Retrospectives: The Lost Art of Economics

Economists generally divide economics into two distinct categories—positive and normative—but how applied economics fits within these categories is unclear. This paper argues that applied economics belongs in neither normative nor positive economics; instead it belongs in a third category—the art of economics. Currently, many economists are trying to use a methodology appropriate for positive economics to guide their applied work, work that properly belongs in the art of economics. This three-part distinction is not mine, but dates back to a classic book, The Scope and Method of Political Economy (1891) by John Neville Keynes. In his book, Keynes argued that economists' failure to distinguish the art of economics as a separate branch from positive and normative economics would lead to serious problems. One hundred years later, he has turned out to be clairvoyant.