Question I study economics. In the first few pages of introductory textbooks there is often a distinction between positive economics (concerned with explanation and prediction) and normative economics (concerned with what one ought to be). I have a feeling that the distinction is not as clear as economists seem to assume, but I can’t put my finger on exactly why this is. Does philosophy have anything to say about this distinction?

Accepted:
November 5, 2005

Comments

Philosophy has much to say about this type of distinction, though I doubt I'm the one to say it. Nevertheless...

It seems quite right to distinguish between the normative or prescriptive question of what the ends or even choices of an individual or institution ought to be, and the descriptive question of what, as a matter of fact, they were or are likely to be in a particular case. Moreover, it's important, as the books emphasize, to keep these different questions in mind as one assesses proposals, explanations and theories. I might predict that you will come to financial ruin because of a strong preference (e.g., for expensive wines) which I don't think you should have, or a series of choices (e.g., to invest in junk-bonds) which I don't think you should make. And I might argue that the government should raise taxes even though I predict it won't, and even though I doubt its policy leaders share the crucial assumptions that ground my normative view. So the distinction between normative and the descriptive (or "positive") questions seems important and useful.

What seems suspect is the thought that we can answer descriptive questions without making assumptions about normative ones, and vice versa. This might sometimes be so, but less often, I think, than we might imagine. For one thing, in making a prediction about what will happen we might need to make assumptions about the preferences/goals and decision-making strategies of those involved. And the most tempting way to proceed is to assume that others will think and choose like us, and that we think and choose as we should. Of course, economics is long on attempts precisely not to proceed in this way--to abstain from assuming unrevealed preferences, for example. But it's unclear, to say the least, that this can be done. Moveover, the assumption that individuals are utility maximizers is still at the heart of many descriptive models--and even if(!) we agree that this captures the way we should act, it's pretty clear, as the behavioral economists are showing, that we lapse from it in systematic ways (or that practical rationality involves very, very complex social dimensions).

On the flip side, it seems difficult to approach the normative questions (with which philosophers are more involved) without taking into account facts about the way people actually choose. For example, any account of how we ought to choose that strays massively from the way we actually do choose will, I think, rightly be rejected for that very reason. For another example, the question of what our goals and ends ought to be will, once we've rejected hedonism, take into account the types of things humans tend to do when they are actually living well.

So the normative/descriptive distinction is important in bringing out dimensions that inextricably co-exist in the subject matter of economics (and practical rationality more generally). Or so says this non-economist...