Scarcity, Opportunity Costs, and Basic Economic Questions I. Graphical Analysis A.

The student needs a basic understanding of graphical analysis to be able to learn economics. There are three basic methods of discussing economic models and concepts: (1) verbal discussions, (2) graphical analysis, and (3) mathematical analysis. athematical analysis is an e!tremely important tool in economics. "o#ever, at the principles level only basic mathematical tools (algebra) are used and then only occasionally. $rinciples #ill rely mostly on the first t#o methods for teaching economics #ith a special emphasis on graphical analysis. Students cannot learn economic principles without a basic understanding o graphical analysis. "o#ever, it is generally assumed that students #ill have learned the elements of graphical analysis prior to the class. %f you have a problem #ith graphical analysis you must get spend some time ma&ing sure you understand ho# to use and understand graphs. '. The graphical analysis that #ill be used in the class #ill rely upon the (artesian coordinate system. This system is sho#n in the graph belo#. There e!ist t#o variables, ! and y, #hich may both ta&e either positive or negative values. Any specific pairs of values for ! and y can be represented on the graph by a single point. )or e!ample, the origin occurs #here the ! and y a!is cross. At the origin both the ! and y variables e*ual +ero. As ! moves to the right on the graph, it gets larger in value and the reverse as it moves to the left. ,imilarly, as y moves up on the graph, y gets larger in value and the reverse as y moves do#n. ,o point A represents y e*ual to five and ! e*ual to negative -.

)inally, notice that the (artesian coordinate system divides the graph into four separate areas, &no#n as *uandrants. .ach *uandrant is defined by the values of ! and y. )or e!ample, in *uandrant %, both ! and y are positive, #hile in *uandrant %%%, both ! and y are negative. %n principles of economics, #e mostly #or& in *uandrants % and %%. As a result #e dra# graphs that only sho# these *uandrants, sometimes only *uandrant % and sometimes both *uandrant % and %%. (. The ma/or use of graphs, and graphical analysis, in this class #ill be illustrative. To do #ell in the course, the student should be able to *uic&ly grasp the meaning of a given graph. )or e!ample, #hat information does the graph to the right convey0 )irst, consider the variables on the a!es. 1n the ! a!is is the number of hours studied per #ee& for our class, .conomics 12-. This variable can be no less than +ero. That is, the least amount of time this student can study per #ee& is +ero. 1n the y a!is, is the grade obtained in the class. 3ust as #ith study time, the lo#est the grade (on a 4.5 scale) that can be earned in any class is +ero. "ence, both of the variables on the graph must be greater than or e*ual to +ero. 6e can conclude that the graph represents only *uadrant % of the (artesian coordinate system, as described in '. above.

,econd, carefully consider the information conveyed by the graph. The main point of graphs is to convey information about the relationship bet#een the t#o variables on the a!es. This particular graph tells us all of the follo#ing about the relationship bet#een the number of hours studied per #ee& and the grade obtained in the class: 1. As students do not have identical abilities or bac&grounds, this graph can only convey information about a single student. %t is important to reali+e that not all students #ill have e!actly the same relationship. 2. 7otice that initially as the number of hours studied per #ee& increases that the grade in the class increases as #ell. "o#ever, the grade reaches a ma!imum at 12 hours and thereafter falls as hours per #ee& increase. Thus, the ma!imum grade this student can possibly receive is a '. 1ther students #ith different abilities #ill have a different ma!imum, either higher or lo#er. 3. The curve intercepts on the y8a!is, at about .9. This means that if this student did not study at all, he #ould receive a .9, #hich translates into a :8 on a 4.5 scale. Thus, this student can receive a passing grade #ithout any studying. 1ther students, again, might get either a higher or a lo#er grade #ith no effort. 4. The concave (concave means bo#ed out from the origin) form of the curve, implies that initially an hour studied returns a large increase in the grade, but eventually the return gets smaller and, past 12 hours, even yields a decrease in the grade. :oes this relationship seem realistic to you0 %s the first hour you study more li&ely to have a larger positive impact on grades than later hours studied0 %n fact, it is common for variables to e!hibit this type of relationship. %t is so common that economists have named it a la#, the la# of diminishing returns. This particular graph is not important for the class, e!cept as an e!ample of graphical analysis. ,tudents should learn to *uic&ly loo& at graphs and understand the information contained in the graph. A student once told me in my teacher evaluations something li&e ;:r. 1lsen is also droning on about some graph or another.; %t is true that this class relies heavily upon graphs and if you cannot understand the graphs then you #ill be lost, do poorly in class, and also thin& it boring. ,tudents need should revie# their graphical s&ills and re*uest help if they are lost. A good source for such revie# is the student study guide, in the appendi! to chapter 1. II. Basic Economic !e initions

The first step in the course is to understand some basic definitions, to be used throughout the course of the semester. ,ome of the definitions #ill be modified slightly later in the course< once more bac&ground information is gained. A. .conomics. 6hat is economics0 6hen % as& students #ho have not already ta&en an economics class this *uestion, they often focus upon money and financial institutions. ,ometimes, it is described as dealing #ith *uestions li&e unemployment and inflation. Although all of these ans#ers are correct, in that these are issues that economists analy+e, economics itself is much broader in application. .conomics is the study of the choices that people ma&e, all of the choices, and the personal and social conse*uences of those choices. %t is easy to see that economics is relevant for the topics discussed above, but also for a #ide range of other types of issues not normally considered by most people to be economic in nature. )or e!ample, economist =ary 'ec&er first suggested more than t#enty years ago that the choices that people ma&e in families could be fruitfully analy+ed #ith economic principles and procedures. "is treatise on the family #as primarily the reason #hy he #as a#arded the 7obel $ri+e in .conomics in 1>>2. .conomics considers an e!tremely #ide range of topics ranging from e!plaining divorce to investigating the #or&ing of the la# and legal institutions. '. icroeconomics vs. acroeconomics

icro and macroeconomics are the t#o main branches of economics. %n each branch, it remains the case that #hat is being studied is the choices that people ma&e, and the personal and social conse*uences of those choices. "o#ever, the particular types of choices being studied vary bet#een the t#o branches. As the #ord implies, macroeconomics deals #ith the large, or aggregated, economic choices faced by society. Thus, macroeconomics studies issues dealing #ith an aggregated, national or regional economy such as matters of unemployment, inflation, levels of government spending and ta!ation, and so forth. %n contrast, microeconomics deals #ith small, sometimes individual, economic choices faced #ithin any society. Thus, microeconomics studies

issues dealing #ith smaller choices including individual choice by consumers, the behavior of profit ma!imi+ing firms in different types of mar&et scenarios, and other types of non8mar&et organi+ations, such as the family. (. ,carcity 6e have already decided that economics is a study of choices, either collective societal choices or more individuali+ed choices. "o#ever, #hat is it about the real #orld that re*uires that #e ma&e choices0 A moment?s thought about our individual lives, and the choices that #e face, reveals that #e must ma&e choices because #e have limited resources. ,carcity is simply the concept that human #ants (not human needs) e!ceed the resources available that are necessary to produce the goods used to satisfy those #ants. Thus, scarcity is fundamentally the most important concept in economics, upon #hich all of the rest of the discipline rests. )or #ithout scarcity, no need for choice, either individual or collective, e!ists. 1ne need not ma&e a choice bet#een buying a nice lunch at a restaurant and buying a ne# s#eater because one #ill al#ays have enough resources to purchase both goods. ,ince economics is the study of ho# people ma&e choices, #ithout scarcity there #ould e!ist no choice and, hence, no economics. Thus, scarcity is one of the fundamental premises of economics. "o#ever, scarcity is not necessarily universally true, especially for all times, all places, and all goods. Thus, a given good at a specific place or time might not be scarce. Thus, #e must define #hat #e mean, not only by scarcity in general, but by scarcity for specific goods. A good is considered scarce if the amount people demand of the good (*uantity demanded) e!ceeds the amount that is supplied (*uantity supplied), #hen the price of the good e*uals +ero. A good is considered free if the *uantity demanded either e*uals or is less than the *uantity supplied, #hen the price of the good e*uals +ero. %n other #ords, a good is not scarce if enough of the good is freely available at a +ero price. The definitions of scarce and free goods depend upon the price of the good, #hich must e*ual +ero to determine #hether the good is scarce or free. "o#ever, this does not mean that the price must e*ual +ero before one can determine #hether or not a good is scarce.

(onsider, for e!ample, a good that is free. 6e already &no# that this good has *uantity demanded less than or e*ual to *uantity supplied #hen the price of the good e*uals +ero. 6hat happens to the relationship bet#een *uantity demanded and *uantity supplied, for this free good, as the price of the good rises from +ero0 After reflection on their behavior, most people #ill recogni+e that they #ill buy less of the good as the price rises, all else e*ual. @i&e#ise, as the price rises, suppliers of a good #ill tend to be #illing to supply more of the good, all else e*ual. "o#ever, at a +ero price there #as already more than enough of the good available for those #ho #anted to consume the good. Therefore, as the price rises this e!cess supply of the good available #ill only increase. "o#ever, in a free mar&et (one #ith no government interference in the mar&et) no one #ill be #illing to pay a more than a +ero price for this good because they can get all they #ant #hen the price is +ero. %t is only #hen the good is scarce at the +ero price that people #ill be #illing to pay a higher price. %n this case, there #ill not be enough of the good to go around and the people #ho are not luc&y enough to obtain it #ill try to get it by offering a higher price for the good. Thus, one can loo& at the price that occurs for a good in a free mar&et to determine #hether or not the good is free or scarce. %f a positive mar&et price e!ists, then the good must be scarce. "o#ever, if the mar&et price is +ero, then the good must be free. :. $roduction The follo#ing flo# diagram describes #hat economists mean #hen they tal& about production.

Aesources are inputted into a production process, #hich yields an output. The production process itself embodies the technology used to produce the output. An increase in technology #ill ma&e it possible to produce more output #ith the same level of resources or ma&e it possible to produce the same output #ith fe#er resources. There are four general types of resources:

Type of Aesource @abor @and (natural resources) (apital .ntrepreneurship

Abbre"iation $ % & E

#eturn wages rent interest pro it

@abor is often referred to as ;human capital,; an ac&no#ledgement that labor resources are often made more productive through education or training. (apital is one of the most confusing types of resources, largely because many students thin& of (apital as primarily financial rather than as a productive resource. "o#ever, not only is (apital a productive resource, but it is also al#ays itself the result of a production process. @and is an inclusive category that includes all &inds of natural resources. The only condition that must be met is that the resource cannot be the result of a production process, #hich #ould ma&e the resource (apital rather than @and. .ntrepreneurship is really /ust a particular type of @abor, that type of labor that organi+es all of the other resources in a productive enterprise. As a result, .ntrepreneurs receive profit B the amount of money that is left after all other resources have been paid. .. Aationality As noted above, scarcity implies that humans and human organi+ations must ma&e choices. "o#ever, one of the crucial *uestions that must be ans#ered, in order to investigate ho# people ma&e choices, is the underlying goal follo#ed by individuals. .conomists assume that individuals are rational, that they ma&e choices in order to ma!imi+e their o#n self8interest. Aationality may seem to be a rather narro# assumption. "o#ever, self8interest actually has *uite a broad application because each individual can, obviously, define the limits of their o#n self8interest. Thus, for many people, their o#n self8 interest includes *uite a broad range of people or issues including, for e!ample, their o#n families. ). 'asic .conomic (hoicesCDuestions

All economies face four basic choices, *uestions that must be ans#ered for an economy to #or& #ell. 1. '(A) goods #ill be produced0 %nitially society must decide #hat goods, specifically, they #ish to produce. 2. (O' #ill resources be used in the production process0 1nce it has been decided e!actly #hat goods #ill be produced, the ne!t *uestion that must be addressed is e!actly ho# these goods #ill be produced. This *uestion focuses on issues such as the type of technology to be used, #hether the production process should be labor intensive or capital intensive, and so forth. The most important focus for economists is on the issue of producing output #ith the fe#est resources or the lo#est costs. 3. '(O #ill receive the goods0 1nce the goods have been produced, the ne!t crucial *uestion that remains deals #ith #ho, specifically, #ill get these goods. %n a mar&et economy, #hich replies upon money for many transactions, this *uestion is essentially one of determining the distribution of income. "igher income, in a mar&et economy, translates into the ability to purchase more goods and services. Thus, this *uestion focuses on issues of ta!ation and subsidies. 4. 'hen #ill production occur0 The final *uestion deals #ith the timing of production. ,ometimes the timing of production is determined by nature, as in the case of many agricultural products that are produced in a particular season. This leads us directly to another relevant issue for this *uestion, the storage and #astage of perishables. )or, #hile many goods can only be produced in a particular season, most often consumption of those goods ta&es place during the entire year. ,ometimes the timing of production is determined by society. )or e!ample, in 6estern society the largest season for retail sales occurs /ust prior to (hristmas. =. 1pportunity (osts An opportunity cost e*uals the value of the ne!t8best foregone alternative, #henever a choice is made.

Again, notice the common theme of the necessity of choice, and its conse*uences, running throughout all of these definitions. .conomists are careful to consider all of the costs of ma&ing a choice. (onsider, for e!ample, the choice made by all of the students in this class, the choice to attend school. The costs of attending school can be divided into direct costs and indirect costs. :irect costs are actual, out8of8poc&et payments for goods, services, or resources. %ndirect costs are, on the other hand, the opportunity costs of goods, services, or resources that are consumed, even though no direct payment for them occurs. (arefully consider the costs, both direct and indirect (opportunity), of your choice to attend school. @et?s suppose that they loo& something li&e the follo#ing: The (ost of Attending (ollege %tem )uition and ees Aesidents 7on8residents #oom and Board Boo*s and Supplies $ost 'ages $ost Interest $ost #ent $ost +ro it E3,214 E2,1-4 E3,->4 E255 E2,->2 E2-2 E-,152 EF,155 :irect :irect :irect :irect %ndirect %ndirect %ndirect %ndirect (ost Type of (ost

7ote: The :irect costs are yearly figures for issouri ,tate charges for each item. The %ndirect costs are e!amples only. The above includes both types of costs, direct and indirect. The direct costs are fairly straightfor#ard, representing the dollar payments charged for goods many students must buy. "o#ever, the indirect costs re*uire more e!planation. These all represent, as given in the definition of the term ;opportunity costs; above, not direct out8of8poc&et dollar payments, but the value of foregone alternatives. )or e!ample, lost #ages refer to the #ages

that a student loses because he chooses to attend college. Any resource can have an indirect cost associated #ith it, not /ust labor. )or e!ample, a person could have E15,555 that she uses to finance the direct payments for college. "o#ever, she could have used this money as an investment, #hich #ould have yielded interest payments. The interest that she loses as a result of this decision is also a cost of attending college, albeit an opportunity cost. %t is important to note that each individual?s total costs of attending college #ill vary because their choices and situation varies. )or e!ample, one person may bear none of the indirect costs because they had no other options besides attending college, at least none that involved such dollar losses. Another person may have lost #ages, #hich may be *uite lo#, #hile a second?s lost #ages might be *uite high because they have different opportunities. "ence, one cannot simply add up all the numbers in the table above to discover the total cost of attending college for each individual. ,inally, only indirect costs are considered opportunity costs. ". onetary $rice versus Aelative $rice

The monetary price of a good or resource is simply the actual dollar price paid. 1ther terms for the concept of ; onetary $rice; are ;Absolute $rice; and ;7ominal $rice.; %n contrast to the monetary price, the relative price measures the price of the good or resource relative to prices of other goods and resources. Thus, the relative price of a good or resource can either (1) remain unchanged even though its monetary price rises or falls or (2) rise or fall even though its monetary price remains unchanged. This is true because relative price can change, not only because of changes in the monetary price of a good or resource, but also because of changes in the monetary prices of other goods or resources. (onsider, for e!ample, the price of oranges relative to apples #hen both cost E1 per pound. %f the dollar price of oranges rises to E2 per pound, then both of the above situations are possible dependent upon #hat happens to the price of apples. %f the price of apples also rises to E2 per pound, then the relative price of oranges has not changed. This is because giving up one orange #ill still buy one apple, and the reverse, /ust as it #ould before the monetary prices changed. "o#ever, if the price of apples does not change, then oranges have gotten more e!pensive relative to apples. 'efore the price change, one could buy one apple or one orange #ith a dollar. After the

price change, one could buy one orange or t#o apples #ith the same amount of money. 7o# that #e understand the meaning of these t#o different types of prices, the ne!t step is to consider #hich of the t#o concepts, monetary or relative price, is used by individuals as they ma&e their consumption decisions. To illustrate the ans#er to this important *uestion consider #hether your behavior #ould change if all prices doubled, including the price paid for your labor and other resources. %n other #ords, all the prices you pay for goods you consume #ould double as #ould your income. %n this case, although monetary prices have changed, relative prices for all goods and resources remain unchanged. 6hen faced #ith such a scenario, most people do not change their behavior. This serves as an indication that it is relative price, and not monetary price, that matters in individual decision ma&ing. )inally, prices in a mar&et economy have some additional functions. )or e!ample, the price of a good or resource conveys information about the availability of the good and, often, its *uality. $rices also serve as an incentive to individuals in their decision ma&ing. "igher prices give people an incentive to ration scarce goods and resources. %. .conomic .fficiency )or society as a #hole, economic efficiency is achieved #hen society produces the output of goods such that society?s highest net value is obtained. 7et value e*uals the difference bet#een the total benefit society reaps from all the goods currently being produced and the total costs of producing those goods. The concept of economic efficiency can be bro&en do#n into t#o types of efficiency, technological and allocative efficiency, both of #hich must be achieved in order to achieve economic efficiency. Technological efficiency focuses on ans#ering the basic economic *uestion of ho# goods and resources #ill be produced. That is, it focuses on the *uestion of #hat production process (i.e., #hat technology) should be used in order to produce a given output, #ith the goal being to ma!imi+e society?s net value. A production process is considered technologically efficient if, given the output being produced, the fe#est resources possible are used to produce that output. Technological inefficiency is the result #hen this goal is not achieved.

The above is not the only possible definition of technological efficiency. A production process #ould also be considered technologically efficient if, given the resources being used, the ma!imum possible output is gained from those resources. These t#o definitions for technological efficiency do not contradict each other, but are /ust t#o different #ays of loo&ing at the same problem B ho# should production occur. Allocative efficiency focuses on ans#ering the basic economic *uestions of #hat to produce and #ho #ill receive those goods. That is, it focuses on the *uestion of the efficient allocation of resources into different productive enterprises. At our current level of understanding, the definition of allocative efficiency #ill rely upon mutually beneficial e!changes. An e!change is considered to be mutually beneficial, if at least one of the parties to the e!change is benefited by the e!change and no one is damaged by the e!change, including parties #ho are e!ternal to the e!change. (onsider the follo#ing e!ample to illustrate the concept of mutually beneficial e!changes. ,uppose individual A builds a house, #hich he values at E155,555. %ndividual ', ho#ever, values the house at E1-5,555. :oes some price e!ist by #hich A can sell the house to ' and have at least one, or both, of the parties better off0 The ans#er to this *uestion is obviously yes. )or e!ample, an e!change price of E12-,555 #ould leave both A and ' better off. A #ould be better off because she sold a house #orth only E155,555 to her at a price of E12-,555, a net gain of E2-,555. ' #ould be better off because he gave up E12-,555 to buy a house #orth E1-5,555 to him, a net gain of E2-,555. )urther, since both A and ' are members of society, society is also better off, by a total of E-5,555, assuming that the e!change does not damage anyone else. 7o# that the concept of mutually beneficial e!change is #ell understood, allocative efficiency can be defined. Allocative efficiency occurs #hen all possible mutually beneficial e!changes have ta&en place. %f any potential mutually beneficial e!changes do not occur, then allocative inefficiency occurs. As noted above, both allocative and technological efficiency must occur for society to be economically efficient. 3. The ,cientific ethod

$eople are often confused about #hich disciplines can legitimately be considered science. Are those #ho study .nglish, for e!ample, scientists0 6hat about economists, are they scientists0 To many only those disciplines

included in the so8called ;hard; sciences, such as biology and physics, should be considered scientists. "o#ever, for the purposes of this class #e #ill consider a discipline a science if it follo#s the scientific method in its academic in*uiry. 6hat is the scientific method0 The scientific method is a process that attempts to ob/ectively learn truth about the real #orld. %t has three ma/or components: 1. %nitial identification of a real #orld problem to study. %n this step, the scientist loo&s at the real #orld to find some phenomenon that she thin&s e!plaining #ill yield fruitful insights. )or e!ample, one problem that economists have addressed is ho# mar&ets, #ith buyers and sellers, #or&. %n addition to identifying the problem to study, in this stage the scientist also thin&s about the nature of the problem and, perhaps, ma&es ad hoc observations that #ill help him formulate a method of modeling the problem, #hich is the ne!t step of the process. 2. 'uild a model of the real #orld problem being studied. includes the follo#ing three steps. odel building

The first step is to ma&e some assumptions that #ill serve as the foundation upon #hich the model is built. Assumptions serve t#o crucial purposes. ost importantly, they attempt to mimic the real #orld conditions that affect #hatever problem is being studied. "o#ever, the real #orld is often too comple! to include all of its components #ithin a scientific model. As a result, assumptions are often made in order to simplify the model, as opposed to reality, #hich has the benefit of ma&ing the model easier to understand and use. The &ey in this step of the process is to not ma&e simplifying assumptions that are so far removed from reality that the model is incapable of providing insight into the problem under consideration. The second step is to build a model or theory based upon the assumptions the scientist has made that describes the phenomenon being studied. ost of the time, mathematics is used to build scientific models. The final step in the model building process is to use the model to get predictions about ho# the real #orld behaves. )or e!ample, one of the &ey purposes of building a model describing ho# mar&ets #or& is to predict #hat #ill happen in different circumstances to prices and *uantities e!changed in a given mar&et.

3. The final step in the scientific method is to test the model. The scientist uses the predictions developed in step 2 above, gather real #orld data, and then compares actual outcomes #ith the predictions. %f the predictions are accurate, then the simplified scientific model is successful. "o#ever, #hen the predictions are inaccurate, the scientist must begin over #ith step 1 and go through the process again as many times as it ta&es until accuracy is achieved. .conomics is a science because it uses the scientific method to analy+e real #orld problems. 1ther disciplines, li&e .nglish, are not sciences because they do not use the scientific method. This does not mean that these disciplines are not useful to society, /ust that they are not science. %n this course, #e #ill use the scientific method to build a number of models describing real #orld phenomena. 1ur focus #ill be upon building models about ho# mar&ets #or& and ho# consumers and firms ma&e decisions. These models constitute the principles of economics. 6e #ill not do any systematic testing of the models, although economists have rigorously done such testing, because such testing is beyond the scope of the course. "o#ever, #e #ill discuss applications of the model to the real #orld to give students some insight into the real #orld and to demonstrate that the models have real #orld applicability. G. $ositive versus 7ormative .conomics or ,tatements 1ne of the crucial s&ills needed by scientists is the ability to differentiate bet#een opinion, especially their o#n opinion, and facts. $ositive economicsCstatements are statements about ho# the #orld actually e!ists or behaves. 7ormative economicsCstatements are statements about ho# the #orld should e!ist or behave. Thus, positive statements are factual #hile normative statements are opinions. "o# does one distinguish bet#een the t#o types of statements0 The easiest method to distinguish bet#een the t#o is to simply as& #hether or not the statement can be tested empirically. %f the statement can be tested, then it is positive even if it is false. "o#ever, if it cannot be tested, then the statement must be an opinion, as opinions are sub/ective and are untestable. (onsider the follo#ing e!amples of statements:

1. ;Aead my lips. 7o ne# ta!es.; =eorge 'ush asserting in a presidential debate in 1>FF that if he #ere elected $resident of the H.,. he #ould not raise ta!es. 2. ;The minimum #age in the H.,. should be raised.; 3. ;6hen the general employment rate in the H.,. is five percent, unemployment rates for blac&s and other minorities are usually above ten percent.; 4. ;.very 6estern developed nation has a national health care system e!cept for the Hnited ,tates. The Hnited ,tates must follo# the lead of these other countries in providing health care for the uninsured.; 6hich of these statements is positive and #hich normative0 =eorge 'ush?s assertion that, if elected, he #ould not raise ta!es turned out to be false. "e #as elected and he did raise ta!es. "ence, this statement must be positive because it #as, in fact, tested. Any statement that can tested, even if the statement turns out to be false, must be positive. 'oth statements 1 and 3 can be tested and, hence, are positive. The assertion that the minimum #age should be raised is, ho#ever, an opinion, and cannot be tested as to its accuracy. 1pinions are often, although not al#ays, signaled by the #ords ;ought; or ;should.; ,tatement 4 has both positive and normative elements to it. The first sentence, asserting that only the H.,. does not have national health care, is positive because the accuracy of the statement can be chec&ed. The second sentence, ho#ever, is an opinion and as such is normative. As #as noted above, it is crucial for scientists to be able to differentiate bet#een fact and opinion, bet#een positive and normative statements. %f they cannot so distinguish, then the scientific method #ill be compromised. That is, the scientific method re*uires that the scientist chec& the accuracy of the model by comparing its predictions against the real #orld. "o#ever, if the scientist cannot distinguish bet#een the real #orld (positive statements) and opinions (normative statements) this step in the scientific method #ill be compromised and the method #ill fail. "o#ever, it is important to note that this does not mean that scientists should not have opinions, /ust that they must be careful to distinguish their opinions from fact.