Customer Reviews

Essays in Positive Economics (Phoenix Books)

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Love him or hate him, Milton Friedman was a giant of 20th century economics, and this book provides a good example of his thinking on economics when Keynesianism was in the ascendancy. This book is a collection of his early papers (some previously published articles and book reviews, some unpublished before this book) on a variety of topics. There is no common theme other than they are all written by Friedman and all were to have some influence on the economics profession (some more - much more - than others). The most famous paper/chapter in the book is the first, "The Methodology of Positive Economics". Although the book's title proclaims it to be about 'positive' (fact-based analysis) economics, many of the papers are actually about policy and are fairly explicitly normative.

There are eleven essays in this book, the most famous of which is the "Case for Flexible Exchange Rates" -- an original and profoundly influential idea that Friedman proposed in the 'fifties. But the title of the book mostly reflects the lead essay, "Methodology of Positive Economics" which was and still is the most important for me.

As Friedman argues and most economists agree, "positive economics" is possible only when one removes their values or political ideology from their effort to engage in economic science. I found this essay to be profoundly attractive after spending a bewildering year in graduate level philosophy of science. Friedman countered a longstanding emphasis in professional Economics concerning the importance of realistic assumptions with his view that positive science is to be judged on the basis of the accuracy of predictions. Empirical evidence might support the proposition that realistic assumptions are more likely to yield accurate predictions, but at the end of the day we must use predictions to judge theory.

Based on Friedman's sweeping assertion that science is to be judged by its predictive power I've had endless debates with social scientists who argue that science is to advance understanding -- that prediction alone is too narrow a standard. But how do we know that claims of "understanding" are not just BS unless there is predictive power? If you appreciate clean thought compared to the endlessly abstruse disputes found in philosophy of science, this is a beautiful and, I think, right-on essay.

There are some real thought provoking essays in this book but I found the lack of flow and unrelated essays a bit tiring. I guess one alternative Friedman could have done (and he did publish many individual "essays") was not put so many unrelated topics under one book title and simply leave them on their own merit. I think he thought he was doing the reader a favor by combining these thoughts. There are some real classics on foreign exchange, gold standard flirtations and government policy. In summary, DON'T make this book one of the first you read from him because it can be a bit confusing.

Essays in this book included his famous "The Methodology of Positive Economics" and "The Marshallian Demand Curve". There are other essays on monetary economics, price theory and methodology. You can learn a lot from this book about Friedman's way of thinking