(This is an archived page, from the Patterns of Power Edition 3 book. Current versions are at book contents).
Economists draw a distinction between two types of economics:
• Governments exert economic power to create moral and political effects: so-called ‘normative economics’.[1]
• They cannot avoid consequences that can be quantified in financial terms: ‘positive economics’.
There is confusion in using the term 'economics' for both these aspects, sometimes leading to heated debate between economists about what constitutes good policy. This book attempts to reduce the confusion by treating them in separate sections:
• Welfare payments can be discussed in the context of levels of government spending (3.5.2), as a social benefit compared to relying on private charity (4.2.4.3), and as a question of political acceptability (6.7.1).
• Measures to combat climate change can be considered in economic terms (3.5.7.1), as a moral issue (4.3.5.3), and as a political question about the extent to which people would support spending public money (6.7.5).
• Assistance to people in other countries can also be considered from the economic (3.5.8), moral (4.3.5.1) and political (6.7.6) perspectives.
In this chapter, economic power is considered as a motivating force and as a numeric calculation; the moral and political aspects of its use are in later chapters.
[1] Paul A. Samuelson and William D. Nordhaus’s book Economics contains a very useful glossary of specialised terms, which are shown in single quotation marks when they are used in this chapter. In the glossary, they summarise the difference between 'normative economics' and 'positive economics' in these terms:
"Normative economics considers ‘what ought to be’ – value judgments, or goals, of public policy. Positive economics, by contrast, is the analysis of facts and behavior in an economy, or ‘the way things are.’"
They give more detail on this distinction on page 6.