Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Contributors
- Preface
- Part 1 The classical essay in twentieth-century economic methodology
- Part 2 Reading and writing a classic
- Part 3 Models, assumptions, predictions, evidence
- Part 4 Theoretical context: firm, money, expected utility, Walras and Marshall
- 8 Friedman's 1953 essay and the marginalist controversy
- 9 Friedman (1953) and the theory of the firm
- 10 Friedman's selection argument revisited
- 11 Expected utility and Friedman's risky methodology
- 12 Milton Friedman's stance: the methodology of causal realism
- 13 On the right side for the wrong reason: Friedman on the Marshall–Walras divide
- Part 5 Concluding perspectives
- Index
11 - Expected utility and Friedman's risky methodology
Published online by Cambridge University Press: 02 December 2009
- Frontmatter
- Contents
- List of figures
- List of tables
- Contributors
- Preface
- Part 1 The classical essay in twentieth-century economic methodology
- Part 2 Reading and writing a classic
- Part 3 Models, assumptions, predictions, evidence
- Part 4 Theoretical context: firm, money, expected utility, Walras and Marshall
- 8 Friedman's 1953 essay and the marginalist controversy
- 9 Friedman (1953) and the theory of the firm
- 10 Friedman's selection argument revisited
- 11 Expected utility and Friedman's risky methodology
- 12 Milton Friedman's stance: the methodology of causal realism
- 13 On the right side for the wrong reason: Friedman on the Marshall–Walras divide
- Part 5 Concluding perspectives
- Index
Summary
Introduction
In this chapter my aim is to offer some reflection upon Friedman's methodology, focusing in particular upon his work relating to the theory of risky choice. With this objective in mind, I revisit two key papers in which Friedman and Savage (1948, 1952) discuss the empirical support for expected-utility theory (EUT). In these papers there are clear traces of the methodological position set out in Friedman's 1953 essay (henceforth F53). For instance, a recurrent theme is that EUT should be judged in terms of its predictive accuracy relative to its intended realm of application. At the same time, both papers are motivated by the scarcity of “direct” empirical evidence, and in light of this each paper suggests some remedy. My interest will focus especially on the second of these contributions, which argues that the normative appeal of EUT axioms can be read as a source of “indirect” evidence for the hypothesis.
I will argue that this claim is methodologically problematic partly because the argument set out in the joint 1952 paper fails to successfully forge an explicit link from normative appeal of EUT axioms to predictive success of the hypothesis. A key question addressed in this chapter is how, if at all, such a link could be established. I suggest the issue is of more than passing historical interest because there has been an apparent tendency in modern economics for the selection of descriptively oriented theories to be guided by normative criteria.
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- The Methodology of Positive EconomicsReflections on the Milton Friedman Legacy, pp. 285 - 302Publisher: Cambridge University PressPrint publication year: 2009
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