Definitions
It is easy to confuse normative and positive economics in practice but in theory, they are two definitive concepts. Positive economics relates to objective notions and issues. This means that each statement made under positive economics can be tested and proven or disproven. Under normative economics, statements made are subjective, value-based and mainly based on opinion. They relate to what ought to be or is believed to be, yet has no definitive way to test and prove or disprove it. What happened or is happening in a macroeconomic situation is positive economics while what should be happening or the supposed causes for what is happening is normative economic.
Application on the Global Warming Example
Positive Economics
Global warming is a serious problem that in the next few decades will cost the national and global economy trillions of dollars. This will also have a direct impact on most of the investments being made today since even their meteoric rise will be checked by the adverse effects of global warming. Therefore, the instant problem calls for an instant solution today to either avoid or extenuate the eventual massive impact that global warming will have in future economics. The main driver of global warming is the relatively low cost of mineral fuels as compared to renewable sources of energy. The elimination of the incentive to use mineral fuels such as coal and mineral oil can lead to a focus on renewable energy and this would extenuate on global warming. High taxes should then be introduced in all mineral-based sources of energy and the proceeds made therefrom be used to develop the renewable energy sector. This transition will come at a high cost to the economy but the return on investment, in the long run, will make the investment worth the while.
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Normative Economics
Macroeconomics will always be adversely affected by massive economic eventualities such as global warming and its adversities. These are issues that affect the economy from the top downwards and will have a trickling effect on each and every segment and level. The issue of global warming is bound to cost the world trillions of dollars unless something is done to forestall it. This places a major obligation on global governments to establish a joint approach to the issue by developing a joint form of taxation and regulation regimens to combat global warming. This makes the situation both an economic and political one, more so from a perspective of the global political powers having to agree on the implementation of the recommendations to extenuate the problem. For example, it would be extremely difficult for mineral oil producers to agree to a taxation regimen that might be geared towards eliminating their only economic advantage in the world. The global economy has also within the course of the 20 th century become increasingly reliant on mineral fuels. Weaning it off mineral oils can be disastrous even when done carefully. Yet, the world faces a major catastrophe unless urgent solutions are developed for the problem of global warming.
Which of the Two Approaches Correctly Defines the Situation
The positive economic approach looks great on paper as it envisages an accurate path to a clearly defined solution. The normative approach had manifest ambiguities and may not seem to be a solution at all. Yet, when it comes to a global problem that will impact economies singularly and severally, then the normative approach is the most correct to define the situation. Global happenings have an effect on the macroeconomic situation that cannot be defined except by looking back at them with the eyes of history. For example, the two global wars in the first half of the 20 th century ruined the global economy, but it grew to unimagined heights in the aftermath of the Second World War. This gives normative economics an edge over positive economics.
