Economists like to draw a distinction between “positive” economics and “normative” economics. Positive economics is defined as analyzing the variables and trade-offs of a choice without value judgments, while normative economics is usually disdainfully described as “making judgments about what the world should look like.”
As an economics student, I can attest that most of us are taught to look down our noses at normative assessments. Introductory texts are full of examples such as “positive economics tells us that an increase in the price of tomatoes will cause consumers to buy fewer tomatoes, while normative economics might say that tomatoes should cost more so that tomato growers can have a comfortable standard of living.” The implicit assumption in these simplistic examples is that positive economics is scientific, but normative economics is misguided. Almost any economics student will shy away from “should” statements considered to be normative, such as “the minimum wage should be higher.”
There are valid reasons for avoiding normative economics: It is important in any field of inquiry not to start with the desired answer and work backward to find supporting evidence. We don’t want our view of what “should be” to cloud our view of what “is.” And yet the academic dismissal of normative economics masks a gigantic bias in the discipline. At the same time that students explicitly reject the notion that social welfare goals are normative, they almost wholeheartedly accept the idea that “growth is good, and more growth is better.” Ask nearly any student of economics and most practicing economists what policies a country should pursue, and they will almost always answer with an analysis of how that country can increase its gross domestic product.
Growth is good. Economic growth is what allows me to have a washer and dryer, an automobile and a consistent food supply. An important axiom of economics is the principle of “local non-satiation,” which in English basically means that our desire for good things is infinite. We will always prefer more of a good thing to less of a good thing. Naturally, if growth is good, we prefer more growth to less.
But there is an even more important principle to consider: scarcity. We cannot have an unlimited amount of everything good. And growth is not the only good thing.
By dismissing normative economics we lose the context in which to talk about other values. What we are left with is the implicit agreement that growth is the only thing worth working for. We forget that the entire justification for growth is the improvement in human welfare it engenders. Soon we find ourselves dismissing human welfare concerns simply as impediments to growth.
Recent events in Peru are an excellent example. Over the last two months, tens of thousands of indigenous Peruvians have been violently protesting the central government’s plans to develop the Amazonian region for oil exploration, commercial farming and logging. This is just one of the many conflicts between the Peruvian government and the 330,000 Peruvians living in the jungle. The government wants to exploit the natural resources for the development of the economy; the protestors want autonomy over their indigenous lands and resources.
When economists talk about Peru, we talk about the potential for developing the energy sector, agriculture and timber exports. We don’t talk about the dramatic standoffs between protestors and police resulting in multiple deaths on both sides; we don’t talk about the tribes that will lose their traditional ways of life if their jungle is plowed over for soybean production, among other things.
This neglect for human welfare makes economists dangerous.
Until we allow a discussion of human well-being into our calculus and abandon our fascination with growth as the only good, we will continue to be dangerous — remember this next time you listen to our advice.
Guevarra is an economics junior
