Positive economics, normative economics, and state intervention

Distinguish between positive economics and normative economics, and classify these statements: "youth unemployment exceeds $25\ \%$", "the government should raise the minimum wage", "raising taxes on tobacco reduces its consumption", and "more public housing must be built".

Classify these statements as positive or normative and justify each decision: "the CPI rose by $3\ \%$ last year", "the Federal Reserve should cut rates now", "public debt exceeds $100\ \%$ of GDP" and "health care should be free and universal".

In an election debate, the following statements are heard: (a) "the sales tax increase on movie tickets reduced audience numbers", (b) "sales tax on culture should be lowered", (c) "subsidies for European film maintain jobs", (d) "more should be spent on trains".

1. a) Classify each statement as positive or normative and justify your classification.
2. b) Explain why it is important to separate both types of statements in public debate.

Explain three reasons why the government intervenes in the economy (market failures, income redistribution, and economic stabilization) with an example of each.

What is a natural monopoly (an activity where duplicating the network would be wasteful, such as water or railroads)? Explain why the government usually regulates its prices or runs it directly, instead of leaving it to competition.

Shared e-scooters clutter the sidewalks, cause pedestrians to fall, and their batteries generate waste.

1. a) What market failures or externalities justify the city council regulating this service?
2. b) Design the regulation (parking zones, mandatory insurance, a fleet limit) and evaluate its costs and benefits qualitatively.

Explain what income redistribution is and how the government carries it out. Illustrate it with the case of student grants funded with taxes: who provides the money, who receives it, and with what aim?

What is an economic stabilization policy? Give an example of how the government acts when a crisis arrives (maintaining benefits, public works) and explain what it tries to avoid.

The figure summarizes the logic of public intervention: objectives, instruments, and evaluation indicators.

1. a) Apply it to the case of "reducing youth unemployment": formulate an objective, two instruments, and an indicator.
2. b) Why is it important to define the indicator before applying the measure?

Name three instruments of economic intervention by the state and give a real-life example of each applied in Spain.

Distinguish between the objective and the instrument of a public policy. In the sentence "to reduce youth unemployment, we will subsidize the hiring of under-$25$s", state which is the objective and which is the instrument, and give another alternative instrument for the same objective.

The federal government subsidizes the purchase of electric bicycles with $\$400$.

1. a) Formulate the policy's objective in a measurable way.
2. b) Design its evaluation: what data you would collect before and after, and what group you would compare the buyers with.
3. c) Point out two unintended effects you would watch for (rising bike prices, aid going to people who were going to buy one anyway) and how you would detect them.

A state creates an annual charge of $\$500$ for apartments that have been empty for more than two years, with the aim of bringing them onto the rental market.

1. a) Analyze the policy: objective, instrument and incentive mechanism (what does it expect owners to do?).
2. b) Anticipate two unintended effects (transferring ownership to companies, apartments formally declared "occupied", little revenue) and explain each one.
3. c) Design the two-year evaluation: indicators, data needed and what you would compare the state with.