lt is important to know the difference between positive economics and standard economics. Positive economics has been explaining what it is, that is, it describes the principles and laws for explaining the observed economic events, while standard economics is concerned with about what should be. Keynes distinguishes between two types of economics in the following way: “A positive science can be defined as the body of systematic knowledge, about what it is; an authentic science or a regulatory science, while normative science is a part of systemic knowledge related to the norms of what should be.”
Thus, in positive economics, we obtain proposals, principles and laws in pursuance of some rules of logic. These principles, law and propositions explain the relationship between cause and effect in economic forms. In positive micro economics, we are largely concerned with the determination of relative prices and allocation between different commodities. In positive macro-economics, we are widely worried about how national income and employment levels, total consumption and general level of investment and prices are determined. In these parts of positive economics, what should be the value, what the savings rate should be, what resources should be allocated and what the distribution of income should be.
Considering the perception of maximizing profits, this question, according to the question of what is, and what should be, in the scope of economics of norms, positive economics states that monopoly will determine a price which is equal to marginal cost with marginal revenue. The question is whether the price should be decided so that maximum social welfare can be achieved outside the scope of positive economics.
It is generally agreed that economics is both a positive and an ideal science. Economists believe that absolute neutrality between the ends is neither appropriate nor desirable. This is not possible because in many cases economists suggest ways to achieve some financial objectives. They advocate various policies for increasing employment, reducing inflation and so on. While making these suggestions, they are making a price decision.
