Revisiting Friedman’s “On the methodology of positive economics” (“F53”)

Abstract

In this paper, I shall defend two main claims. First, Friedman’s famous paper “On the methodology of positive economics” (“F53”) cannot be properly understood without taking into account the influence of three authors who are neither cited nor mentioned in the paper: Max Weber, Frank Knight, and Karl Popper. I shall trace both their substantive influence on F53 and the historical route by which this influence took place. Once one has understood these ingredients, especially Weber’s ideal types, many of F53’s astonishing sentences like “the more significant the theory, the more unrealistic the assumptions” make good sense. Second, I shall claim that the much-discussed question whether Friedman’s essay espouses an instrumentalist or a realist position, is the wrong question to be asked. I shall illustrate that by a comparison with examples from physics in which also unrealistic assumptions are made. Also there, the question whether these assumptions are indicators of instrumentalism or realism is not appropriate. Cleared from these misunderstandings, F53 presents itself as an interesting and reasonable but much less controversial contribution to the methodology of economics.