Economists like to distinguish between Positive Economics and Normative Economics. Positive Economics describes how things work. For example, if prices go up, demand will go down. Normative Economics describe what should be. Normative Economics seeks an ideal economic system.

When I was training in economics, my teachers all preferred to concentrate on Positive Economics. Having no absolute ethical standards, they really had no option to stay with Positive Economics. They said they would leave the politicians to decide what should be done, while they concentrated on working out how it could be achieved. A few Marxists did get into Normative Economics, because they had an ethical system (or at least an historical imperative) which allowed them to make assessments of economic programs and system.

In some ways that avoidance of Normative Economics was an embarrassment. An economist who cannot tell you what should be done is not much help. So in recent years, economists have sneaked back into Normative Economics. One approach has been to use cost benefit analysis. An economic program is good, if the social benefit exceeds the social costs. The fact that measuring social costs and social benefits is practically impossible is conveniently ignored.

Economists have also used Positive Economics as a backdoor in to Normative Economics. For example an economist will do a study to decide which level of tax is most efficient, in terms of gathering the most revenue for the least loss of production (the Laffer curve is an example). This is positive economics, because it is looking at the effects of particular problems. However, once the most efficient tax rate has been decided, it suddenly becomes something that should be implemented. Positive Economics morphs in Normative Economics.

Christians have an absolute God, who has revealed his standard of ethics. Since we do have absolute ethical standards, so we should have made Normative Economics our home. However, we have been quite slow to take up the challenge.

Worse still, I find that most Christians approach economics in a pragmatic way. They ask what will work. What will produce the desired outcome? What policies will produce economic growth? However, this is the approach of those stuck in Positive Economics. What will work does not matter for Christians. What matters to us is what is right; even if it does not work well. The fact that a market system is very productive does not make it right. The fact that market system produces inequality does not make it wrong. These are questions about what works. Christians should be asking what is right, according to God’s standards.

I see most economic issues as ethical questions: what should be done. This is Normative Economics. Christians have God’s standard of what is right and wrong, so we are in a great position to do say what should be done. Our question about every economic policy should be this: Is it morally right? Does it comply with God’s word?

A good economic policy is one that complies with God’s ethical standards. The irony is that the right economic policies may not achieve the goals that many politician’s desire: fast economic growth or equal income distribution. However, Christians should always be advocates for the right policies, not effective policies.