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
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 Godís standards.
I see most economic issues as ethical questions: what should be done.
This is Normative Economics. Christians have Godís 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 Godís word?
A good economic policy is one that complies with Godís ethical
standards. The irony is that the right economic policies may not achieve
the goals that many politicianís desire: fast economic growth or equal
income distribution. However, Christians should always be advocates for
the right policies, not effective policies.
In the long term, obedience to God will lead to blessings, so
everything will be okay, but it the short term, the right economic
policies may make people worse off. However, they are sill the right
policies. Godís way is the best way.