Last week I wrote that the driving question behind economics is this: Given scarce (i.e., limited) resources, what should each of us do today and how will we coordinate billions of projects? Today we identify two modes of economic analysis: positive and normative.
Positive Economics is concerned with understanding and describing what is. Theories are articulated, hypotheses formed, variables identified, and experiments run, to clarify how the world actually functions.
Normative Economics incorporates value judgments about what ought to be. Those value judgments can come from natural law, from theology, or from most anywhere. Normative economics aims to identify the best policies to achieve a desired outcome.
So ask an economist what the price of gas should be and she will likely ask you what outcome you hope to achieve. Identify an outcome and she can likely identify a price ? but then she will also tell you about the trade-offs for achieving your outcome, including those that may not be so desirable.
It is this propensity to give all the ramifications — the trade-offs between options — that led Harry Truman to exclaim, concerning his council of economic advisers, “Give me a one-armed economist!” Every answer he got from an economist was followed by, “On the other hand…”
This is precisely how the positive economist sees her role. She helps decision makers understand the consequences of their decisions.
People coming at economic questions from a theological perspective are usually doing normative economics. They want to discern what economic structures ought to exist and which policies ought to be implemented. Think tanks and policy organizations usually engage in normative economics as well.
Most economists engage in both. It isn’t possible to responsibly do normative economics without reference to positive economics. Since even the most sincere devotee of positive economists is a human being with values, she will occasionally state her preferred outcomes and policies in appropriate contexts where it is clear she is speaking about her values. Are economists always successful in appropriately separating these to modes of analysis? Hardly. Nevertheless, the two modes of economic analysis are helpful to keep in mind when listening to or reading an economist.
Why is this important? I think some of the misunderstanding between the theologically-minded and economists comes from evaluating issues through different legitimate lenses. For instance, the theologian proposes a course of action. In response, the ?two-armed? economist goes into her mode of articulating trade-offs, bypassing discussion of the merits of the theologian?s constructs. The theologian experiences this as dismissive — an elevation of economics over theology. Meanwhile, the theologian persists in making truth claims that are unsupportable from economic analysis. The economist experiences this as idealistic or ideological close-mindedness. If a person has convinced himself of a belief that is economic equivalent to believing we can walk of cliffs without falling, why bother? The conversation ends.
We know that economics is not a clean science. Postmodern critique has buried the notion of a scientific expert dispensing unassailable truth to the masses. Economic models have frequently been criticized for “assuming away” elements of human behavior that are inconvenient for mathematical models. There is a joke about an economist who was asked about how to help a man who had fallen in a deep hole. The economist begins his response with, “First, we assume a ladder. Next…” Simplistic assumptions and overly segregating economic life from other aspects of a culture are but two of the criticisms economists have been charged with.
But before we too quickly write off the economists, there is plenty of ?ladder in the hole? thinking that goes on with theological models for economic behavior. With some constructs you can implicitly hear something like, “First, we assume the laws of supply and demand don’t exist. Next …” No effort is made to seriously engage rudimentary economic principles. At times there is even a prideful negation of it, much like some creationists speak of biology. The elegance of theological constructs trumps the guidance God gives us through the application of reason and experience.
Economists are not infallible but neither is any other form of human learning. It is true that it is easy to be misled with statistics (or empirical research), but it is even easier to be misled without them. The decision to not to factor in careful real world analysis is a decision to give unchecked reign to our proclivities and ideologies.
Economic questions are at the core of Scripture and of our daily existence. They are clearly at the heart of our reflection on how best to minister to and with the least of these. For that reason alone we dare not let our deliberations and actions be dictated by a culture war mentality. We need to vigorously engage both economics and theology with respect as we work out what it means to be the Kingdom of God. In our theological deliberations on economic questions, we must be willing to accept that we will not all agree and that we will have opponents. But insofar as it depends on us we must determine that we will have no enemies.
Here are my questions. After my first post, four people told me they found the distinction made in the comments between positive and normative economics very helpful. Does this distinction clarify anything for you? How so? Most importantly, how can we move the dialog about economic issues beyond the bumper-sticker culture war level of dialog?
To conclude I want to commend two books to you. Both are written by Christians who are economists (as opposed to theologians writing about economics.) Both attempt to expose the reader to a broad sweep of basic economic principles without all those a scary graphs and indecipherable mathematical formulas.
First is Bulls, Bears & Golden Calves: Applying Christian Ethics in Economics
, by John E. Stapleford. A new expanded second edition was released this year. It was originally designed to be used as a supplement to standard college economic textbooks but read well on its own.
Second, Economics in Christian Perspective: Theory, Policy and Life Choices
by Victor V. Claar and Robin J. Klay, published in 2007. This book is also being used as a supplement in some classes.