Friedman, 1953

16 December 2010 at 1:58 pm 12 comments

| Lasse Lien |

Some things just cannot be ignored. A prime example is Friedman’s 1953 essay “The Methodology of Positive Economics.” As most O&M readers will know Friedman’s key claim is that a theory should be judged by its predictive accuracy, not the realism of its assumptions. On the contrary, a theory that makes dramatic (i.e., unrealistic) simplifying assumptions and still generates good predictive results is considered a better theory than a more complex (i.e., realistic) theory with the same predictive performance. Few texts, and surely no other text on economic methodology, is loved, hated, and cited by so many. In much of mainstream economics Friedman’s position — or some version thereof — is routinely relied upon. For example, imagine defending game theory on the realism of its assumptions.

In 2003, on the 50 year anniversary of its publication, a conference was held at the Erasmus University in Rotterdam where the legacy of this paper was discussed. In 2009 a book was published containing a collection of papers from this conference, edited by Uskali Mäki. A link to this book can be found here, and a recently published (harsh) review of the book can be found here. Note that the book review makes interesting reading even if you do not intend to read the book (but have read the original essay).

If this is your cup of tea, you might also like this remarkable paper.

Entry filed under: - Lien -, Methods/Methodology/Theory of Science. Tags: .

Megachurches and Management Education Short Course on Network Economics

12 Comments Add your own

  • 1. Robert Higgs  |  16 December 2010 at 2:06 pm

    Damn shame that this sort of neo-positivist economic theory, besides its other objectionable aspects, has an utterly wretched record of accurate prediction. Not that mainstream economists really care, of course. They’ve got a good thing going, and they’re going to stick with it so long as it puts dinner on their tables.

  • 2. k  |  16 December 2010 at 2:08 pm

    Sorry. if its against your policy but someone at this link has some thoughts on the subject

    http://churchofrationality.blogspot.com/2010/12/if-it-was-not-rational-for-me-then-i.html

  • 3. Lasse  |  16 December 2010 at 4:43 pm

    Great link k. Highly recommended.

    As I said – it is easily loved and easily hated, but almost impossible to ignore. If you ever need to start a heated discussion, just exclaim that you like/dislike Friedman, 1953. Red spots will start appearing in peoples faces within seconds.

  • 4. Peter Klein  |  16 December 2010 at 5:49 pm

    I probably shouldn’t repeat this, but I once heard of a dinner party at which Friedman and Popper were present, and during which Friedman’s views on methodology were discussed. One of the participants told me that after the Friedmans left, Popper turned to the host and said, “That Milton Friedman . . . not very clever, is he?”

  • 5. Rafe  |  16 December 2010 at 10:08 pm

    Just as well Popper did not talk about economics and leave early:)

    Still, apart from Larry Boland’s commentary on the paper, the ovewhelming mass of secondary literature is a waste of space (and paper). Same applies to the papers inspired by Lakatos and Kuhn. And the papers that lambast Popperian “falsificationism”.

    http://www.the-rathouse.com/Pop-Schol/TrashingPopper.html

  • 6. JC Spender  |  17 December 2010 at 9:37 am

    Since I am writing on Herb Simon at the moment I have just re-read his 1978 Nobel lecture, It seems Herb did his best to burnish his credentials as an economist, given he was probably a bunch of other things too – and may not have been an economist at all – by attacking Friedman.

    See especially the footnote to p.495.

    Simon, H. A. (1979). Rational Decision-Making in Business Organizations. American Economic Review, 69(4, September), 493-513.

  • 7. Rafe  |  18 December 2010 at 6:37 pm

    Yes that was a cheap shot by Simon. Friedman’s views on methods and also those of Samuelson are usually praised or rubbished cited on party lines and Larry Boland had a very interesting classroom experiment to demonstrate that. He wrote about it, but I don’t have time to find the reference so will try to recall. He would present their ideas about method without naming the source and get the students (mostly pro Samuelson) to pass “bliind” comments which might be positive or negative but in each case they would be shocked to find that they had mostly adopted the “wrong” stance when the author was revealed!

  • 8. JC Spender  |  19 December 2010 at 10:05 am

    The idea is to present quotes from Samuelson or Friedman and then get people to guess where they come from??

  • 9. Simon Gleadall  |  21 December 2010 at 12:27 pm

    Hi, interesting links.

    I’ve always found the ‘fruitfulness’ criterion objectionable in Friedman’s methodology. He suggests that between two models of equal predictive success, we are to prefer that which offers the most promising lines of enquiry for further research.
    But how can this be known in advance? And surely any opinion on which model is likely to be more fruitful is entirely subjective?
    This criterion is often accepted by some who reject the rest of his methodology, but I’ve never seen any compelling justification for so doing.

  • 10. Rafe  |  21 December 2010 at 4:07 pm

    The fruitfulness criterion need to be applied to research programs more than models unless you broaden the meaning of model to become a complex of theories and methods which would be better called a program.

    It is applied in advance of further work (which of course means that it could turn out to be a bad choice) in the light of work that has been done.

    The thing is to have many programs in play so that fads, fashions and funding don’t allocate too many eggs to too few trendy baskets.

    And you also need to specify criteria for fruitfulness. One kind of fruitfulness is to use a new method or a new theoretical approach to generate a heap of papers but that may be just a fad with no lasting scientific value.

    Like applying the thoughts of Lakatos and Kuhn to issues in economics. That was a thriving academic industry for a decade or three but what has emerged that is helpful for economists?

  • 11. Simon Gleadall  |  22 December 2010 at 4:25 am

    I agree entirely. The whole idea of fruitfulness as a methodological criterion for models is paradoxical. Either it must be broadened out as you suggest as a plan for wider research, in which case it is no longer to do with a specific model(s) per se. Or it must surely be focussed on the model that is correct (else how is it genuinely ‘fruitful’?), but that presumably is un-knowable in advance, else there would not be a set of competing models.
    Prosaically, I suspect anyone researches what they perceive to be the most promising line of enquiry. They follow their own ideas, whatever they might be. No-one follows the least promising path as they view it, first. I think the fruitfulness criterion is simply a clumsy attempt to incorporate this common-sense pragmatism into a hypothetical method.

  • 12. Brandy Miranda  |  28 December 2010 at 10:35 pm

    Hi, interesting links. I’ve always found the ‘fruitfulness’ criterion objectionable in Friedman’s methodology. He suggests that between two models of equal predictive success, we are to prefer that which offers the most promising lines of enquiry for further research. But how can this be known in advance? And surely any opinion on which model is likely to be more fruitful is entirely subjective? This criterion is often accepted by some who reject the rest of his methodology, but I’ve never seen any compelling justification for so doing.

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