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One - Positive Economics for Democratic Policy

Milton Friedman, Institutionalism, and the Science of History

from Part One - Economics Built for Policy: the Legacy of Milton Friedman

Published online by Cambridge University Press:  05 November 2011

Thomas A. Stapleford
Affiliation:
University of Notre Dame
Robert Van Horn
Affiliation:
University of Rhode Island
Philip Mirowski
Affiliation:
University of Notre Dame, Indiana
Thomas A. Stapleford
Affiliation:
University of Notre Dame, Indiana
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Summary

As economics pushes on beyond “statics,” it becomes less like science, and more like history.

– Sir John R. Hicks , xi

Conventional wisdom would place early institutional economics and the postwar Chicago School on opposite ends of any methodological spectrum. Prominent faculty and graduates from postwar Chicago have derided institutional economics not merely as incorrect but as actually devoid of content. Thomas Sowell characterized it as “half economics, half sociology, and all mush” (Sowell , 788); Ronald Coase claimed it “had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire” (Coase , 230); and George Stigler found it vacuous beyond “a stance of hostility to the standard theoretical tradition” (Kitch , 170).

Nonetheless, recent scholarship has softened this superficially sharp contrast. In the first place, institutionalism encompassed a diverse range of approaches (Rutherford ), and postwar Chicago economists have been noticeably less critical of at least one prominent strand: the quantitative analysis associated with Wesley C. Mitchell, the National Bureau of Economic Research (NBER, cofounded by Mitchell), and some aspects of the Robert Brookings Graduate School (forerunner of the Brookings Institution). Stigler expressed grudging respect for Mitchell, and Milton Friedman likewise concluded that Mitchell was “not as empty of content as most of the [institutionalists]” (Kitch , 170, 171). In fact, Friedman spoke quite positively about Mitchell in a lengthy posthumous assessment in 1950 in which he argued for viewing Mitchell as an “economic theorist” (Friedman ), a significant label because the most common objection to institutional economics from postwar Chicago was its alleged neglect of theory (e.g., Kitch , 169–171).

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Chapter
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Building Chicago Economics
New Perspectives on the History of America's Most Powerful Economics Program
, pp. 3 - 35
Publisher: Cambridge University Press
Print publication year: 2011

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