A basic issue in political economy is the question of how a decentralized economy is possible: How can a system survive and, moreover, be efficient, if all decisions are taken independently, that is, without any explicit coordination? The issue has two sides to it. On the one hand, it is a “thought experiment,” falsifiable only on logical grounds, an object of debate for the sake of pure intellectual interest, even for people who might not live in a market economy. On (...) the other hand, for those who do or might live in such an economy, a thought experiment of this kind contains a critical political dimension, for the conclusions derived from it will usually be appealed to in arguing about the ideal organization of the economy. (shrink)

In this paper I study how the theoretical categories of consumption theory were used by Milton Friedman in order to classify empirical data and obtain predictions. Friedman advocated a case by case definition of these categories that traded theoretical coherence for empirical content. I contend that this methodological strategy puts a clear incentive to contest any prediction contrary to our interest: it can always be argued that these predictions rest on a wrong classification of data. My conjecture is that this (...) methodological strategy can contribute to explain why Friedman’s predictions never generated the consensus he expected among his peers. (shrink)

This reassessment of the long debate about Friedman's thesis on the pointlessness of testing assumptions in economics shows that Friedman's three famous examples, on which a large part of the credit given to this thesis is based, far from substantiating it, can be used to establish radically opposite conclusions. Furthermore, it is shown that this so-called “instrumentalist” thesis, when applied by Friedman to economics, is of a quite different nature and raises much more serious problems than the standard instrumentalist thesis (...) devised by some methodologists of physics. To disentangle these ambiguities concerning realism and instrumentalism applied to physics or to economics, this paper refers to Van Fraassen's “constructive empiricism”, which is helpful in reformulating, in a more satisfactory way, the essentials of Friedman's considerations about empiricism and anti-realism. (shrink)

This essay attempts to distinguish the pressing issues for economists and economic methodologists concerning realism in economics from those issues that are of comparatively slight importance. In particular I shall argue that issues concerning the goals of science are of considerable interest in economics, unlike issues concerning the evidence for claims about unobservables, which have comparatively little relevance. In making this argument, this essay raises doubts about the two programs in contemporary economic methodology that raise the banner of realism. In (...) particular I argue that the banner makes it more difficult to relate the concerns of those who wave it to those of other methodologists. Although this essay argues that many of the debates in this century between scientific realists and their opponents are not relevant to economics, it does not attack scientific realism, and it does not urge economists or economic methodologists to reject it. (shrink)