Economists and Economic Policy

Economists play a major role in helping governments to devise economic policy. In order to consider this role, it is necessary to distinguish between positive and normative statements.

A positive statement is a statement of fact. It may be right or wrong, but its accuracy can be tested by appealing to the facts:

e.g. ‘Unemployment is rising’.

e.g. ‘Inflation will be over 6% by next year’.

e.g. ‘If the government cuts taxes, imports will rise’.

These are all examples of positive statements. They do not necessarily have to be true, but we can test whether they are true or false by looking at evidence. If we make a prediction, we will have to wait to see what happens.

A normative statement is a statement of value: a statement about what ought or ought not to be, about whether something is good or bad, desirable or undesirable:

e.g. ‘It is right to tax the rich more than the poor’.

e.g. ‘The government ought to reduce inflation’.

e.g. Pensions ought to be increased in line with inflation’.

These are all examples of normative statements. They cannot be proved or disproved by a simple appeal to the facts.

Economists can only contribute in a positive way to questions of policy. That is, they can analyse the consequences of following certain policies. They can say which two policies are more likely to achieve a given aim, but they cannot, as economists, say whether the aims of the policy are desirable.

For example, economists may argue that a policy of increasing government expenditure will reduce unemployment and raise inflation, but they cannot decide whether such a policy is desirable or undesirable. Economists, then, as scientists cannot make normative judgements. They can only do so as individual people, and as such have no more moral right than any other individual.

Economists do play an important role in helping governments to formulate their aims. They can help governments to devise policy by examining the consequences of alternative courses of action. In doing this, it is important to separate positive questions about what the effects of the policies are, from normative ones as to what the goals of policy should be. Economists in their role have no superior right to make normative judgements on the ideological, moral or political basis of policy. They can and do however, play a major role in assessing whether economic policy meets the political objectives of government (or opposition).


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