One of my few regrets from my time at George Mason University is that I never took a class from Peter Boettke. To make up for it, I recently started reading his new book, Living Economics. His enthusiasm for economics and ideas is as contagious as ever. Even better, he shares many ways to teach those ideas; the book is for teachers as well as students.
One of those teaching ideas is the devil test. It is as good a way to explain the difference between positive and normative analysis as I’ve heard, which is why I’m sharing it here.
First, the positive-normative dichotomy. Positive is objective; normative is subjective. Positive is describing the world as it actually is; normative is describing how one would like the world to be. Think of it as the difference between is and should.
Now the devil test. As Boettke puts it on p. 28, “Using the example of minimum wage or rent control, I demonstrate to students that the analysis could be agreed upon by either an angel or a devil, but the angel and devil would differ on the normative implications.”
Clever. Now let’s put minimum wage laws to the devil test. The minimum wage gives some workers a raise, but it also prices other people out of the workplace entirely, especially younger workers. On net, minimum wage laws are a regressive wealth transfer. The absolutely poor give up their wages entirely so their slightly better-off fellows can get a raise. Those being the objective facts on the ground, angel and devil agree on the positive analysis.
But they part ways on the normative. The angel, who opposes regressive wealth transfers, opposes high minimum wage laws. The devil embraces them, and rejoices at every increase.
I’m not very far in to the book yet, but nuggets of wisdom like that abound.