In the philosophy of economics, economics is often divided into positive (or descriptive) and normative (or prescriptive) economics. Positive economics focuses on the description, quantification and explanation of economic phenomena, while normative economics discusses prescriptions for what actions individuals or societies should or should not take.

The positive-normative distinction is related to the subjective-objective and fact-value distinctions in philosophy. However, the two are not the same. Branches of normative economics such as social choice, game theory, and decision theory typically emphasize the study of prescriptive facts, such as mathematical prescriptions for what constitutes rational or irrational behavior (with irrationality identified by testing beliefs for self-contradiction). Economics also often involves the use of objective normative analyses (such as cost–benefit analyses) that try to identify the best decision to take, given a set of assumptions about value (which may be taken from policymakers or the public).

Positive economics as a science concerns the investigation of economic behavior. It deals with empirical facts as well as cause-and-effect relationships. It emphasizes that economic theories must be consistent with existing observations and produce precise, verifiable predictions about the phenomena under investigation.

Examples of positive economic statements are "the unemployment rate in France is higher than that in the United States," or "an increase in government spending would lower the unemployment rate". Either of these is potentially falsifiable and may be contradicted by evidence. Positive economics as such avoids economic value judgments. For example, a positive economic theory might describe how money supply growth affects inflation, but it does not provide any instruction on what policy ought to be followed.

An example of a normative economic statement is as follows:

This is a normative statement, because it reflects value judgments; this specific statement makes the judgment that the benefits of the policy outweigh its costs.

Some earlier technical problems posed in welfare economics have had major impacts on work in applied fields such as resource allocation, public policy, social indicators, and inequality and poverty measurement.

Since its inception as a discipline, economics has been criticized for insufficiently separating prescriptive from descriptive statements and also for excessively separating prescriptive from descriptive statements.