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THE METHODOLOGY OF POSITIVE ECONOMICS The most basic counsel of this essay is to respect John Neville Keynes 's distinction between ''positive'' And ''normative'' Economics , what ''is'' vs. what ''ought to be'' in economic matters.A more general distinction was made by David Hume in his discussion of the Is-ought Problem . The essay sets out an epistemological marker for Friedman's own research, subsequent and earlier. The essay argues that economics as ''science'' should be free of normative judgments for it to be respected as objective and to inform normative economics (for example whether to raise the Minimum Wage ). Normative judgments frequently involve implicit ''predictions'' about the consequences of different policies. The essay suggests that such differences in principle could be narrowed by progress in positive economics (1953, p. 5). The essay argues that a useful economic theory should ''not'' be judged primarily by its tautological completeness, however important in providing a consistent system for classifying elements of the theory and validly deriving implications therefrom. Rather a theory (or hypothesis) must be judged by its:
In a famous and controversial passage, Friedman writes that: :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) (p. 14}. Why? Because such hypotheses and Descriptions extract only those crucial elements sufficient to yield relatively precise, valid predictions, omitting a welter of predictively irrelevant details. Of course descriptive unrealism by itself does not ensure predictive success (pp. 14-15). From such Friedman rejects testing a theory by the realism of its assumptions. Rather simplicity and fruitfulness incline toward such assumptions and postulates as Utility Maximization , Profit Maximization , and Ideal Type s -- not merely to ''describe'' (which may be beside the point) but to ''predict'' economic behavior and to provide an engine of analysis (pp. 30-35). PLACE IN ECONOMIC METHODOLOGY Friedman significantly influenced the Chicago School Of Economics . The essay can be read as a manifesto for that school. Still, M.W. Reder (1987, p. 415) writes that a significant minority of Chicago-school economists such as Ronald Coase and James M. Buchanan have written as if "the validity of an economic theory lies in its intuitive appeal and/or its compatibility with a set of axioms rather than the conformity of its implications with empirical observation." Friedman's criterion of ''fruitfulness'' and usage of 'positive', however, seem to blur this point. The essay and discussion that followed contributed to raising the sophistication of methodological commitments in economics. Its core claim and representation are now widely deployed in Mainstream Economics , even if methodological judgments themselves, like other regulative judgments, are not purely positive (Wong, 1987, p. 921). NOTES REFERENCES
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