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Essay: The Methodology of Positive Economics by Milton Friedman

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  • Published: 1 February 2018*
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Milton Friedman (07/31/1912-16.11.2006) – famous American economist, who received the Nobel Prize for his work in the field of economic science.

Milton Friedman's The Methodology of Positive Economics of Economics was first published in 1953 as an essay, which was then reprinted in different years. To this day, Friedman’s views remain the basis upon which philosophers of economic sciences can rely.

Positive economics should provide such theoretical knowledge and “hypotheses” that can give correct, sufficiently measurable predictions for phenomena that we cannot yet observe. A distinction is made between positive and normative sciences, as well as their relationship. If positive science raises questions of change under given conditions, one might say, is engaged in forecasting, then normative science determines the standards that should be created for society. Both sciences have a temporary orientation of the future period. There is a close relationship between the sciences in question, which inevitably leads to confusion.

According to Friedman, that positive economics can be classified as objective, it is based on facts that already exist, it remains only to systematize a number of these facts to determine the forecasts.

This paper presents a lot of interesting theories regarding hypotheses with which it is impossible not to agree. The author pays much attention to the hypotheses, believing that the facts cannot prove it, they are intended to reveal the fallacy, but not the proof, which in its own way has a different meaning. Moreover, the analysis is characterized by a finite number of observations, but an infinite number of possible hypotheses.

The methodology of positive science also has a goal – to make science as objective and realistic as possible. For this, the range of phenomena must be expanded to which hypotheses and prediction can be applied. The more confirmation, the more likely the prerequisites and hypothesis can be considered.

About the theory, it can be said that its value is higher if it is necessary to collect less initial information for the prediction, and at the same time the predictions should strive, of course, for maximum accuracy. Also for each theory a number of circumstances is determined in which the hypothesis is valid.

“The methodology of positive economics” has a number of illustrative examples that allow to more thoroughly understand the essence of the methodological problems, which Friedman writes about.

The methodology of positive economics. A very interesting example is provided with the location of the leaves on the trees, which seem to have committed actions that lead to such an arrangement. In this case, you can think so, because we see how certain actions lead to an effect, there is no discrepancy in this. But if it is necessary to explain the arrangement of the leaves, then other information is used, then no longer a hypothesis is created for explanation, but vice versa. Similarly, the example of a billiard, which also has the hypothesis that the player is calculating his blow using complex mathematical formulas. And Friedman gives a wonderful example with firms that also seem to know all the functions of supply and demand for their goods, counting all marginal costs.

In fact, neither the leaves can perform actions, so that the arrangement is in this way, neither billiard players count the angle and all other mathematical elements, nor businessmen in most cases (including successful activities) deduce functions, do not build graphs . In the latter two cases, when the actions directly have a human factor, it is more correct to assume that this is a series of habitual reactions, a random choice, but it is unlikely that a long and careful prediction.

The complexity of the situation in the distinction, throughout Friedman pointed to a fine line – the difference between positive and normative science, the adoption of hypotheses, the results of forecasting, the choice of specific prerequisites, what are these very prerequisites, and what is a consequence. When choosing a specific phenomenon for the analysis, the prerequisites and consequences can be interpreted in such a way that it was previously a prerequisite, but now it is a consequence, and vice versa. The main criterion for distinguishing the effects and prerequisites can be viewed in the context of the class of phenomena for which the hypothesis was created. More general prerequisites are formed from more general ones, which is another approach to testing an indirect hypothesis.

The goal of analyzing phenomena and predictions is also important. If a hypothesis can be used to achieve one goal, then there is no reason to indicate that it also applies to another. Again, an interesting point, in my opinion, is that false premises may lead to new thoughts about other consequences of the hypothesis.

Milton Friedman also cites (probably already a fact) that science has no certainty. The same evidence and background will be considered.

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