A positive economic theory studies the facts and aims to exclude qualitative estimates. It relies only on the actual state of the economy and should contribute to the formation of an effective policy aimed at stabilizing various processes in the state.
In other words, this theory is based on a statement of facts. So, a positive economic theory studies:
- the consequences that a specific decision of a business entity may lead to;
- means with which you can achieve your goal;
- the cost of achieving them.
In addition to the above, a positive approach can:
- explain and predict economic phenomena;
- to study general economic patterns;
- to identify certain (causal) or functional relationships between certain phenomena.
Positive and normative economic theory are opposed to each other. So, normative, in contrast to the stated aspects of the first theory, is based on the study of qualitative assessments of the economic state of the state. The normative method can express a subjective opinion about the necessary state of an object.
Positive economic theory is exploring the choice of an effective way to meet human needs using rational resources. In other words, the subject of economic theory is the contradiction between resource constraints and the limitless human needs. Thus, a positive and normative economic theory performs the function of finding a rational combination of resources in order to obtain the greatest satisfaction of social needs. The next function has a practical focus. It is based on certain knowledge that a positive economic theory studies public policy and makes certain recommendations.
Economics and economic theory are in interaction with each other thanks to the definition of their object of study. So, depending on this criterion, the following concepts are considered:
- macroeconomics (economic theory that studies the state economy);
- microeconomics (economic theory that studies the behavior of specific business entities).
Depending on the level of economic research (macro or micro), there are certain goals.
- Stability in national production, its dynamics and the level of well-being of citizens, the state essence, as well as the volume of export operations and the general political situation, depend on its volume.
- Price stability, which can create conditions for economic predictability, and also help to choose the direction of stimulating the processes of investment and lending. It should also be noted the positive impact of this factor on strengthening confidence in the monetary unit functioning in the state, which leads to general stability in a social society.
- Equilibrium in the foreign trade balance.
