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Positivism about Economics in Philosophy of Social Science. Edit this record. Mark as duplicate. Find it on Scholar.

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Request removal from index. Revision history. Configure custom resolver. Chapters BETA. Hoyningen-Huene Paul - manuscript. Aki Lehtinen - - Journal of Economic Methodology 20 2 Jacob Bjorheim - unknown. Cambridge University Press. Eric Schliesser - - Philosophy of the Social Sciences 35 1 Friedman, Positive Economics, and the Chicago Boys. Eric S. Schliesser - manuscript. The Methodology of Positive Economics. University of Chicago Press. Milton Friedman was born in Broklyn, New York, on July 31, , the youngest child in a family of poor jewish immigrants from Carpatho-Ruthenia then in the Hungarian part of Austria-Hungary, nowadays a part of independent Ukraine.

His early schooling was in the public school system of Rahway, New Jersey, were he grew up, and in he obtained a state scholarship to attend Rutgers University, which he entered with the intention of majoring in mathematics his original career plan was to eventually become an actuary. In college, however, chance intervened, as he puts it, in the form of "two extraordinary teachers [of economics] who had a major impact on my life": Homer Jones and Arthur F. Burns Friedman, Under their influence, he switched majors from mathematics to economics.

Upon graduation from Rutgers in , in the middle of the Great Depression, Friedman received two scholarship offers for graduate study, one to study economics at the University of Chicago, the other to study applied mathematics at Brown University. Both, it seems, were equally attractive: "It was close to a toss of a coin that determined which offer 1 accepted" Friedman, In the event, he opted for Chicago, and became an economist 1.

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There, he also met two fellow graduate students, W. Allen Wallis and George J. Stigler, who would become life-long friends and colleagues 3.

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His friendship with Stigler was especially significant, as the Stigler-Friedman team, more than any other pairing of individuals, would eventually define and personify what came to be known as the "Chicago School" of economics 4. The following year he went to Columbia University, where he studied mathematical statistics under Harold Hotelling, and economics with Wesley C. Mitchell and John M. In , Friedman returned to Chicago as research assistant to Henry Schultz, who was then working on his massive study of empirical demand curves 5. At this point it is perhaps useful to pause and reflect on this remarkable educational experience.

A theorem on the methodology of positive economics - Eduardo Pol

Though it resulted from a seemingly fortuitous combination of circumstances, it would have been very hard to deliberately plan a program better suited to his future professional development. At the theoretical level, the Chicago influence was of course decisive, though one of the most important aspects of Friedman's approach to economic research -his careful and detailed analysis of empirical evidence- did not come from Chicago, but from his contact with Wesley Mitchell and the NBER.

In fact, though empirical research is now regarded as a hallmark of "Chicago" economics, this is at least partly due to the later influence of Friedman himself. In the 's, and with the somewhat marginal exceptions of Henry Schultz and Paul Douglas, at Chicago the emphasis was more on theory than on empirical analysis Reder, In the early stages of his career, however, the most important influence was that of Hotelling. Indeed, at first Friedman showed more signs of becoming an eminent statistician than a great economist. One of his first professional publications developed a non-parametric technique for the analysis of variance under certain conditions Friedman, As in the case of most of his analytic contributions, the motivation for the "Friedman test" was to facilitate the solution of practical problems posed by data analysis in this case, income and expenditure data 6.

During World War II, and after a brief stint at the Treasury Department, Friedman was a member of the "Statistical Research Group" at Columbia, working on combat problems and quality inspection for war materials 7.

(PDF Download) The Methodology of Positive Economics: Reflections on the Milton Friedman Legacy

This group comprised a truly dazzling collection of brilliant statistical minds, and their joint efforts would result, inter alia, in the development of "sequential analysis," a very important advance in statistical theory. Essentially, Friedman, together with Allen Wallis and a Navy captain Garret Schuyler , noticed that the conventional method of taking samples of a predetermined size was inefficient, since it did not take into account information generated by the sample process itself.

The idea was later rigorously developed by Abraham Wald, who proved the basic theorem underlying sequential testing, which was quickly adopted and adapted as the standard method for inspection sampling 8. After the war, Friedman served briefly on the faculty of the University of Minnesota, and in he returned to the University of Chicago as professor in the Department of Economics, where he stayed until his retirement in The return to Chicago coincided with a major change in the focus of his research activity, which shifted away from pure statistics, and eventually centered almost entirely on economics.

He was back home.


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The Methodology of Positive Economics. Friedman had a profound impact on economic research during his lifetime, and his influence reached far beyond the particular fields he chose for his own research. Much of this influence was due to his opinions on methodological issues, which were clarified at an early stage of his career.

A famous essay on "The Methodology of Positive Economics" is arguably his most well-known work among professional economists, as well as one of the most controversial. Friedman began his essay by distinguishing between positive economics, a "body of systematized knowledge concerning what is," and normative economics, "a body of systematized knowledge discussing criteria of what ought to be" Friedman, 3; unless otherwise stated, all page references in parentheses in this section are to this work.

Essays in Positive Economics - Wikipedia

Both disciplines are related, though the conclusions of positive economics are independent of ethical positions or normative judgments. The purpose of positive economics is to "provide a system of generalizations that can be used to make correct predictions about the consequences of any change in circumstances" Economic theories should be evaluated according to strictly empirical criteria: "Viewed as a body of substantive hypotheses, theory is to be judged by its predictive power for the class of phenomena which it is intended to 'explain. This is stressed repeatedly throughout the essay:.


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The hypothesis is rejected if its predictions are contradicted "frequently" or more often than predictions from an alternative hypothesis ; it is accepted if its predictions are not contradicted; great confidence is attached to it if it has survived many opportunities for contradiction : , italics in the original.

Using language that is nowadays associated with Karl Popper's philosophy of science Popper, [] , Friedman added that "factual evidence can never 'prove' a hypothesis; it can only fail to disprove it, which is what we generally mean when we say, somewhat inexactly, that the hypothesis has been 'confirmed' by experience" : 9 9. To be sure, the nature of economic phenomena presents special difficulties, since it is usually impossible to perform controlled experiments, explicitly designed to eliminate complicating factors.


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Therefore, "we must rely on evidence cast up by the 'experiments' that happen to occur" Friedman held, however, that "the inability to conduct so-called 'controlled experiments' does not No experiment can be completely controlled, and every experience is partly controlled in the sense that some disturbing influences are relatively constant in the course of it" Furthermore, "evidence cast up by experience is abundant and frequently as conclusive as that from contrived experiments; thus the inability to conduct experiments is not a fundamental obstacle to testing hypotheses by the success of their predictions" On the other hand, such evidence is admittedly "far more difficult to interpret.

It is frequently complex and always indirect and incomplete. Its collection is often arduous, and its interpretation requires subtle analysis and involved chains of reasoning, which seldom carry real conviction" : In short, the "crucial" experiment is seldom possible in economics, which hinders adequate hypothesis testing, though "this is much less significant than the difficulty it places in the way of achieving a reasonably prompt and wide consensus on the conclusions justified by the available evidence" The process of weeding-out failed hypotheses is slower than in other sciences.

On occasions, however, casual experience provides evidence that is just as dramatic as any controlled experiment the empirical correlation between monetary growth and price inflation is a good example. In Friedman's approach the criteria for acceptance or rejection of hypotheses are thus strictly empirical. Unlike his teacher Wesley Mitchell, however, Friedman was by no means opposed to abstract theory per se. In fact, one of his objectives in this essay was precisely to defend the abstract nature of neo-classical economic theory, which was often criticized due to its lack of realistic assumptions.

Friedman thought these critiques were misplaced, and that scientific hypotheses should not be judged by the realism of their assumptions, since these can never be "realistic" in a descriptive sense. In fact,. Truly important and significant hypotheses will be found to have "assumptions" that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions in this sense.

A hypothesis is important if it "explains" much by little, that is, if it abstracts the common and crucial elements from the mass of complex and detailed circumstances surrounding the phenomena to be explained and permits valid predictions on the basis of them alone Theoretical assumptions are simplifications of reality, and in this sense they must be descriptively false i.

To Friedman, the realism of the assumptions was unimportant, and "the relevant question to ask about the 'assumptions' of a theory is not whether they are descriptively 'realistic,' for they never are, but whether they are sufficiently good approximations for the purpose in hand," which can be determined only by "seeing whether the theory works, which means whether it yields sufficiently accurate predictions" The "Methodology" essay was and still remains quite controversial, and it generated a large secondary literature".

Friedman, however, having stated his case, preferred to let others argue about it, and never responded to any of his critics. Instead, he decided to move on, and was more concerned with applying his principles in practice. Since about his interests began to center on monetary economics, and in this field he achieved his greatest prominence. A notable collection of empirical studies edited by Friedman Studies in the Quantity Theory of Money, was based on doctoral dissertations supervised in his famous Money and Banking Workshop at Chicago.

A longer run project resulted from his association with the NBER, where he took charge of the monetary aspects of a much larger-scale project on business cycles. The detailed investigations related to this project resulted in three volumes co-authored with Anna J. The theoretical framework underlying this empirical research, and the link to previous monetary traditions at Chicago, was Friedman's introduction to the Studies volume: "The Quantity Theory of Money.