Normative Economy

Economics is a special sphere of social life. Man not only participates in economic relations, but also seeks to understand their nature. The normative economy, which is an economic analysis, includes judgments about the necessary actions. This is different from simple theorizing.

Economic theory is designed to study the interaction of people in the search for the most effective methods of using production resources to meet the needs of individuals. Many methods of analysis contain positive (study of involuntary unemployment) and normative elements (methods of effective budgetary policy to reduce this unemployment).

Normative economics is the direction of economic science based on a number of value judgments about development goals and related policies, and a positive economy involves an analysis of the facts on the basis of which the basic principles of behavior are subsequently formulated.

There are a number of methods of economic theory :

- Inductive - method of inference, which are based on a generalization of facts;
- abstraction - a method of abstraction from everything that does not fall under the phenomenon under study, it is based on such economic categories as "profit", "price", "commodity" (they together constitute the logical basis of economic theory);
- deductive - the method of reasoning, in which hypotheses are checked by real facts;
- modeling - creating a simplified picture of reality.

A positive economy is everything that happens in the present tense, and the regulatory one determines what should be in the future, so the hypotheses and conclusions about all interrelationships in the systems differ. A certain complexity of the normative economy lies in the fact that economists need to come to one single opinion to determine the most effective ways of achieving a standard (optimal economic state), which is often very difficult. The main problem in making a single decision is that the development of economic systems is a multivariate process.

A positive economy is not only an analysis of the consequences of a certain state policy, but also a detailed description of all activities of the public sector, as well as all the forces that implement its programs. The exit of economists beyond the framework of positive analysis leads to the transition to the normative economy, which is connected with the evaluation of the success of various programs and the development of new strategies that meet certain goals. The normative economy compares the extent to which different state programs correspond to the goals and objectives set.

Positive and normative economy of each other complement each other. For correct judgments about the necessary measures to be taken by the state, it is necessary to know what consequences the actions will bring. It is also necessary to accurately describe the alleged events that will occur in the event of the introduction of some taxes or subsidies for certain industries.

Discussions about the effectiveness of the economy are considered positive economic theory, which is based only on facts and real dependencies. Discussion of the equity of the economy is part of the normative economic theory, which makes its judgments about specific economic conditions and policies. It is relevant not only to the problem of equitable distribution of the product. Normative economics is a science that provides evaluative judgments about the main types of choice that the economic system makes. Normative problems always cover all aspects and aspects of the economy.