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Milton Friedman’s Stance: The Methodology of Causal Realism

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  • Kevin Hoover

    (Department of Economics, University of California Davis)

Abstract

Milton Friedman is usually regarded as an instrumentalist on the basis of his infamous claim that economic theories are to be judged by their predictions and not by the realism of their assumptions. This interpretation sits oddly with Friedman’s empirical work – e.g., Friedman and Schwartz’s monetary history – and his explicit rejection of theories of the business cycle that, while based on accurate correlations, nevertheless do not make economic sense. In this paper, I try to reconcile Friedman’s methodological writings with his practices as an empirical economist by, first, taking his roots in Alfred Marshall seriously and, second, by taking the methodological implications of his empirical work seriously. Friedman dislikes the word “cause”. Nevertheless, appearances to the contrary notwithstanding, Friedman is best understood as a causal realist – that is, one who understands the object of scientific inquiry as the discovery through empirical investigation of the true causal mechanisms underlying observable phenomena.

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Bibliographic Info

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 66.

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Length: 27
Date of creation: 01 Feb 2004
Date of revision:
Handle: RePEc:cda:wpaper:06-6

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Keywords: friedman; realsim;

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  1. Mayer, Thomas, 1993. "Friedman's Methodology of Positive Economics: A Soft Reading," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 213-23, April.
  2. Frazer, William J, Jr & Boland, Lawrence A, 1983. "An Essay on the Foundations of Friedman's Methodology," American Economic Review, American Economic Association, vol. 73(1), pages 129-44, March.
  3. Tobin, James, 1970. "Money and Income: Post Hoc Ergo Propter Hoc?," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 301-17, May.
  4. Milton Friedman, 1949. "The Marshallian Demand Curve," Journal of Political Economy, University of Chicago Press, vol. 57, pages 463.
  5. D. Wade Hands, 2003. "Did Milton Friedman's methodology license the Formalist Revolution?," Journal of Economic Methodology, Taylor & Francis Journals, vol. 10(4), pages 507-520.
  6. Hoover, Kevin D., 2004. "Lost Causes," Journal of the History of Economic Thought, Cambridge University Press, vol. 26(02), pages 149-164, June.
  7. anonymous, 1992. "Interview with Milton Friedman," The Region, Federal Reserve Bank of Minneapolis, issue June.
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