1.1 Positive and Normative Thinking
Positive economics deals with what is; normative thinking deals with what ought to be and is value-laden. All sciences and fields of learning try to be positive and deal with facts and models based on facts. You should try to be positive i.e. scientific in your statements, especially when writing essays and in the exam room.
Words like "ought¡± or "should" or ¡°as a nation we must¡± are all normative statements and you should do your best to avoid them. Try not to say things like ¡°It would be better if¡-¡±, or ¡°the government should¡-.¡± ¡°It would be a good thing for X to do Y¡±. Many policy prescriptions you might wish to make are normative, e.g., ¡°The economy would be better off if we¡-.¡± and it can raise an examiner¡¯s hackles. You might get away with a general statement such as ¡°Some advocate¡-¡±, ¡°It has been suggested that¡-¡± or ¡°Many believe that¡-.¡± as these are positive statements and sound less normative. Note that the words used in an otherwise scientific study can themselves carry a normative feeling, e.g. "freedom", "democracy", "efficiency", or "welfare" may all seem to be ¡°good words to many people; whereas words such as ¡°inequitable¡±,
¡°exploitation¡±,
"unsound",
"interference", "fascist", or "police state" seem "bad" to many people.
1.2 Opportunity Cost
We live in a world of scarcity, in the sense that we can never have everything that
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