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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.

Suggested Citation

  • Kevin Hoover, 2004. "Milton Friedman?s Stance: The Methodology of Causal Realism," Working Papers 66, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:06-6
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    File URL: http://wp.econ.ucdavis.edu/06-6.pdf
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    References listed on IDEAS

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    1. Thomas Mayer, 1995. "Doing Economic Research," Books, Edward Elgar Publishing, number 305.
    2. Mayer, Thomas, 1993. "Friedman's Methodology of Positive Economics: A Soft Reading," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 213-223, April.
    3. Milton Friedman, 1949. "The Marshallian Demand Curve," Journal of Political Economy, University of Chicago Press, vol. 57, pages 463-463.
    4. anonymous, 1992. "Interview with Milton Friedman," The Region, Federal Reserve Bank of Minneapolis, issue June.
    5. James Tobin, 1970. "Money and Income: Post Hoc Ergo Propter Hoc?," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 301-317.
    6. 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 129-144, March.
    7. Thomas Mayer, 1992. "Truth versus precision in economics," Books, Edward Elgar Publishing, number 307.
    8. 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.
    9. Milton Friedman, 1970. "Comment on Tobin," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 318-327.
    10. Hoover, Kevin D., 2004. "Lost Causes," Journal of the History of Economic Thought, Cambridge University Press, vol. 26(02), pages 149-164, June.
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    Citations

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    Cited by:

    1. Bruno Chiarini, 2008. "Milton Friedman: la moneta, il metodo e la politica," Rivista di Politica Economica, SIPI Spa, vol. 98(1), pages 39-56, January-F.
    2. Simon Deichsel & Andreas Pyka, 2009. "A Pragmatic Reading of Friedman's Methodological Essay and What It Tells Us for the Discussion of ABMs," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 12(4), pages 1-6.
    3. 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)," MPRA Paper 7458, University Library of Munich, Germany, revised Mar 2008.
    4. Khan, Haider, 2005. "Friedman’s Methodology: A Puzzle and A Proposal for Generating Useful Debates through Causal Comparisons," MPRA Paper 7024, University Library of Munich, Germany, revised Jan 2008.

    More about this item

    Keywords

    friedman; realsim;

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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