Normative Economics

Normative economics is a branch of economics that deals with how things ought to be. It is concerned with making value judgments about economic outcomes and policies. Normative economics is often contrasted with positive economics, which is concerned with describing economic phenomena as they are.

Normative economics is based on the assumption that there is a set of desirable economic outcomes that can be used to evaluate economic policies. These outcomes are often referred to as "social welfare" or "economic welfare."

There are a number of different ways to define social welfare. One common approach is to define it as the sum of the utilities of all individuals in society. Another approach is to define it as the maximum possible level of utility that can be achieved.

Once a definition of social welfare has been established, normative economists can use it to evaluate economic policies. They can do this by comparing the effects of different policies on social welfare.

For example, a normative economist might argue that a policy that increases the income of the poor will increase social welfare, while a policy that increases the income of the rich will decrease social welfare.

The goal of normative economics is to identify policies that will improve social welfare. However, there is no guarantee that a policy that is judged to be good by normative economists will actually be effective in practice.

This is because normative economics is based on subjective value judgments. There is no objective way to determine what is good or bad for society. As a result, different normative economists may come to different conclusions about the same policy.

Despite this limitation, normative economics can be a valuable tool for understanding and evaluating economic policies. It can help policymakers to make informed decisions about the best way to improve social welfare.

Here are some additional points about normative economics:

* Normative economics is often used to justify government intervention in the economy. For example, a normative economist might argue that the government should intervene in the economy to redistribute income from the rich to the poor.
* Normative economics is also used to evaluate the performance of economic systems. For example, a normative economist might argue that a market economy is more efficient than a planned economy.
* Normative economics is not as well-developed as positive economics. This is because it is more difficult to make objective value judgments about economic outcomes.
* Normative economics is often controversial. This is because different people have different values and beliefs about what is good for society.