When asked to list the five books that have most influenced his writings, the acclaimed British novelist Ian McEwan put a book called “What Science Offers the Humanities” on the top of his list. He goes on to suggest that science is “a matter of beauty”, to be admired just as we admire our favourite painting, song, or novel. He’s right. Science is beauty, and I would add, economics is a science.
So what is the essence of the scientific method?
At its core is the distinction between “positive” statements, and “normative” statements, a distinction that every aspiring economist must appreciate, but which is certainly difficult to make particularly when we are concerned with the conduct of public policy.
Positive economics describes economic events and situations, and develops theories (or as is commonly put, “models”) to explain them.
Normative economics reflects a value judgment on what should be done. While a normative statement might be built upon some objective view of reality, it requires a further leap based upon something other than the facts. It is explicitly, or implicitly, ethical.
Both are a necessary part of public discourse. Policy makers need to understand the world as it is, how it works, and the effectiveness of the tools proposed to change it. But policy makers also need to have a vision of the ideal, of the social goals citizens value and wish to achieve. It is no wonder it is easy to confuse the two.
It is also not surprising that there is no shortage of “experts” who are quite willing to express their opinions, and give their advice. Self-proclaimed experts will be more numerous on matters of economics than they are on matters of cataracts or sub-atomic particles because the subject matter of economics touches our lives so directly.
Read this article from The Guardian about how a couple of British Doctors have found a solution for climate change—people should have fewer babies—and wonder if this positive or normative public policy.
Milton Friedman, in a famous essay called “The Methodology of Positive Economics” that was published in a book called Essays in Positive Economics, wrote:
Positive economics is in principle independent of any particular ethical position or normative judgments. … it deals with “what is,” not with “what ought to be.” Its task is to provide a system of generalizations that can be used to make correct predictions about the consequences of any change in circumstances. Its performance is to be judged by the precision, scope, and conformity with experience of the predictions it yields. In short, positive economics, is or can be, an “objective” science, in precisely the same sense as any of the physical sciences. Of course, the fact that economics deals with the interrelations of human beings, and that the investigator is himself part of the subject matter being investigated in a more intimate sense than in the physical sciences, raises special difficulties in achieving objectivity …
Our first lesson in economics is to understand the distinction between positive and normative statements, to appreciate that this distinction can at times be challenging to make, and to develop a familiarity with the scientific approach that disciplines our analysis of public policy. An important aspect of this approach is the development and testing of “models.”
Download the Lecture 1 presentation and use it to help your reading and reflection on the first block of material in the course outline with this in mind as you struggle in giving a definition to the subject. (… and as you do so, pause and appreciate the wonder and beauty of it all !! 🙂 )
Economics for public policy 