Jim Devine wrote:
On the Methodology of The Methodology of Positive Economics
By James Devine
at http://maxspeak.org/devine.html
on January 29, 2007.
There is a superb chapter on this very point/excample in
Homer-Dixon's recent book, "The Upside of Down".
Paul P
<snip>
well the model as a whole predicts. But Friedman can save the model by
assuming that leaves think in a different way than we do. Similarly,
the Ptolemaic Earth-centered model of the solar system can be made to
predict the movement of planets better than the Copernican one -- by
assuming new epicycles (unrealistic complications).
Friedman, of course, assumed that free markets always produce the best
of all possible worlds. But then people pointed to poverty, pollution,
or pestilence. He defended the model with another assumption: when
markets don't do a good job, it's because the government meddled with
them.
Similarly, the assumption that each of us is totally individualistic
does not to fit with experience. But the added assumption that each is
operating within market institutions makes models based on the first
one much more accurate in their predictions. This is because trying to
survive in markets encourages people to act in an individualistic way
(a fact that Friedman ignored).
Instead of Friedman's view, we must ask: is the cost of an
unreasonable assumption (consciously-calculating leaves) worth the
value of the resulting prediction? Crucially, it's a judgment call.
Thus, our value judgments help us to decide which assumptions to make.
Friedman and his followers make assumptions based on laissez-faire
ideology, which is heavily based on value judgments. They then use his
imprimatur to defend their unreasonable assumptions. This transforms
their normative views into "positive economics." But this is merely
legerdemain.
[1] 1953. The Methodology of Positive Economics. In his Essays in
Positive Economics. U. of Chicago, pp. 3-43.
http://members.shaw.ca/compilerpress1/Anno%20Friedman%20Positive.htm,
as of Jan. 26, 2007.
[2] "I suggest the hypothesis that the leaves are positioned as if
each leaf deliberately sought to maximize the amount of sunlight it
receives, given the position of its neighbors, as if it knew the
physical laws determining the amount of sunlight that would be
received in various positions and could move rapidly or
instantaneously from any one position to any other desired and
unoccupied position." (Friedman, p. 19.)
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