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Jewish World Review
June 27, 2007
/ 11 Tamuz, 5767
Straight Thinking 101
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.
How about the statement "Gasoline prices are unreasonable"? If some think they're reasonable while others don't, the argument can go on forever without resolution because there are no facts to which we can appeal to settle the disagreement. However, there are facts that tend to back up the statement: Buyers of gasoline prefer lower prices while sellers prefer higher prices.
By the way, years ago, Mrs. Williams would arrive home complaining about unreasonable grocery prices. After airing her complaints, she'd ask me to unload her car full of groceries. Having completed the chore, I'd ask her whether she was unreasonable, suggesting that it was my opinion that only an unreasonable person would pay unreasonable prices. The conversation never went far in a pleasant direction.
Having explained the difference between positive and normative statements, I tell my students that in no way do I propose that they purge their vocabulary of normative statements. Normative statements are excellent tools for tricking others into doing what you want them to do. I simply caution that in the process of tricking others, there's no need to trick oneself into believing that one normative statement is better or more righteous than another.
A related term that doesn't make much economic sense is the term "need." The implication of an absolute, crying, dying or urgent need is that one cannot do without the need in question. Students sometimes say they absolutely need a car or a cell phone. At that point I ask them, how in the world was it that Gen. George Washington could defeat Britain, the mightiest nation on earth, without a cell phone or a car?
The problem with the term "need" is that it suggests there are no substitutes for the item in question. Thus, people will pay any price for it; however, the law of demand says that at some price, people will take less of something, including none of it. In response, a student might say, "Diabetics can't do without insulin" or "People can't do without food." I say, "Yes, they can; diabetics have been doing without insulin for thousands of years." In some poor African countries, people do without food. Of course, the results of doing without insulin or food are indeed unpleasant, but the fact that the results are unpleasant doesn't require us to deny that non-consumption is a substitute for consumption. Again, I tell my students not to purge their vocabulary of crying, dying and urgent needs; just don't trick yourself while you're tricking others.
You say, "Williams, it doesn't sound like economics is a very compassionate science." You're right, but neither is physics, chemistry or biology. However, if we wish to be compassionate with our fellow man, we must learn to engage in dispassionate analysis. In other words, thinking with our hearts, rather than our brains, is a surefire method to hurt those whom we wish to help.
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