Milton Friedman on how economics should be done
Friedman on prediction as the test of a theory, and on assumptions that need not be realistic to be useful.
15 passages in the archive13 checked against the source2 not yet checked
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 IntoleranceSpeech, 1991, Liberty, vol. 4, no. 6 (July 1991), p. 20Checked against the sourceRead the originalRent control is certainly one example in which I will challenge you to find from the professional economists from the left to the right, I will challenge you to find anybody who will defend rent control from a technical economic point of view.
The Open MindInterview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)Checked against the sourceWatch itThe 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 EconomicsJournal article, 1953Not yet checkedTo the despair of every economist, it seems almost impossible for most people other than trained economists to comprehend how a price system works.
Blaming the ObstetricianColumn, 1979, Newsweek (June 4, 1979); reprinted in the Congressional Record, Extensions of Remarks, June 7, 1979, pp. 14007 to 14008, introduced by Representative G. William Whitehurst of Virginia, who describes it as “an article by Milton Friedman, which appeared in the June 4, 1979, issue of Newsweek”, Congressional Record, June 7, 1979, pp. 14007 to 14008Checked against the sourceRead the originalI’ve had this experience many times. Get a dozen people in a room together, some of them economists and some non-economists, political scientists, sociologists, journalists, whatever they may be. Start any subject going. Within 15 minutes, all the economists will be on the same side, whatever their political persuasion is.
The Open MindInterview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)Checked against the sourceWatch itOn the other hand, if I say, regardless of the consequences, it is morally wrong for a government official to force me to rent a piece of property to you for less than the price at which I would voluntarily rent it, at that point, I am now speaking as a man with values and philosophy. That is to say, you have both principle and expediency involved. The economist talks to the expediency. The philosopher, the ethicist, the human being, talks to the principle.
The Open MindInterview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)Checked against the sourceWatch itThe situation today is different. Scattered studies have been brought together, additional studies made and some earlier studies re-evaluated. The evidence is now overwhelming that the unemployment predicted by economic analysis is confirmed by economic experience.
Legislating UnemploymentColumn, 1972, Newsweek (1972; the issue current on June 28, 1972); reprinted in full in the Congressional Record, Extensions of Remarks, June 28, 1972, p. 23100, Congressional Record, June 28, 1972, p. 23100Checked against the sourceRead the originalWell, the way in which many economists have implicitly reconciled it is by being in favor of the free market in general and opposed to the free market in particular. This area is a special case. It needs regulation. This area is a special case. You know, the same thing happens to businessmen. Every businessman is in favor of private enterprise. Except for himself.
The Open MindInterview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)Checked against the sourceWatch itEconomists may not know much. But we know one thing very well: how to produce surpluses and shortages.
Blaming the ObstetricianColumn, 1979, Newsweek (June 4, 1979); reprinted in the Congressional Record, Extensions of Remarks, June 7, 1979, pp. 14007 to 14008, introduced by Representative G. William Whitehurst of Virginia, who describes it as “an article by Milton Friedman, which appeared in the June 4, 1979, issue of Newsweek”, Congressional Record, June 7, 1979, pp. 14007 to 14008Checked against the sourceRead the originalKeynes was a great economist. In every discipline, progress comes from people who make hypotheses, most of which turn out to be wrong, but all of which ultimately point to the right answer. Now Keynes, in The General Theory of Employment, Interest and Money, set forth a hypothesis that was a beautiful one, and it really altered the shape of economics. But it turned out that it was a wrong hypothesis. That doesn’t mean that he wasn’t a great man!
The Romance of EconomicsInterview, 2006, Interview by Tunku Varadarajan, The Wall Street Journal; reprinted in Hoover Digest 2006 No. 4Checked against the sourceRead the transcriptThe negative lesson is that we must beware of intolerance if we’re going to be really effective in persuading people. The writings of both Rand and Mises—and much libertarian literature—take for granted that hard questions have easy answers, that it’s possible to know something about the real world, to derive substantive conclusions, from purely a priori principles.
Say 'No' to IntoleranceSpeech, 1991, Liberty, vol. 4, no. 6 (July 1991), p. 18Checked against the sourceRead the originalOver 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 FunctionBook, 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. 123Checked against the sourceFind the bookI have found, over a long time, that some people are natural economists. They don’t take a course, but they understand—the principles seem obvious to them. Other people may have Ph.D.s in economics, but they’re not economists. They don’t think like an economist. Strange, but true.
The Romance of EconomicsInterview, 2006, Interview by Tunku Varadarajan, The Wall Street Journal; reprinted in Hoover Digest 2006 No. 4Checked against the sourceRead the transcriptStagflation was the end of naive Keynesianism. Now obviously the term "Keynesian" can mean anything you want it to mean, and so you have new Keynesianism, but this particular feature was put to an end by the stagflation episode.
Commanding Heights: Milton Friedman interviewInterview, 2000, PBS, “On John Maynard Keynes,” interview conducted October 1, 2000Checked against the sourceRead the transcriptIf 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 EconomicsJournal article, 1953Not yet checked
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