Economics as policy.

Economists help government to devise economic policy. Economic policy is like a card of a state. Stability, prosperity, welfare of the nation - everything depends on it. Different “schools of thought” have different approaches to solving economic problems. This choice defines the policy of the state. The political left and the political right may choоse quite different models. One may adhere to normative economics, the other to positive economics. Normative economics presupposes what ought or ought not to occur in economic affairs. Positive economics answers what does and what does not occur in economic affairs. Statements in positive economics are statements of facts. Statements in normative economics are emotional ones. They are based on subjective feelings and assessments of facts. They usually include words such as better, best, most worthwhile, etc. So, being scientists, economists cannot make normative statement. The best they can do is to analyze the consequences of adopting various policies and try to help government to formulate their policies.

Answer the questions:

1. In what way do economists help government?

2. Why is the economic policy of the state very important?

3. What is meant under “schools of thought”?

4. What is the difference between political right and political left, to your mind?

5. What principles do you adhere to: political right or political left? Why?

6. What does normative economics do? What does positive economics do?

Reveal the meaning of the following economic concepts as you understand them:

Positive economics schools of thought normative economics

Let’s ponder!	1. If you have to choоse between positive and normative policy being a government adviser, what would you chosоe? Why?
		GRAMMAR Structures with Adjectives.

Structures with adjectives:

As … as – indicates the same degree.

Political rights are as emotional as political lefts while solving their problems.

Not as … as; not so … as – indicate lower degree.

Normative statements are not so accurate as positive ones.

More than, less than, worse than + adjective.

Economists were more than pleased when their predictions had come true.

This economic model turned out to be less than useless.

The same as; different from.

Even in positive economics it’s very seldom when real event turns out to be the same as it was predicted.

“School of thought” of positive economists is different from “school of thought” of normative economists.

The given text contains more information about economics and policy. Read the text and pick up additional knowledge of the subject.

Economics and policy

Economists play a major role in helping government to devise economic policy. There is plenty of scope for competing models in economics, with different models making different assumptions. Different “schools of thought” will often take quite different views about how the economy operates. As a result economics may often be highly controversial, with different models leading to different policy conclusions. For example, different political parties may adhere to different schools of economical thought. Thus the political left may adhere to a model which implies that government must intervene if unemployment is to be cured; whereas the political right may adhere to a model at which unemployment will be reduced if the government intervenes less and relies more on the free market. In order to consider the role of economists in policy 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. “Unemployment is rising”, “If government cuts taxes, imports will rise”. These are all the examples of positive statements and we can test whether they are true or false by looking at the evidence.

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 not desirable. “It is right to tax the rich more than the poor.” “Old-age 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.

We should remember that people are mistaken about facts. The choice between the opposing views must ultimately depend on an individual’s subjective judgements about what is good and bad.

Economists can only contribute in a positive way to questions of policy. That is they can analyse the consequences of following certain policies. As scientists they cannot make normative judgements. They can only do so as individual people, and as such have no more moral rights than any other individual. Thus, the economists, by examining the consequences of adopting various policies, can help governments to formulate their policies and to amend them subsequently.

COMPREHENSION CHECK

Exercise 1. Are these statements true or false?

1. Economists don’t play any role in helping government to devise economic policy.

2. The choice of economic policy depends on people and their adherence to this or that “school of thought”.

3. Taking into consideration facts, normative economics is based mainly on emotions.

4. Positive economics doesn’t tell us which policy is best; its purpose is to increase our knowledge of all policy alternatives and eliminate source of disagreement about policy matters.

5. Normative economics helps government evaluate whether or not a policy alternative leads to a desired objective.

6. The task of the professional economist is to expend our knowledge of how the real world operates.

7. It’s easy to predict the impact of a change in an economic variable or policy.

Exercise 2. Answer the following questions.

1. Who helps government to devise economic policy?

2. What role do the competing models play in economics?

3. Does adherence to this or that “school of thought” influence the adoption of any policy?

4. What do usually normative economists say evaluating events and predicting their development?

5. What is the attitude of positive economists to the same events?

6. Can the statements of positive and normative economists be proved? How?

7. Can economists be mistaken? Why?

8. How can economists contribute to questions of policy?

TRAIN AND CHECK YOURSELF

1. Insert “as … as”, “not as … as”, “not so … as”, “the same as…”, “different from…”, “more than+adj.”, “less than+adj.”, “worth than+adj.”.

   1. This model is … important … all the rest in making different assumptions.

   2. It’s … to examine opponent’s point of view.

   3. This assumption is …, it clearly shows interdependence of these curves.

   4. Normative statements are … accurate … positive ones.

   5. “School of thought” of positive economists is … “school of thought” of normative economists.

   6. The assessment given by Dr.N. is… the one, given by Dr.X.

   7. Nation’s welfare is …, it’s our major objective.

   8. Positive economics is … in its statements.

   9. Each government … intervenes free market.

   10. It’s … for government to formulate their policies with the help of economists.

2. Make up sentences.

   1. Assumptions, economists, different, models, different, using, competing, make.

   2. Different, different, economic, of, school, of, to, thought, adhere, decisions, in, view, points.

   3. Be, can, highly, economics, often, controversial.

   4. Economists, prediction, only, sometimes, make, can, approximate.

   5. Economics, with, ought, ought, to, in, affairs, economic, occur, not, or, what, deals, normative.

   6. Positive, affairs, economics, economic, deals, in, with, occur, what, not, or, does, does.

   7. Statement, fact, statement, of, a, is, a, positive.

   8. The, facts, of, a, the, to, by, be, can, statement, tested, accuracy, appealing, positive.

   9. Judgements, falls, normative, proved, value, economic, because, views, they, on, be, are, cannot based.

   10. Value, values, opinion, system, judgement, personal, definite, social-philosophical, ethical, and, a, of, expressing, usually, is.