May 20, 2007

Friedman, Essays in Positive Economics, pages 3-7

Filed under: Economics, Friedman, Philosophy — duncan @ 7:46 pm

Milton Friedman begins his essay ‘The Methodology of Positive Economics’ on a note at once programmatic and sly. He begins by quoting Keynes. Not John Maynard Keynes… no, his father, John Neville Keynes. Neville was a well-respected Cambridge economist, a student, friend and disciple of Alfred Marshall, but he didn’t set the discipline alight. The positive reception of his book on economic method was tempered by (in the words of the Economic Journal) “a certain impatience at the continual reopening of a question on which authorities appear to be substantially… agreed.”
That was in 1891. Friedman’s quoting of Neville Keynes’ book is another reopening of the same undying question. It is polemical. By summoning the father, not the son, Friedman is saying: “We are now awakening from the Keynesian revolution, as from a bad dream. Even the word ‘Keynes’ will be reclaimed for theories I endorse; it will be taken from the left, taken from “a somewhat comprehensive socialisation” (General Theory, p. 378), and returned to “positive”, classical, (or neo-classical) economics.” The Keynesian revolution was, among other things, a patricide. Maynard Keynes’s contempt for the classical school was mostly directed at the big hitters of that tradition: Ricardo, Pigou, Marshall. But Keynes’s father can hardly have escaped those blows. When the son is killed, the father can be resurrected.

I have an almost frightening sense of deja-vu as I read these pages of Friedman. I know this world; I know these arguments; I know these rhetorical tricks. It is the world of analytic philosophy. More than that: it is the world of strongly positivist analytic philosophy. Has Friedman been reading Carnap? He gives no philosophical references for his claims, but listen:
“The ultimate goal of a positive science is the development of a ‘theory’ or ‘hypothesis’ that yields valid and meaningful (i.e., not truistic) predictions about phenomena not yet observed. Such a theory is, in general, a complex intermixture of two elements. In part, it is a ‘language’ designed to promote ‘systematic and organized methods of reasoning’ [he’s quoting Marshall]. In part, it is a body of substantive hypotheses designed to abstract essential features of complex reality.
Viewed as a language, theory has no substantive content; it is a set of tautologies. … [Its usefulness] depends partly on logical, partly on factual considerations. The canons of formal logic alone can show whether a particular language is complete and consistent, that is, whether propositions in the language are ‘right’ or ‘wrong’ [unless he thinks that truth is an entirely formal concept (which he can’t), he must mean “whether analytic propositions…”] Factual evidence alone can show whether the categories of the ‘analytical filing system’ have a meaningful empirical counterpart, that is, whether they are useful in analyzing a particular class of concrete problems.”
Yes, we’ve heard it all before. It’s logical positivism; it’s early analytic empiricism; it’s widespread, sure, but that doesn’t mean it’s right. Keynes (the son) wrote, in one of his most famous aphorisms: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” And economists, who believe themselves to be paragons of intellectual independence, are usually the slaves of some defunct philosopher. Friedman’s essay on method was published in 1953. So he can’t be blamed for not having read Quine’s ‘Two Dogmas of Empiricism’, published 1961. But by the time Friedman’s ideas became widely accepted, within the academy and, still more, by policy-makers, the philosophical ideas he was deploying had been largely exploded – or at least pervasively rejected – within the community of professional philosophers. I’m sure that most economists read Friedman’s lines without much knowledge of the powerful arguments that have been deployed against them.
Quine’s ‘Two Dogmas’ is arguably the most influential article ever published in the analytic tradition. Its central claim is that there is no fundamental difference between analytic and synthetic statements. (That is, between tautologous statements and statements the truth of which is dependent on experience). No proposition, Quine writes, is so fundamental to the constitution of a system of thought that it cannot in principle be subject to revision in the light of experience. Similarly (though Quine places less emphasis on this point) no proposition is so closely bound to experience that it cannot in principle be maintained in the light of any and all evidence, provided we are prepared to make sufficiently substantial changes in the rest of our system of thought.
No claim in analytic philosophy has provoked so much debate. The arguments go on, over the meaning, implications and validity of Quine’s ideas. For myself, I have an almost limitless set of objections to Quine – but on this, I’m with him. My main criticism of Quine is that he refuses to pursue the implications of his own most famous idea.
That will have to wait for another time (or not). The point here is that Friedman’s methodological claims are (so far) highly dubious. Further: he is not actually engaging in economics – except to the extent that all economics always involves philosophy. He is philosophising covertly, without giving his reasons, and without giving his sources.

Project for an infinite synthesising intelligence: trace the intellectual, cultural, (even) economic forces that generate these parallels. Oh! There’s so much to think and say. But one has to start somewhere. Tomorrow, then, or some time soon, we’ll move on to the fact/value distinction, beloved of positivists everywhere, and the basis for Friedman’s whole division between ‘positive’ and ‘normative’ economics.

This thing will run and run.

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