What should managers do?

In this first topic, I want to articulate what role I think economists have to play within companies.

We need to clarify two forms of analysis first.

Positive analysis

refers to what is. For example, the claim that “wearing helmets can increase the number of accidents” is a positive statement.

Normative analysis

refers to what ought to be. If I told you that “people shouldn’t wear helmets” I’d be introducing a value claim and thus making a normative statement.

I believe that the proper role of the economist is to limit themselves to making positive claims about society. Having said this, positive claims only take us so far. Indeed the reason many of us engage in economic analysis is not only to understand the world, but to try to make it a better place. So normative analysis is important as well. The point is that when we move from positive to normative we introduce ethical and moral opinions. Traditionally, economists were also moral philosophers, and we shouldn’t shy away from ethical questions. But economists have no specialist claims when it comes to moral questions. Therefore, our main function is to provide the positive analysis that helps to inform other people’s moral decisions.

Managers can’t just employ economists, they must become economists.

Shlomo Maital

I want to convince you that good managers need to become good economists. and I will use positive analysis to make this case. But we can keep those argument analytically distinct.