Friedman’s methodology defended perfect competition by prioritizing aggregate prediction over individual descriptive accuracy.

Evidence

First, Friedman’s emphasis on the necessary descriptive simplifi cation entailed in the act of generating hypotheses reinvigorated the embattled theory of perfect competition. Economists had long struggled against the descriptive inaccuracies of the homo economicus; as Frank Knight had often observed, its atomistic and coldly calculating vision of human activity utterly failed to explain many selfevident aspects of intersocial behavior. To Friedman, the individual falsities were beside the point, because the only criterion to use in evaluating the theory that individuals “singlemindedly” seek to maximize their “money income” was its relative capacity to predict successfully when confronted with aggregated data. Friedman’s distinction between a theory’s descriptive and predictive capacities helped justify economists’ use of an abstract theory that appeared, when applied to individual cases, to be manifestly untrue. The defense of simplifi ed hypotheses in “The Methodology of Positive Economics” was, implicitly if not overtly, a defense of the model of perfect competition. — Angus Burgin, The Great Persuasion, 407

Categorization

• XREF: Connects to the methodological debate between Austrian a priori deduction and Friedman’s positivist instrumentalism — a core fault line in the broader neoliberal intellectual history this reader charts. — connects to: Friedman’s positive economics defended Marshall’s engine-like analytic approach — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1392; Friedman defined positive economics as prediction-focused and science-like — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 53; Friedman judged hypotheses solely by predictive capacity, not by realism of assumptions — Angus Burgin, The Great Persuasion: Reinventing Free…, 405 (+1 more)
• DEFINE: Clarifies what the positive/normative economics distinction actually buys: permission to use descriptively false assumptions.

Broader Connections

• Friedman judged hypotheses solely by predictive capacity, not by realism of assumptions #expands (0.90) — Angus Burgin, The Great Persuasion, 405
• Friedman’s positive economics defended Marshall’s engine-like analytic approach #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 1392
• Friedman defined positive economics as prediction-focused and science-like #corroborates (0.75) — Donald MacKenzie, An Engine, Not a Camera, 53