Milton Friedman's Stance: The Methodology of Causal Realism

27 Pages Posted: 19 May 2006

See all articles by Kevin D. Hoover

Kevin D. Hoover

Duke University - Departments of Economics and Philosophy

Date Written: February 5, 2004

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.

Keywords: Milton Friedman, methodology, monetary economics, causal realism, causality, realism, instrumentalism, as if reasoning, realism of assumptions

JEL Classification: B20, B21, B23, B40, B41

Suggested Citation

Hoover, Kevin D., Milton Friedman's Stance: The Methodology of Causal Realism (February 5, 2004). Available at SSRN: https://ssrn.com/abstract=902062 or http://dx.doi.org/10.2139/ssrn.902062

Kevin D. Hoover (Contact Author)

Duke University - Departments of Economics and Philosophy ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

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