Unrealistic assumptions do not count as legitimate criticisms in financial economics

Evidence

Around here,” the prominent finance theorist Merton Miller told me, “we just sort of take [Friedman’s viewpoint] for granted. Of course you don’t worry about the assumptions.” (Miller interview) By “here” Miller meant the University of Chicago, but he could as easily have been describing much of finance theory. Attitudes to the verisimilitude of assumptions did differ, with Samuelson and (to a lesser extent) his student Robert C. Merton distancing themselves somewhat from the more Friedmanesque attitudes of some of their colleagues. However, that a model’s assumptions were “unrealistic” did not generally count, in the epistemic culture of financial economics, as a valid argument against the model. — Donald MacKenzie, An Engine, Not a Camera, 63

Categorization

• DEFINE: Establishes the Friedman-as-if-epistemology that the performativity thesis tacitly challenges — the baseline attitude this whole book repositions.
• XREF: connects to: Friedman judged hypotheses solely by predictive capacity, not by realism of assumptions — Angus Burgin, The Great Persuasion: Reinventing Free…, 405; Friedman armed finance theorists against ‘unrealistic’ critiques of their models. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 62; Economists’ modeling may bend economic reality toward theoretical assumptions — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 116 (+8 more)

Broader Connections

• Friedman armed finance theorists against ‘unrealistic’ critiques of their models. #corroborates (0.92) — Donald MacKenzie, An Engine, Not a Camera, 62
• Empirical failure does not dislodge orthodox economists from their theory #corroborates (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 722
• Economists’ modeling may bend economic reality toward theoretical assumptions #corroborates (0.75) — Donald MacKenzie, An Engine, Not a Camera, 116