Normative economics

Normative economics evaluates economic outcomes and policies using value judgments, then recommends choices about how economies ought to work.

Positive economics: The study of economic claims that describe or predict outcomes without judging what ought to happen. It distinguishes value-based recommendations from descriptive and predictive economic analysis.
Cost–benefit analysis: A method that compares a policy's estimated benefits and costs, often expressed in monetary terms. It converts predicted consequences into a recommendation using an evaluative accounting rule.
Utilitarianism: An ethical theory that evaluates choices by their consequences for total well-being. It offers one influential rule for ranking policies by aggregate welfare.
Market failure: A situation in which market decisions do not produce an economically efficient allocation of resources. Normative assessments of market failure help justify or reject corrective intervention.
Interpersonal utility comparison: The comparison of how much well-being different people experience or gain. Policy evaluation remains contested when evidence cannot establish whose welfare gain matters more.
Value judgment: An evaluation that something is good, bad, desirable, or undesirable according to a standard. Normative conclusions rely on judgments about which economic outcomes are desirable.
Optimal taxation: The design of tax systems to balance social objectives against behavioral and administrative costs. It applies normative criteria to choices among tax rates and tax structures.
Rawlsian justice: A theory of justice associated with John Rawls that gives priority to fair institutions and the least advantaged. Its priority for the least advantaged can conflict with maximizing total welfare.
Income inequality: The unequal distribution of income among individuals or groups within a population. Its evaluation depends partly on judgments about acceptable differences and distributive fairness.
Value pluralism: The view that multiple genuine values can conflict and cannot always be reduced to one scale. It challenges the idea that every policy trade-off can be settled by a single welfare measure.

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