Friedman’s Methodology: A Puzzle and A Proposal for Generating Useful Debates through Causal Comparisons (with a postscript on positive vs. normative theories)

Khan, Haider (2008): Friedman’s Methodology: A Puzzle and A Proposal for Generating Useful Debates through Causal Comparisons (with a postscript on positive vs. normative theories).

Abstract

Milton Friedman’s “The Methodology of Positive Economies” is still one of the most widely read pieces on economic methodology. One reason for this might be Friedman’s attractive proposal that economists use theories and hypotheses as pragmatic devices to summarize data and make predictions over the relevant range of observations. Logically, this should lead to a fair minded comparison among many contending theories. However, Friedman's actual examples and discussion of these examples raise a puzzle. The field of comparison seems unduly narrow from the beginning. In my attempt to resolve this, I consider some logical and ontological problems for Friedman's position. I end up by suggesting a scientific realist approach to testing theories by causal comparisons over a wide field of contending theories.

• Item Type: MPRA Paper
• Language: English
• Keywords: Positive economics, normative economics, prediction, realism, scientific realism, causal comparisons, causal depth
• Subjects: A - General Economics and Teaching > A1 - General Economics > A13 - Relation of Economics to Social Values; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology

References

Basu, Kaushik(2000).Prelude to Political Economy: A Study of the Social and Political Foundations of Economics, Oxford:Oxford University Press Boland, Lawrence, 1979. "A Critique of Friedman's Critics," Journal of Economic Literature 17: 503-22. Boyd, Richard N. (1973) "Realism, Underdetermination, and a Causal Theory of Evidence," Nous, pp . 1-12. Coase, R. (1999) ‘Interview with Ronald Coase’, Newsletter of the International Society for New Institutional Economics, Vol. 2, Spring, No. 1. Friedman, Milton, 1953. "The Methodology of Positive Economics." pp. 3-43 of Essays in Positive Economics. Chicago: University of Chicago Press. ----(1999) ‘Conversation with Milton Friedman’, in B. Snowdon and H. Vane (Eds.) Conversations with Leading Economists: Interpreting Modern Macroeconomics, Cheltenham: Edward Elgar, pp.124–44. Goldman, Alvin I. (1 967). "A Causal Theory of Knowing," Journal of Philosophy pp. 355-72. Harman, Gilbert(1 965). "The Inference to the Best Explanation," Philosophical Review pp. 88-95 Hammond, J. Daniel, unpublished. "Early Drafts of Friedman's Methodological Essay," delivered at the History of Economics Society Meetings, June, 1991. Hempel, C.G. 1965 Aspects of scientific explanation, and other essays in the philosophy of science: New York: Free Press Hirsch, Abraham and Neil de Marchi, 1990. Milton Friedman: Economics in Theory and Practice. Ann Arbor: University of Michigan Press. Hoover, Kevin D. (2004). "Milton Friedman's Stance: The Methodology of Causal Realism", Unpublished Paper, UC Davis.

Iwai, Katsuhito(2001). "Schumpeterian Dynamics: A Disequilibrium Theory of Long_Run Profits", in L. Punzo(ed.) Cycles, Growth and Structural Change London: Routledge James J. and H.A. Khan (1998), Technological Systems and Development, Macmillan Khan, H.A. (2002), "Innovation and Growth: A Schumpeterian Model of Innovation", Oxford Development Studies, Vol.30, No.2: 289-306. -----(2003) " On Paradigms, Theories and Models", Problemas del Desarello, October( can be downloaded in working paper form from http://ideas.repec.org/e/pkh22.html ) _____(1998) Technology, Development and Democracy, Cheltenham,UK: Edward Elgar

Leamer, E.E. (1978) Specification Searches: Ad hoc Inferences with Non-experimental Data, New York: John Wiley and Sons.

Lagueux, Maurice. 1994. "Friedman's 'Instrumentalism' and Constructive Empiricism in Economics", Theory and Decision, vol 37, 1994, 147-174.

----- undated Ms. "Economists' flight from ontology", Discussion Paper, Université de Montréal, Montréal, Canada.

Lawson, T.,(1997) Economics and Reality, London: Routledge. --------------(2003) Reorienting Economics, London and New York: Routledge.

Leontief, W. (1982) Letter in Science, Vol. 217, pp.104–107. Miller, R.(1987), Fact and Method, Princeton: Princeton University Press. Rubinstein, A. (1995) ‘John Nash: the master of economic modeling’, Scandinavian Journal of Economics, Vol. 97, No. 1, pp.9–13.