Normative economics - What is it? characteristics, examples, and more

Normative economics - What is it? characteristics, examples, and more
Posted on 13-03-2022

Normative economics

Branch of economic analysis that provides recommendations and advice about how the economy should work.

 

What is normative economics?

Normative economics is the branch of economic analysis that provides subjective recommendations and advice about how the economy should work.

Unlike positive economics, which does not give advice, normative economics offers subjective recommendations and personal opinions about how the economic environment should work.

Characteristics of normative economics

The main characteristics of normative economics are the following:

  • Express personal and subjective opinions about what should be.
  • It seeks to generate ideas or plans that can be used as economic strategies.
  • It serves as a guide for the investigation of economic facts.
  • It does not predict economic consequences, it is only based on how the economy should work.
  • Provides recommendations on managing the economy.
  • The theories he expounds on cannot be verified or proven.
  • It is based on approaches and theories of personal criteria.

Examples of normative economics

The following expressions are examples of normative economics:

  • To reduce the carbon footprint, a pollution tax should be applied.
  • The price of tolls should be raised in order to reduce vehicular flow and pollution.
  • If the percentage of income taxes is lowered, perhaps the purchasing power of consumers can be increased.
  • Imports from Europe should be limited to reduce COVID-19.
  • If the tax on beer and alcohol were increased, traffic accidents would decrease.
  • If the VAT on cigarettes were increased, lung cancer would decrease.
  • Private contributions to political campaigns should be reduced to reduce corruption.
  • Doubling workers' wages are good.
  • Raising income tax and VAT could be bad.
  • The price of vegetables should increase to improve the quality of life of farmers.
  • The price of gasoline should fall to increase car sales.
  • The increase in the price of bitcoin decreases the money deposited in banks.
  • By increasing tariffs on paper imports, we encourage domestic consumption.

 

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