Just about the most difficult lesson for first-year economics students, and sometimes graduate students, is that economic theory, and for that matter any scientific theory, is positive or non-normative. You might ask, “What?s this business about positive and normative?” It?s easy. Positive statements deal with what was, what is or what will be. Normative, or subjective, statements deal with what?s good or bad, or what ought to be or should be. Confusing the two leads to considerable mischief.

The statement “Scientists cannot split the atom” is a positive statement. Why? If there?s disagreement with the statement, there are facts to which we can appeal to settle the disagreement ? just visit Stanford University?s linear accelerator and watch atoms being split. The statement “Scientists shouldn?t split the atom” is a normative statement. Why? There are no facts whatsoever to which we can appeal to settle any disagreement. One person?s opinion on the matter is just as good as another?s.