Normative Price Theory

Abstract

It should be clear from the previous chapters that the resources of an economy can be allocated in a near-infinite number of ways. Strictly, ‘positive’ economics concerns itself only with factual statements about the effects of one allocation rather than another. It makes no attempt to evaluate different allocations in terms of criteria of what is good or bad. The function of evaluating allocations is reserved for ‘normative’ economics, more popularly called welfare economics.