Economics as a social science
A science tries to explain the world using evidence. A social science studies people and society. Economics is a social science because it studies how people, firms and governments choose how to use scarce resources (there is not enough for everything we want).
Economists work like scientists:
- Observe something (prices of onions jumped).
- Make a hypothesis, a guess that can be tested ("bad rain cut supply").
- Collect data (harvest numbers, prices).
- Test the guess. Keep it, change it or drop it.
- A guess that passes many tests becomes a theory.
Why economics is not like physics
- People change their minds, copy others and react to news. An atom does not.
- We usually cannot run a controlled experiment on a whole country.
- So economists use models: simple pictures of reality built on assumptions (simple starting rules, like "people want the best deal").
- They use ceteris paribus (Latin for "other things being equal"): change one thing, hold the rest fixed in the model.
- Economic laws are tendencies, not exact rules. "When price rises, people usually buy less" is true on average, not for every person.
Today some economists do run real experiments, such as field trials that compare villages that got a policy with ones that did not.
Positive vs normative statements
A positive statement says what is, was or will be. It can be tested with facts. It may be true or false, but it is still positive if it can be checked.
- "Inflation was 4% last year."
- "A tax on fuel will reduce how much fuel people buy."
A normative statement says what ought to happen. It contains a value judgement, a view of what is good or bad, fair or unfair. Facts alone cannot settle it.
- "The government should cut fuel taxes."
- "Inequality is too high."
Clue words for normative: should, ought, must, better, worse, fair, unfair, too much, too little. But do not rely only on clue words: ask "Could data prove this right or wrong?"
Why both matter
Positive economics tells us what will happen if we choose a policy. Normative economics helps us decide which result we want. Governments need both: evidence first, then a choice based on values. Value judgements also shape which questions economists ask and which data they collect.
Models, assumptions and their limits
A model is like a map: it leaves out detail on purpose so that you can see the main road. The demand and supply diagram is a model.
- Good: simple, makes clear predictions, can be tested.
- Limits: assumptions may be unrealistic (people are not always rational), the data may be poor, and the world changes over time.
When a prediction fails, economists check the assumptions. This is how the subject improves. For example, behavioural economics grew when tests showed people often act on habits and rules of thumb.
Try it
Take today's newspaper or a news app. Find 5 sentences about prices, jobs or the economy. Mark each one P (positive) or N (normative). Then, for each P, write what data could test it. For each N, write the value judgement hidden inside it.
Key formulas and definitions
- Positive statement = what IS (testable with data)
- Normative statement = what OUGHT to be (value judgement)
- Scientific method: observe → hypothesis → data → test → theory
- Ceteris paribus = all other things being equal
- Model = a simplified picture of reality built on assumptions
Worked examples
1. Classify: 'The average price of rice rose by 8% in 2024.'
Positive. It says what happened. Price records can check it, so it is testable.
2. Classify: 'Rice is now too expensive for poor families, so the state must give it free.'
Normative. 'Too expensive' and 'must' show a value judgement about what is fair. Data can show prices, but not whether free rice is the right choice.
3. An economist says: 'If bus fares fall by 20%, ceteris paribus, bus journeys will rise.' Why add 'ceteris paribus'?
Many things affect bus use: fuel prices, weather, new metro lines. 'Ceteris paribus' means we look only at the fare change and hold everything else fixed. Otherwise we could not tell which change caused the rise.
Common mistakes
- Thinking a positive statement must be true. 'The Moon is made of cheese' is positive because it can be tested; it is just false.
- Using only clue words. 'Many economists believe taxes should rise' is positive: it reports what economists believe, which a survey can test.
- Saying economics is not a science because it cannot do lab tests. It uses the scientific method with data, models and natural experiments.
- Forgetting that a model is a simplification. Its assumptions must be checked before trusting its predictions.