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Milton Friedman on How economics should be done

If we are to use effectively these abstract models and this descriptive material, we must have a comparable exploration of the criteria for determining what abstract model it is best to use for particular kinds of problems, what entities in the abstract model are to be identified with what observable entities, and what features of the problem or of the circumstances have the greatest effect on the accuracy of the predictions yielded by a particular model or theory.
The Methodology of Positive Economics
Journal article, 1953
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  1. The construction of hypotheses is a creative act of inspiration, intuition, invention; its essence is the vision of something new in familiar material. The process must be discussed in psychological, not logical, categories; studied in autobiographies and biographies, not treatises on scientific method; and promoted by maxim and example, not syllogism or theorem.
    The Methodology of Positive Economics
    Journal article, 1953
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  2. Before there were airplanes, nobody thought of the problem of trespass through air. So simply saying “private property” is a mantra, not an answer. Simply saying “use the market” is not an answer.
    Say 'No' to Intolerance
    Speech, 1991, Liberty, vol. 4, no. 6 (July 1991), p. 20
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  3. Over the period covered by these data, a drastic change has occurred in the responsibilities undertaken by the state to provide assistance to the aged, unemployed and otherwise dependent. This change has had divergent results on the particular data under discussion. The availability of assistance from the state would clearly tend to reduce the need for private reserves and so to reduce private saving—it is equivalent, in terms of our hypothesis, to a reduction in the variance of transitory components.
    A Theory of the Consumption Function
    Book, 1957, Princeton University Press for the National Bureau of Economic Research, Chapter V, “Consistency of the Permanent Income Hypothesis with Existing Evidence on the Relation between Consumption and Income: Time Series Data,” p. 123
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