Positive and Normative economics
Another division of the subject distinguishes two types of economics.
Positive economics ("what is") seeks to explain economic phenomena or behavior.
Positive economics ("what is") seeks to explain economic phenomena or behavior.
Positive economics is the study of how the economic system actually
functions. It is concerned with reality. Positive statements are about facts, what is or has happened, or how certain conditions are related to each other.
Normative economics ("what ought to be," often as to public policy)
prioritizes choices and actions by some set of criteria; such priorities reflect value judgments, including selection of the criteria.
Normative economics is concerned with what ought to be. Normative statements are about value judgements. The actual performance of the economy is compared with what would be the ideal performance and differences between the two leads to economic policy proposals for improving the performance of the economy.
The economist can use this knowledge of reality to analyse the problem and suggest effective means for attaining the desired end.