientific
change, the nature of the scientific community, and the mutual relations between science and
society. Of those works we can mention W. V Quine's "holistic network model for theories",
Toulmin's "conceptual systems", Lakatos's "research programmes", and Thomas Kuhn's
"paradigm". Among those, Kuhn's model of scientific change and the notion of
paradigmatic transition have had such a dramatic impact on almost all branches of science
that "it would be impossible to understand contemporary theories of science... without
considering his work in detail".
The analyses proposed by Böhm, Feyerabend, Hanson, Toulmin and Kuhn drew attention to the
idea that science is done from within a conceptual perspective which determines in large
part the questions that arc worth to investigating and the sort of answers that arc acceptable.
Despite some differences, this line of thought agreed on the following three theses:
a) Observation is theory-laden (different theories will observe different things when they view
the same phenomena).
b) Meanings are theory-dependent (the principles of theory that help to determine the meanings
of terms which will vary from one theory to another; hence changes in theory result in changes in
meaning).

Positive and normative analysis and its applicability in economics and beyond Page 16
c) Facts are theory-laden (there is no neutral set of facts for assessing the relative adequacy of
two competing theories).
If observation is theory-laden, meanings are theory-dependent and facts are theory-laden, it can
be said that, a corollary to these premises is that scientific rationality changes over time
and interparadigmatic theory appraisal is not possible. In other words, it is not a proper
methodological attitude to ask, to find out or to create a demarcation criteria that seperate
science from non-science.
More complex and. maybe, more sociological by its nature, and context-dependent questions
have to be asked about a scientific theory: How was it developed, how was it presented,
what do its terms mean, who was its audience, how does it treat evidence, how docs it use
technical terms, how does it link problems posed in earlier papers previously valued by the
community,.., etc.?. This leads to descriptive methodology. In descriptive methodological
perspective, the task of methodologists is to acquire an understanding of the actual
practice of what is called as science. Descriptive methodology focuses on the living tradition
as the locus of knowledge, and it allows the community not the rules or principles to decide what
counts and
what does not count as good research.

Feyerabend, as a defender of an anarchistic theory of knowledge, tried to deconstruct

prescriptive methodological approaches in order to emancipate scientists from epistemologists,
and citizens from scientists. He attacked two distinct tutelages: one imaginary: the other real.
The imaginary tutelage occurs when philosophers of science "prescribe truly scientific, rational
methods" for scientists; real tutelage occurs in the exercise of power by experts, technicians and
scientists on the political choices of citizens and future of the society. Prescriptive
methodologies, by their nature, dictate and impose one way of thinking, and exclude all others.
So in order for both science and society to become free, for Feyerabend, they must accept a
radical pluralism.

If it is needed to give a rule for identifying descriptive methodologies from prescriptive ones, it
can be said that when a methodology does not use a demarcation criterion, it is a descriptive one:

Positive and normative analysis and its applicability in economics and beyond Page 17
but this way of categorising, paradoxically, is itself a different kind of prescription. So we have
two levels in this rule-making argument: At the first level, the rule is related to
demarcate between economic methodological approaches. At the second and more abstract
level, the rules implicitly or explicitly arc used in order to categorise "things” or separate one
thing from the others, as a logical affair, since following a rule is one of the basic characteristics
of all kinds of "human" activities.

On the other hand, to describe something, or to use words to describe it. can be considered as to
theorise. This is because knowledge is largely paradigm-specific and facts and meanings arc
discourse-specific. There is an interdependence between "theory and fact, mediated by culture,
paradigm, and experience, that govern perception and that arc themselves products, not
independently given”. Within this framework there can be categorised six different kinds of
descriptive approaches in economic methodology literature (Demir, 1995). These arc
conventionalism, paradigmism, structuralism, deconstructionalism, discourse analysis and
rhetorical.

Since they are examined in detail elsewhere 5, only the general common characteristics of those
approaches will be considered here. It must be said that the common feature of those
methodological approaches in economics is that all of them try to describe established science
that is accepted by scientific community as science without considering the criteria that
determine scientificity of it. It can be said that if one methodological attempt docs not try to
reconstruct established knowledge as scientific according to its own demarcation criterion or
criteria, its social function is not legitimising
established scientific knowledge. Once using the demarcation criterion as a methodological
tool to appraise alternative theories as being scientific or not is rejected, this means that seeing
science at the top of the hierarchies of human knowledge has started to be questioned. Then the
second function of methodology enters into scene: questioning of established scientific
knowledge. It can be said that economic methodology perform this function implicitly or
explicitly. According to this way of methodological thinking there is no "instant rationality,

5
Demir, 1995

Positive and normative analysis and its applicability in economics and beyond Page 18
no test we can apply which gives us a precise judgement about worth of a particular bit of work
in economics”. If this is the case, why do economic methodologists examine methodological
issues? This question cannot be answered only on epistemological or methodological grounds
without taking the dual social function of methodological activities mentioned above into
consideration.
Now that we have summarized the history of the positive-normative tradition, we turn to
Robbins’s views on methodology. Our claim is that Robbins’s methodological views are best
understood as a continuation of this Mill –Keynes tradition, not the imposition of a logical
positivist tradition, as the conventional view suggests. A significant reason why Robbins is
usually interpreted as a follower of logical positivism is likely related to some of his statements
in his classic treaties Essay on the Nature and Significance of Economic Science. 6 For example,
he wrote: Economics deals with ascertainable facts; ethics with valuations and obligations. The
two fields of enquiry are not on the same plane of discourse. Between the generalisations of
positive and normative studies there is a logical gulf fixed which no ingenuity can disguise and
no juxtaposition in space or time bridge over. Propositions involving the verb ‘ought’ are
different in kind from propositions involving the verb ‘is.’ And it is difficult to see what possible
good can be served by not keeping them separate, or failing torecognize their essential different.
These passages have been interpreted as meaning that Robbins was denying that ethics can be
useful to economic studies or can be rationally discussed. This reading is a misinterpretation of
Robbins’s position because it interprets it in a logical positivist framework. For logical
positivists, ethics is non-cognitive and meaningless. However, for Robbins, as for both Mill and
Keynes, ethics is not meaningless; it plays an essential role in economic policy analysis. This
sharp contrast between the views concerning ethics held by logical positivists and Robbins is
clearly supported by his own words. In the introductory chapter to his book Political Economy:
Past and Present, Robbins explained his use of the term political economy in contrast to scientific
economics. For him, political economy is ‘a discussion of principles of public policy in the
economic field’ and ‘a search for solutions to problems of policy’ whereas scientific economics
is a collection of ‘generalisations about the way in which economic systems works’. 7 The
relation between the two is that political economy has to make use of the findings of economic
6
Robbins, 1932
7
Robbins, 1976, p. 3

Positive and normative analysis and its applicability in economics and beyond Page 19
science, rather than wishful thinking, to make recommendations for practice. The key to
understanding Robbins is recognizing that for him, political economy is part of economics, but it
is far more than a pure application of science. According to Robbins, it Journal of Economic
Methodology 5 involves assumptions which, in the nature of things, lie outside positive science
and which are essentially normative in character. It consists of prescription rather than
description.8 Robbins reiterated the importance of the distinction between scientific economics
and political economy for interpreting his views in his Ely Lecture. In it he reaffirms his position
stated in Political Economy: Past and Present regarding reviving the term political economy to
designate the branch of studies which is concerned with economic policy. 9 Robbins also pointed
out that this is not a new position but a position he constantly holds as far back as 1937. He
wrote that he treated his book Economic Planning and International Order as ‘essentially an
essay in what may be called Political Economy as distinct from Economics in the stricter sense
of the word’. Robbins definitely did not exclude ethics out of economics broadly defined. As did
Mill and Keynes before him, he merely allocates that part of economic analysis which requires
ethics to the branch of economics which deals with policy and other practical issues, but not in
the branch which deals with models and pure theory. For Robbins, ethics is crucial to economic
policy analysis, but however important, it is not science. This position is consistent with Mill’s
science-art distinction and Keynes’s tripartite division of economics and this is why we see
Robbins in the Mill –Keynes tradition. Roughly speaking, Robbins’s economic science
corresponds to the positive science of political economy in Keynes’s classification, and
Robbins’s political economy corresponds to Keynes’s art of political economy. One can best
understand the Robbins’s goal in separating economic science from ethics by considering his
first statement of his 1932 methodological views, which is to be found in his discussion of
Hawtrey (Robbins, 1927). In it he criticized Hawtrey (1925) for claiming economic science
supported his arguments when Robbins believed economic science did not support them.
Robbins (1927) wrote I do not think Mr. Hawtrey does justice to the real cause of the
economist’s desire to keep his science free from the intrusion of ethical criteria. [ ...] It is not
because we believe that our science is exact that we wish to exclude ethics from our analysis, but
because we wish to confine our investigations to a subject about which positive statement of any
8
Robbins, 1976, p. 3
9
Robbins, 1981, pp. 7 and 8

Positive and normative analysis and its applicability in economics and beyond Page 20
kind is conceivable. (p. 176) Thus, Robbins’s work is best seen as an attempt to stop economists
from claiming that arguments that were based on economists’ own values were scientifically
valid. This is also one of the main aims when Mill and Keynes respectively advocated for the
separation of economic science from those branches of economic which should be seen as art.
Like Mill and Keynes, Robbins sees the pure science of economics as only a small portion of
economic studies, and the theorems derived from economic science having severe limitations for
policy applicability. For Robbins, the only part of economic analysis that could qualify as
economic science at the time was the deductive study of logical arguments and models. As
Howson (2004) quoting from notes of his lectures, points out, in Robbins’s view, all exact
generalizations ‘are merely the explanation of the logical consequences of your initial
assumptions. Given the assumptions and assuming a correct logic they are unassailable.’ She
continued, referring to J.N. Keynes, ‘Pure economic analysis is simply a matter of exercises in
logic, a matter of squeezing the utmost drop of implication out of assumptions which are
given’.10 Because Robbins sees pure economics analysis as simply an exercise in logic, he does
not consider that economic theory can be directly applied to policy, just as was the case with Mill
and Keynes. Colander and H.-C. Su Robbins’s concerns about applying these logical deductions
were quite different than the concerns of the logical positivists. He had little to say about the
difficulties of testing theory since he believed it unlikely that any then-existing statistical tests
would be conclusive. This meant that applied work for Robbins was not about testing the truth of
the theory. It was about determining its applicability to a particular problem. That, for Robbins,
was primarily a matter of judgment based on much more than economic science alone.

The Marshallian tradition and the loss of the Mill –Keynes methodological tradition

The Mill –Keynes position of defining science narrowly that Robbins was advocating did not
last, and there were strong institutional pressures on economists to call their applied policy work
‘scientific’ (as there still are today). Ironically, Alfred Marshall, even though he was a follower
of that tradition, played a significant role in its loss. The reason has to do with his role in
changing the name of the economics field from political economy to economics. That change

10
(Howson, 2004, p. 430)

Positive and normative analysis and its applicability in economics and beyond Page 21
helped lead to a misinterpretation of this tradition because it did not highlight the particular
interpretation of science as referring only to ‘pure’ science, which essentially limited it at the
time to deductive models that had no direct relevance for policy. So whereas the Mill –Keynes
tradition that Robbins followed carved out separate roles for economic science and art, Marshall
did not. A likely reason for this was that for Marshall, all economics was art, and the pure
science of economics was essentially empty. Since there was no pure science of economics,
Marshall’s engineering approach to economics, which would have been called art in the Mill –
Keynes tradition, was called science by Marshall.8 In principle Marshall’s definition of science
should not have been of major consequence to economists, since Marshall would agree that his
analysis is not science in the sense that Keynes was using science. Both arrived at the same
conclusion: the applicability of pure economic theory to policy was minimal – drawing policy
conclusions required ethical judgments. The Mill –Keynes tradition highlighted the difference by
not calling policy analysis science. Marshall called it science, but saw science as being a realistic
science, not pure science. But it did make a difference in that Marshall’s different terminological
use of science led to serious confusion about precisely what different individuals were saying
since their definitions of science differed. It played an important role in the profession’s
misinterpretation of Robbins’s methodological views.11 The confusion developed over time.
Initially, to distinguish the two different uses economists of the period distinguished ‘pure’
economics and ‘pure’ science from a Marshallian concept of science as applied policy research –
research that would be seen as art, not science, in the Mill – Keynes tradition. An example of this
usage can be seen in the Maffeo Pantaleoni’s text, which he entitled Pure Economics (1889) and
which was one of the first texts to structure the presentation of economics around maximization
models. He writes ‘Thus all questions pertaining to economic art, or Political Economy, are
beyond its scope’ (p. vii). He continues: ‘This is a departure from the lines on which textbooks of
economic science are usually prepared, their authors’ objects being to equip the reader forthwith
for the discussion of the most important economic problem as presented by everyday life’ (p.
vii). Journal of Economic Methodology 7 A. C. Pigou, who was Marshall’s student, also
resolved the different uses of the term by distinguishing two types of science – a ‘pure science’
and a ‘realistic science.’ In his The Economics of Welfare (1920), he described the pure science

11
(Colander, 2009)

Positive and normative analysis and its applicability in economics and beyond Page 22
of economics as lightbearing science, and realistic economics as fruit-bearing science. He
explicitly stated that his focus was fruit-bearing science, not light-bearing science (Pigou, 1920,
pp. 3 –5). In Robbins’s terminology, Pigou’s realistic economics (which became the foundation
of what would become welfare economics) would not be called science, but would be seen as
part of the art of political economy. Although the Marshallian approach and the
Mill/Keynes/Robbins approach defined science differently, they were not methodologically
incompatible, if one took account that they used different terminology. Specifically, both
Marshall and his follower, A. C. Pigou, had discussions of how important it is to limit the claims
one made about the implications of economic reasoning for policy. Following Mill, Marshall saw
economic theory a set of tools, not rules, and argued that economists should avoid taking
scientific authoritative positions on policy.9 In his The Economics of Welfare, Pigou was also
circumspect about policy implications of his theory, and was quite willing to accept that his
policy analysis included value judgments. He saw the concept of aggregate output as value laden
– an engineering simplification that had to be justified when it was applied.10 It was not
everywhere applicable. Pigou saw transfers of income from richer to poorer as welfare
enhancing. Seen within the Robbins’s definition of pure science, these were unacceptable
blending of value judgments into science, but seen within the art of economics they were
acceptable blends to Robbins. They were a type of heuristic needed in policy analysis. If one sees
Pigou’s realistic science as a type of Keynes’s art of economics or Robbins’s political economy,
not as pure science, there is little difference between their views of how policy analysis needs to
be conducted in reference to theory. In his welfare economics Pigou was simply developing one
approach that Keynes and Robbins said needed to be developed in the art of economics or
political economy.

The problem with modern economists’ use of the positive-normative distinction

Most modern economists are not theorists, and as pointed out in Colander (2007), in recent times
there has been a major shift away from theory to empirical work. As that has occurred,
economists’ conception of science has changed away from a focus on deductive theory to a focus
on discovering facts through empirical studies. Today what economists generally mean when

Positive and normative analysis and its applicability in economics and beyond Page 23
they say they are doing positive economics is that they are collecting and analyzing the data to
determine robust empirical relationships that can help to guide policy decisions. This empirical
role of positive economics has little to do with testing economists’ overall theory. Instead it
concentrates on discovering ‘facts’ that can help to guide policy makers who, in principle, may
hold any theory and any social welfare function. This contemporary empirical work has little or
no relation to Pareto efficiency or preference. Hence, those problems raised by Davis are
unlikely to resonate with most top recently. Such trained modern economists whose research
focuses on applied empirical work. They see their empirical work as guiding policy makers who
are implementing society’s social welfare function. In their positive work economists see
themselves as technicians for society – carrying out theoretical or empirical analysis that can be
used by anyone. It is this technical empirical work that economists discuss when they discuss
methodology, and what they have in mind when they say they are doing positive economic
analysis.14 They see themselves as studying ‘what is,’ not ‘what ought to be,’ and in principle
their findings are ‘honest broker’ findings that are useful to any person interested in the issue.
This way of using the distinction is similar to the positive-normative distinction in Mill –Keynes
tradition. It has little to do with the logical positivist fact-value divide. When economists say
they are studying facts, they do not intend to claim that their research is free from values, just as
Robbins did not intend to claim economic research is free from values. Davis recognizes this.
For instance, he writes the values Robbins really wanted excluded from economic science were
those associated with ethics and morality. the truly fundamental issue behind the idea of value
neutrality is that ethical values such as what is morally good or right cannot be a part of a
scientific economics.12 In our view, the problem with modern economists’ use of the positive-
normative distinction does not reside in the fact that they believe they are doing positive analysis.
The positive-normative distinction itself is not the main problem. The main problem is that
economists are not as nuanced about the limits of positive empirical analysis as is warranted. Too
often they believe that economic science, if it can be called science, can tell the truth about facts.
That strong belief is not consistent with the Mill –Keynes tradition. The Mill –Keynes tradition
sees the theorems of economic science as true only in the abstract; modern economists too often
treat the findings of empirical work as true in reality. That goes fundamentally against the Mill –

12
(Davis, 2014)

Positive and normative analysis and its applicability in economics and beyond Page 24
Keynes tradition; in that tradition, empirical work would be aimed at sharpening precepts based
on a combination of models and judgments, not at sharpening theorems based on models.
Precepts are based on all dimensions of the problem, not just those that economists’ theoretical
model highlighted. From a Mill –Keynes perspective, current economic work gives far too much
credence and direct policy relevance to economists’ theoretical models and to empirical findings
related to those models. It allows their findings which are highly contingent on limited
theoretical models and limited empirical support for those models to be used in policy analysis
without a careful consideration of the numerous assumptions that went into making the model. In
contrast, the Mill –Keynes tradition suggests that it is necessary to consider all the other elements
that were excluded from the discussion of economic science when moving from the conclusions
of abstract science to policy analysis. It recognizes that drawing any conclusion requires going
beyond economics, and including political, social and cultural factors in the analysis. In the Mill
–Keynes tradition, moving from the conclusions of positive empirical studies to normative policy
prescriptions is not a work of science but a work of art, a division of economics lost in the
contemporary use of the positive-normative distinction.

CONCLUSION
In this article, we discussed the relationships between economics and economic methodology
as two separate, but closely related, fields of inquiry, especially in terms of their subject matters
and aims. It is argued that although it is one kind of "science", methodology, in terms of its
functions and subject matter, is somehow different than "normal" scientific activities, l or
example, the subject matter of the economics is economy and the subject matter of economic
methodology is the way of doing economics.
That is whv it is claimed that "methodology of" any kind, as a systematic knowledge, must
follow its "science". This is the corollary of dual social function of methodology as a
scientific enterprise in general: legitimising and questioning. This duality can only be
crystallised within a social context. So. social context determines which functions of
methodological activities will be dominant and performed by whom and how. At this
point, it must be said that in order to explain this context, epistemological argumentation
become totally meaningless. Because any type and kind of knowledge, including methodological

Positive and normative analysis and its applicability in economics and beyond Page 25
ones, is a kind of social activity and it is carried out in communities, and epistemological
significance and meaningfulness can not be determined by using interparadigmatic criteria (if
there is any) that are given outside of that paradigm (incommensurability of paradigm).
Since meanings are produced, reproduced, transferred and understood in a social context,
to understand and explain methodological aspects of a paradigm can not be reduced to an
epistemological issue without taking its social context and implications into consideration.

With this framework, when someone looks at the position of methodology in economic
literature, he/she will notice that the dual function of methodology becomes very obvious in
distinction between normativeness and positiveness in economics and economic
methodology as two separate but interrelated fields of inquiry. The positive-normative
(prescriptive- descriptive) distinction is an accepted conceptualisation that refers to differences
between alternative approaches in both literature of economics and economic methodology.
Mainstream methodological perspective in economics is the descriptive (positive) one. Contrary
to economics, on the other hand, perspective is commonly accepted by most of the economic
methodologists in the field of economic methodology.
The reason of this choice, that is the fundamental argument of this article, comes from the
social function of the methodology in the process of the formation of scientific knowledge.
If one looks at the methodological position in economic literature he/she will find out that
in economics, mainstream methodological position is descriptive/ positive, but in economic
methodology, it is a prescriptive/ normative one. Since, in a paradoxical way, the positive
methodology in economics leads to the legitimation of the established world, it leads to a way of
questioning of the established scientific discourse in economic methodology. That is why
advocates of positive economics could be advised to prefer a normative/prescriptive
methodological perspective. This is the fact that, in order to legitimise the status of positive
statements (positive economics), one always needs some normative arguments so as to prescribe
the rules or principles that demarcate scientific statements from nan-scientific ones at the
methodological context. So positive science needs normative methodology because of the social
function of methodology by its nature.

Positive and normative analysis and its applicability in economics and beyond Page 26
BIBLIOGRAPHY-

1. craftyworth.s3.ap-south-1.amazonaws.com
2. en-econ.tau.ac.il
3. www.researchgate.net

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