View source for Against Friedman: Outline of a Winchian critique of positivist economics

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{{DES | des = [[Rupert Read]]'s paper in progress finds fatal flaws in [[Milton Friedman]]'s "The methodology of positive economics". | show=}}
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Against Friedman: Outline of a Winchian critique of positivist economics

This chapter is a case-study in Winchian method. 
It is now just over half a century since Milton Friedman published his ‘definitive’ methodological paper, “The methodology of positive economics”. That paper is certainly not as widely- and well-loved within economics as it once was; but on the other hand it has not been superceded, is still in some places taught as a locale of reliable methodological maxims, and (most importantly) is still widely influential on economics textbooks. Or at least: many mainstream economics textbooks still read as if they are structured around the background of Friedman’s methodological approach.
	Friedman taught Economics as comprehensible in an instrumentalist or positivist fashion, prescinding entirely from the human status of its actors. Over the past generation, the standing of Positivism in economics has come under increasing challenge, but there is reason to believe that it has never really been overcome or advanced upon, within ‘mainstream’ economics. Friedman’s central paper, “The methodology of positive economics”  , was the definitive statement of economic methodology -- of the ‘philosophy’ of economics -- for about 25 years, up until the late 1970s. It has not been replaced; but there has been a seeming gradual shift from the notion of constrained maximisation which conditions the Friedmanian approach to game theory, which has risen as an alternative ‘paradigm’ to Friedman’s. However, though I cannot argue this here,  game theory -- and ‘rational choice theory’ more generally -- is actually not in any meaningful sense an alternative ‘paradigm’ to Friedman’s; in all fundamental respects, the two barely differ. And nor does the recent tendency toward the explicit introduction of psychological ideas into the positivist approach usually make any significant difference, either. For the ‘rational choice’ model and the psychological assumptions in question assume as their standard case (from which they allow occasional departures) a robotically selfish individual, which is already assumed in Friedman. 
	The great advantage of Positivism as (formerly) an explicit or (latterly) a perhaps-unconscious ideology of economics is of course that its scientific nature is then seemingly assured.
	The longevity, in effect, of Friedman’s work is, I believe, a symptom -- of the continued domination of the social sciences by the very images that Peter Winch questioned, just under half a century ago, soon after Friedman wrote. I take issue, in this paper, with the philosophy of the social sciences implicit and explicit in Friedman’s piece. Winch never explicitly considered Friedman’s work; I aim here to undermine, drawing implicitly and explicitly on Winch’s thinking, the influential claim of Friedman to have produced a methodology suitable for the explanation specifically of human/social action.

I propose in this paper polemically but definitively to dispose of Friedman’s founding of a positive science of economics. I will not attend to much of the vast literature that surrounds this paper of Friedman’s,  for I believe that, once one is enabled to appreciate the utter worthlessness of Friedman’s claims in his most famous text, one is freed up to do some serious philosophy of ‘social science’, and that one can be so enabled simply by working carefully through the text of the opening pages of Friedman’s paper. 
That is; once one has read Friedman with a roughly Winchian sensibility, one can start at last to think about the sense in which the social science which seems to have the strongest claim to scientificity, so much so that it has at times eschewed even the prefix social, actually is a science. Or, indeed, is not.

Let us consider here then in some detail the example around which Friedman built his still-very-influential understanding of economics as a ‘positive’ science. I quote from the founding example in Friedman’s paper:  

“Let us turn now to [an] example...a constructed one designed to be an analogue of many hypotheses in the social sciences. Consider the density of leaves around a tree. I suggest the hypothesis that the leaves are positioned as if each leaf deliberately sought to maximize the amount of sunlight it receives, given the position of its neighbours, as if it knew the physical laws determining the amount of sunlight that would be received in various positions and could move rapidly or instantaneously from any one position to any other desired and unoccupied position.” [p.19]

Let us not dwell on the highly-problematic vagueness (and thus vacuity?) of this ‘hypothesis’, even if we were notionally to grant its stunningly unrealistic assumptions -- the risibility involved, for instance, in our having to think of each leaf as already existing prior to its ‘choice’ as to where to go, the lack of any attention paid to the branches and twigs that support and nourish each leaf (can the leaves move to any “desired and unoccupied position” ... in the world?!), and so forth. Let us not, that is, concern ourselves overly with the glorious ignorance of the actual nature of hypotheses in the physical or biological sciences that Friedman, perhaps worryingly,  manifests/exhibits, here. Of more interest, for present purposes, is the following feature of this massively influential “example” for Friedman’s subsequent discussion: this “analogue of many hypotheses in the social sciences” has the singular hidden advantage over virtually any actual instance in the natural sciences that it nicely smuggles in human being and social action! I.e. The leaves precisely behave here as (if they are) conscious beings -- and moreover as utility-maximisers. Friedman has smuggled into his key example of ‘natural’ science the very -- tendentious -- vision of social science that he will want subsequently to foist upon his readers!  
	Friedman wants us to forget that his assumptions here include, albeit in a debased (because utility-maximising) version, the very basis of human action -- consciousness, ‘reflexivity’ -- that the alleged economic laws he will mention or describe to us subsequently occlude. But his example is a ‘nice’ one for him -- and again, it is hard to think that this could be accidental -- because it is a ‘natural science’ hypothesis that works because of an analogical appeal to the human/social world. By a neat piece of symmetrical -- though actually fallacious -- reasoning, he can then make it seem natural that ‘human/social science’ ‘hypotheses’ should work because of an analogical appeal to the natural world. That is what he wants: for natural science to be the model for human and social science. That is what this example is supposed, by a (rhetorically-deeply-dubious) roundabout method, to get for him.
	To see in full how, we need simply to read on down the page in Friedman:

“Now, some of the more obvious implications of this hypothesis are clearly consistent with experience: for example, leaves are in general denser on the south than on the north side of trees but, as the hypothesis implies, less so or not at all on the northern slope of a hill or when the south side of the trees are shaded in some other way. Is the hypothesis rendered unacceptable or invalid because, so far as we know, leaves do not “deliberate” or consciously “seek”, have not been to scholl and learned the relevant laws of science or the mathematics required to calculate the “optimum” position, and cannot move from position to position? Clearly (sic.), none of these contradictions of the hypothesis is vitally relevant; the phenomena involved are not within the “class of phenomena the hypothesis is designed to explain”; the hypothesis does not assert that leaves do these things but only that their density is the same as if they did. Despite the apparent falsity of the “assumptions” of the hypothesis, it has great plausibility because of the conformity of its implications with observation.”

The use of the word “plausibility” in the last sentence quoted here is worthy of note: any reader who finds that Friedman has generated thus far any genuine plausibility for his “hypothesis” is of a very different cast of mind from me. But let us be generous to Friedman: let us grant, for the sake of argument, the following two (very dubious) assumptions: that roughly thus is how things go in natural science; and that there is in natural science no need for realistic assumptions. Now, if so, what should we conclude about ‘human/social science’? What are the ‘plausible’ parallels between the two?:

“A largely parallel example[:]...Consider the problem of predicting the shots made by an expert billiard player. It seems not at all unreasonable that excellent predictions would be yielded by the hypothesis that the billiard player made his shots as if he knew the complicated mathematical formulas that would give the optimum directions of travel, could estimate accurately by eye the angles etc., describing the location of the balls, could make lightning calculations form the formulas, and could then makethe balls travel in the direction indicated by the formulas. Our confidence in this hypothesis is not based on the belief that billiard players, even expert ones, can or do go through the process described; it derives rather from the belief that, unless in some way or another they were capable of reaching essentially the same result, they would not in fact be expert billiard players.” [p.21]

Something about the last sentence generates an impression of fishiness. We perhaps sense that Friedman has stacked the deck here: because his chosen example this time is one in which the laws of physics dictate the answer.  The “as if” here is really just a stand-in for something like the following claim: making certain balls go in certain precise directions IS a matter of physics.
	But how could that possibly be surprising, or enlightening? Friedman wants us to be put in a good position to explain human behaviour, scientifically; but his example is one that has been chosen then in a way such as to beg the question: for all he has really described is the motion of certain balls on a flat surface, not any human behaviour at all! Of course the motion of billiard balls is a matter of physics: in fact, it has been used frequently by philosophers (think of Hume) as a paradigm example of a piece of physics!
 	Of course, a different way of emphasising Friedman’s chosen example here would be more helpful, in getting us some way toward having an account of human behaviour: one might draw attention to the various qualities involved in being an “expert” on billiards: for instance, doesn’t one for starters have to know the rules of the game very well? Doesn’t one further have to know many things which are in no rule-book, even: such as how to strategise putting a big score together, via the various allowed moves in the game; and how to outwit or worry one’s opponent? But these variegated things are none of them things that the laws of physics can tell us more than the slightest thing about. Recall what Friedman took his “problem” to be: “predicting the shots made by an expert billiard player.” Well, in a way Friedman’s “hypothesis” can tell us something about where the ball is likely to go once the player has begun to take the shot; but it can tell us nothing about what shot the player is likely to choose, or why! For that, we would have to learn how to play billiards, how someone becomes a good player, what the particular ‘knacks’ and tactics of this player are, and so on.
	In short, if we were ignorant of billiards, then a little human/social study would certainly help us. At its heart would be understanding the game. (And “game” is a concept entirely remote from anything natural-scientisable.)  That is what would start to give us a sense of for instance “optimum directions of travel” for billiard balls... But then this way of putting Friedman’s example would hardly look any more as if it presented us with a piece of human behaviour explained by a kind of quasi natural science!For the ‘explanation’ now would be an understanding, as from within, of a hermeneutic or ‘anthropological’ kind. We would be returning, then to the territory best-described by the likes, not (of course) of Friedman, but of Peter Winch.
	Friedman moves directly from his (failed, as we have seen) ‘account’ of human behaviour to an ‘account’ of social behaviour: 

“It is only a short step from these examples to the economic hypothesis that under a wide range of circumstances individual firms behave as if they were seeking rationally to maximise their expected returns...and had full knowledge of the data needed to succeed in this attempt; as if, that is, they knew the relevant cost and demand functions, calculated marginal cost and marginal revenue from all actions open to them, and pushed each line of action to the point at which the relevant marginal cost and marginal revenue were equal.” [p.21]

As if, that is, they knew ‘the laws of economics’. But, if my line of reasoning above is convincing, we have gained no understanding of this situation yet from the ‘analogies’ with the leaves on the tree or the billiards player, at least as Friedman rends these ‘examples’. What is rather striking about the new -- economic -- examples he mentions, is that in this case the assumptions made by Friedman are in some cases at least not so unrealistic after all. Is Friedman’s hypothesis here a relatively good one, not because he has somehow (how? randomly? or through reflection on what we all already know about economic behaviour, through our participation in it?) found a hypothesis that therorizes the domain in question, albeit an allegedly unrealistic one, but rather because, with a little translation and a little less intellection, firms actually do do some of what Friedman mentions here?
	My point here is a direct analogue of Winch’s important point using the example of “liquidity preference”, in the most crucial section, 3:6 of his The idea of a social science and its relation to philosphy. In fact, it is almost as though Winch here were writing in response to Friedman, only without mentioning the latter’s name: “[L]iquidity preference is a technical concept of eonomics: it is not generally used by business men in the conduct of their affairs but by the economist who wishes to explain the nature and consequences of certain kinds of business behaviour. But it is logically tied to concepts which do enter into business activity, for its use by the economist presupposes his understanding of what it is to conduct a business, which in turn involves an understanding of such business concepts as money, profit, cost, risk, etc. . It is only the relation between his account and these concepts whihc makes it an account of economic activity as opposed, say, to a piece of theology.”    
	To return, thus armed, to the Friedman quote above: Aren’t Friedman’s assumptions in this, genuinely social-human case, unlike in his earlier examples, not entirely unrealistic? I.e. Aren’t there, just as Winch suggests, people in most firms who actually do engage in activities that could very roughly be described as seeking rationally to maximise expected returns, even trying to establish demand functions,  calculating marginal cost (via accounting proceedures that have been designed precisely to work out how much it will actually cost them to produce some more of their product at the margin, etc.  ), and so forth? And, insofaras these assumptions are, indeed, realistic, is that not in part a product of a certain kind of (capitalist) society, and of the workers’ and managers’ decisions, albeit very much under constraint (under constraint of needing to eat, under economic constraint, under legal constraint, sometimes under physical coercion from security guards or police, and so on), to take up certain roles in that society? And indeed of many of these agents knowingly or unknowingly having learnt at school or university or filtered through into the business world... some economics, including (most likely) ‘positive economics’?!  (Strikingly, there just is no serious analogue to the latter kind of effect in the domain of the natural sciences. )
	But note how Friedman himself, contrariwise, understands the analogy he hopes to have generated here: he believes himself to have shown that economics can be and is a positive science because it can treat human beings as if they engaged, to an utterly-unrealistic degree -- just as is indeed so with the leaves and the billiard-ball-hitter --, in a kind of thinking ... but in a kind of thinking which, ironically, leads to no thought, but merely to obeying laws as if of nature. To acting in an algorithmically-determinable manner. To algorithmically obeying ‘the laws of economics’.  Once again: he has given us no reason whatsoever to assume that there are any such. He has simply assumed that there are.  
	And so much is lost in the process: the account of behaviour in firms etc. that Friedman goes on to give just writes out so much from human and social being.  A good way to see this is via the following remarks of Friedman’s: 

“Confidence in the maximisation of returns hypothesis is justified by evidence...in part similar to that adduced on behalf of the biliard-player hypothesis -- unless the behaviour of businessmen in some way or another approximated behaviour consistent with the maximisation of returns, it seems unlikely that they would remain in business for long.” [p.22]

Indeed so -- IF such behaviour is really what is needed to stay in business. As opposed to: in economists’ a priori ‘models’ of what “business” is. Friedman’s ‘argument’ here is, we are now seeing, circular; or, alternatively put, he is simply begging the question he was supposed to be addressing. 
	Friedman has as yet, in other words, given us no evidence at all: he has simply reasserted his belief in the laws of economics as a useful mode of accounting for what goes on in ‘the economic world’. But perhaps there is another place to start in looking at what goes in that world, in our world: namely, looking at what people actually understand themselves to be doing, and can account for. And, when that gives out, attempting to engage in the kind of demystification exercises that the great economists, such as Marx, Sraffa and Keynes, accomplished at the begninning of and at the heart of their economicss.  In other words, rather than assuming that we know what business is, and then theorizing it using assumptions about whose realisticness we claim not to care, why not look and see what people who actually engage in business understand themselves to be doing   -- for aren’t they experts in their activity in a way that leaves are not (!), and that billiard players qua physical systems are not, while billiard players qua self-conscious players of games are --, and then, building via the more or less realistic assumptions we have thus been able to generate, come to understand via our understanding of these agents just what they are doing, and what what they are doing together, ‘business’, amounts to? We -- including Friedman -- might then learn many things that conventional economics has shielded from sight. And, insofaras they themselves -- economic actors -- seem deluded about what they are doing, the task is one of de-seduction, of getting them to come to see themselves and their fellow buyers and sellers etc. as people too. In other words, the task is then a political and ethical -- and a frankly persuasional -- one. One way of putting what that demystificatory task is is: the task of getting capital-owners to be readier than they already are sometimes to ignore the (social) ‘fact’ that they are capital-owners, and to act in a way other than so as to maximise their accumulated profits. Historical materialism, in part through its scientism, but in part through a cold and calm and realistic realism, would certainly have it that this task of persuasion is going to be a fantastically difficult one... It may be as much a task of revolution. But it is founded in the reality, occluded by Friedmanian neoclassical economics, that business is already at least sometimes like this. (Think of some ‘ethical business’, for instance.) 
	And actually, one could easily go much further here. There is much in business that does not necessarily prioritise profit maximisation -- e.g. employee safety, maintenance of employment, non-publicised charity support, supplier and customer loyality, maximisation of turnover, power struggles between owners and managers, government regulation, etc. . To have a grip on most of this requires economic history, and aggregated ethnographic etc. studies of businesses at work (as practiced by ethnomethodolgists etc., fairly extensively, over the last generation.).
	In short: all this would suggest a way of turning traditional economics on its head. Rather than a fundamentally scientific exercise, constructed analogically on the model of the theoretical natural sciences,  it becomes first an exercise in studying quasi-anthropologically (humanistically, including historically) the methods of the people in question,  and then an activism, a philosophically-influenced ‘therapeutic’ praxis. 

To try to sum up what we have learnt from our critical dissection of Friedman’s worryingly influential text: It is striking that Friedman’s would-be birthing of a science proceeds in a superlatively psuedo-scientific and outright-rhetorically-loaded -- in effect, merely propagandistic -- fashion. Friedman smuggles human being into his founding examplars for economics as a ‘positive science’, and hopes we will forget that he has done so. And crucially, his “as if”s skate over the way in which these “as if”s are thankfully (sometimes, at least) entirely eliminable in actual social studies: we can come to understand why people do things principally because we (can) inhabit, vicariously or sometimes literally, their place in the social situation in question. Realistic assumptions, even if as inessential to the natural sciences as Friedman suggests, are available and invaluable in the social studies: it is an intellectual error of vast proportion to eschew them. Friedman’s suggestion that there is no reason to even try to adopt realistic assumptions in the social studies amounts to a refusal to acknowledge that society is made up of aware and (sometimes unpredictably) responsive human beings, human beings with more or less intimate and indeed ‘internal’ relations with each other. That is to say: these human beings are not mere atoms or leaves: they are in an important sense part of one another. This is a fundamental insight of Winch’s, following the Idealists (see the discussion of ‘internal relations’ in my essay “the ghost of Winch’s ghost”, above.).
	Thus what Friedman’s suggestion amounts to begs the question against the philosophical claim that I would stand by hereabouts: that there is a difference in kind between the subject-matter of human/social ‘sciences’ and natural sciences. In the end -- and, in fact, throughout --, Friedman has simply assumed that economics is a science, in the same way that physics or biology are. He has not provided the slightest reason to believe that this is the best way to look at economics.  This positivist stance simply leaves out so much; and, further, tends to militate in due course in favour of the right-wing political philosophy that Friedman espouses, according to which the maximisation of wealth by individuals is rational, natural and unobjectionable. 
	Indeed, the very purveying of this picture of humans as homo economicae   can tend to mould societies in such a way that the picture will come to appear more and more accurate, and the positive economics which elaborates it more and more well-founded...   The final irony of considering the complete travesty that is Friedman’s ‘scientific’ founding of economics is then that there is no way internal to Friedman’s implicit philosophy of ‘social science’ to understand this effect (probably the most important effect of all of Friedman’s essay). Friedman’s essay over time tended to make society look more like what the essay ‘described’ than it had done previously -- but the very nature of this effect is one which is incomprehensible, on Friedman’s own terms. Thus the influence of Friedman’s essay made it look superficially as though what he was saying in the essay was correct, but the way that that influence took place provides in fact a final refutation of the vision of economy and society promulgated in the essay...


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