2009 Lecture 02

The Norms of Positive Economics

This lecture shows that Modern Economic Theory claims to be objective and factual -- that is, positive.

However, it fails to describe the real world -- that is, the prediction of Economic theory do not match real world observations. Therefore the theory is not positive.

Next we show that the theory is normative -- without explicit mention, many normative ideas are assumed within the framework in which the ideas of modern economics are formulated.