Normative Theory Versus Positive Theory

A positive theory is a theory that attempts to explain how the world works in a value-free way. A normative theory provides a value-based view about how the world ought to be or how it ought to work. Positive theories express what is, while normative theories express what ought to be.

[Page 2501]Each of the social sciences, but particularly economics, has advanced both positive theories and normative theories. In economics, positive theories attempt to explain how the economy actually operates and include, for example, the basic supply and demand models of microeconomics, the macroeconomic theories of Keynesian economics, and David Ricardo’s theory of comparative advantage. Normative economic theories typically propose a goal at which economies should aim. For example, early welfare economists (e.g., Alfred Marshall and ...