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                                                         1.3 POSITIVE AND NORMATIVE ANALYSIS                     19
                      families housing vouchers that they can use on the open housing market or by implement-
                      ing rent controls that prevent landlords from charging any renter more than an amount
                      controlled by law. Or, if government finds it desirable to reduce pollution, should it intro-
                      duce taxes on emissions or strictly limit the emissions from factories and automobiles?
                         These examples illustrate that it is important to do positive analysis before nor-
                      mative analysis. A policy maker may want to ask the normative question, “Should we im-
                      plement a program of rent controls or a program of housing vouchers?” To understand
                      the options fully, the policy maker will first need to do positive analysis to understand
                      what will happen if rent controls are imposed and to learn about the consequences of
                      housing vouchers. Positive analysis will tell us who is affected by each policy, and how.
                         Microeconomics can help policy makers understand and compare the impacts of
                      alternative policies on consumers and producers. It can therefore help sharpen debates
                      and lead to more enlightened public policy.


                      APPLICA TION  1.3

                      Positive and Normative Analyses                  Card and Krueger found that the increase in New
                      of the Minimum Wage                              Jersey’s minimum wage did not decrease employ-
                                                                       ment. Though provocative—Card and Krueger’s
                                                                       study presents a finding that is at odds with the
                      Over 100 countries around the world, including the
                                                                       implications of the analysis of the minimum wage
                      United States, set a minimum wage. (In 2009, the U.S.                                    13
                                                                       usually presented in microeconomics textbooks —it
                      minimum wage was $7.25 per hour.) The minimum
                                                                       is nevertheless an example of a positive analysis. Its
                      wage has been extensively studied and debated by
                                                                       purpose was to answer an  explanatory question:
                      economists, and economists differ in their views about
                                                                       What happened to employment when the minimum
                      it. For example, a 2006 survey by Robert Whaples of
                                                                       wage in a state increased?
                      210 economists belonging to the American Economic
                                                                          By contrast, consider a piece written in 2004 by
                      Association found that nearly 47 percent of the econ-
                                                                       the economist Steven Landsburg that makes a force-
                      omists surveyed believed that the federal minimum                              14
                                                                       ful case against the minimum wage:
                      wage in the United States should be eliminated, while
                      nearly 38 percent believed that the minimum wage    In fact, the minimum wage is very good for unskilled
                      should be increased. 11                             workers. It transfers income to them. And therein
                         Perhaps not surprisingly, one can find examples  lies the right argument against the minimum wage.
                      of both positive analyses and normative analyses of  Ordinarily, when we decide to transfer income to
                                                                          some group or another—whether it be the working
                      the minimum wage. Consider, for example, David
                                                                          poor, the unemployed, the victims of a flood, or the
                      Card and Alan Krueger’s study of the impact on em-
                                                                          stockholders of American Airlines—we pay for the
                      ployment resulting from an increase in New Jersey’s  transfer out of general tax revenue. That has two
                      minimum wage in the early 1990s. 12  Contrasting
                                                                          advantages: It spreads the burden across all taxpay-
                      changes in employment in fast-food restaurants in   ers, and it makes politicians accountable for their
                      New Jersey with changes in employment in fast-food  actions. It’s easy to look up exactly how much the
                      restaurants in an adjacent state (Pennsylvania) in  government gave American, and it’s easy to look up
                      which there was no increase in the minimum wage,    exactly which senators voted for it.
                      11 Robert Whaples, “Do Economists Agree on Anything? Yes!” Economist’s Voice 3, no. 9 (November 2006),
                      http://www.bepress.com/ev/vol3/iss9/art1 (accessed September 1, 2009).
                      12 David Card and Alan Krueger, “Miniumum Wages and Employment: A Case Study of the Fast Food
                      Industry in New Jersey and Pennsylvania, American Economic Review, 84, no. 4 (September 1994): 772–793.
                      13 Including this one! See Section 10.6.
                      14 Steven Landsburg, “The Sin of Wages: The Real Reason to Oppose the Minimum Wage,” Slate ( July
                      9, 2004), http://slate.msn.com/id/2103486/ (accessed September 1, 2009).
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