A related interpretation of Friedman is the one proposed by Hirsch and de Marchi In this reading, similarly to the realist one, theory does attempt to make claims about reality and to uncover some truth about the world. But this is analyzed as a dynamic process, in which the continuous interaction between empirical observation and theoretical formulation allows the theorist to gradually increase the amount of knowledge available.
As John Dewey understood it, this methodological approach do not distinguish between the "psychology of knowledge" and the "logic of knowledge," to borrow Popper's phrases, but interprets methodology as a " theory of inquiry , which does concerns itself with facts - the facts about inquiry - and which hypothesizes about what procedures hold the greatest promises for solving the particular problems that one brings to an investigation.
Carefully reading the paper published in , one can find evidence for both an instrumentalist and a realist or pragmatic interpretation of Friedman's claims. His leaning towards instrumentalism can be illustrated by two passages of the essay that are worth mentioning. In one of them, he gives an example of a hypothesis that could be valid to predict "the density of leaves around a tree": "the leaves are positioned as if each leaf sought to maximize the amount of sunlight it receives, given the position of its neighbors, 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.
The other passage in which he reveals an instrumentalist methodology is the one about cigarette firms He maintains that these firms should be regarded as "perfect competitors" if the purpose was to analyze the reaction of the prices of cigarettes to an increase in the federal cigarette tax. According to him, "broadly correct results will be obtained" by the use of this hypothesis However, for a different purpose, namely, to analyze their reactions to price control during the First World War, regarding them as "perfect competitors" would have led to mistaken predictions.
The different characterization of the same market depending on the "class of phenomena that the hypothesis is designed to explain" makes explicit the absence of any ontological reference by the choice of assumptions. Here, theory is just a tool to generate successful predictions.
Conversely, some parts of his argument uncontestably imply a realist or pragmatic methodology, even if coupled with the weak kind of instrumentalism referred to above. This is best revealed by his reliance on some kind of "natural selection" process that makes expert billiard players or successful businessmen behave as if they went through the difficult calculations implied by the theories that aim to predict the outcome of their actions.
In those passages, Friedman makes clear that there is an underlying process at work in reality, one could say that guarantees the agents' adoption of an action that has the same effect as the one "assumed" by the theory. This argument clearly implies ontological claims about the world. One should not simply formulate a theory because it works, because it predicts well, but more importantly one should formulate it because a real "natural selection" process guarantees that its predictions will be true, since the agents are bound to act in the manner it implies that they will.
In his words, "[t]he process of 'natural selection' thus helps to validate the hypothesis - or, rather, given natural selection, acceptance of the hypothesis can be based largely on the judgment that it summarizes appropriately the conditions for survival. In order to better apprehend the implications of this tension, it is interesting to relate it to Friedman's defense of Chicago price theory. Concretely, the interpretation of his argument as instrumentalist often comes coupled with the suggestion that it serves the purpose of shielding neoclassical economics against the critiques it was receiving, then, from adherents to imperfect and monopolistic competition and to alternative pricing theories both mentioned, dismissively, on the paper.
Hammond claimed that this issue - choosing a theory by the realistcness of its assumptions or by the accuracy of its predictions - occupies a main portion of the paper, but it is not its central message. To Friedman, a more serious concern was to defend the necessity of testing a theory empirically independently of whether this is done by its assumptions or by its predictions.
In Hammond's 3 words: "[t]he alternative that Friedman most opposed was foregoing empirical testing altogether. He finds, then, in several reviews that Friedman wrote be fore the methodology paper and in his correspondence with George Stigler, the gradual development of his argument, which can be most aptly described, according to him, as a defense of empiricism against formalism.
This empiricism, it has been noted, was not without ambiguities, however. It was marked by a distinct relationship with Friedman's theoretical option. According to her, a main component of this world view was the identification of the "competitive order" as a reality Thus, while the multi-equations structural models developed at Cowles had the objective of grounding scientifically government planning, Friedman's preference for single-equation models and his search for self-stabilizing mechanisms in the data were connected to his vision of market efficiency and government inefficiency.
Moreover, his "ambiguous position towards empirical work" involved sometimes preferring historical evidence to econometric analysis.
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Hence, she concludes that "the very process whereby he confronted these hypotheses with facts - the collection of data, the choice of discriminating historical events, the modeling, and the interpretation of tests - also appeared undetermined and inconclusive enough to allow Friedman's values to enter the inquiry.
This imbrication of his empiricism with his theoretical option can be illustrated by the analysis of the predictions he made in his work. After summarizing them and examining his later assessment of their successes and failures, Hirsch and de Marchi remark that "Friedman's attitude to untoward outcomes has also been disconcerting to opponents and sympathizers alike.
In effect, he makes confident predictions yet argues at the same time that bad results are just what we should expect, given the state of our knowledge. And this was the main basis of his general policy conclusion, that is, that government should adopt "very broad and simple policies" , instead of attempting to act with discretion. The question, then, is how accurate predictions can be the main criterion by which the validity of a theory should be judged. This digression into the particular nature of his empiricism is useful to suggest that the realist or pragmatic interpretation of his methodology cannot be easily dismissed.
By focusing exclusively on the paper published in , one could conclude, in line with the instrumentalist interpretation, that his defense of Chicago price theory is based solely on its predictive accuracy, independently of its "truth," its correspondence with reality. But the nature of his empiricism makes clear that he did attribute an ontological status to the theory, he did see the "competitive order" as a reality, not only an instrument to make predictions.
Bearing these tensions of his work in mind, the remaining task is to connect them to the tension between technocracy and laissez-faire , characteristic of neoliberalism. But that requires briefly describing the latter. His argument is that the interwar years witnessed the failure of the legitimation basis of capitalism that had been consolidated in the previous century, that is, the laissez-faire ideology, grounded in the equivalence and justice of exchange relations established in the market.
On the one hand, the growing organization of the workers in trade unions and political parties, and their relative empowerment following the extension of suffrage that took place in most rich countries around the turn to the twentieth century, led to the establishment of labor regulations and the politicization of the labor market. On the other, the heightened instability that characterized the interwar years, from the hyperinflations to the Great Depression, pushed for government intervention to attenuate cyclical fluctuations.
Both cause and consequence of this historical shift was the profound political polarization of the s, with the strengthening of the radical Left and the radical Right and the ensuing eclipse of political liberalism. For Habermas, the reestablishment of mass democracy and the achievement of political stability, in the second half of the s, signaled the emergence of a new legitimation basis that, at least in part, replaced laissez-faire.
He characterized it - the rise of this technocratic consciousness - as the emptying of the political content of democratic decisions: "politics now The solution of technical problems is not dependent on public discussion. Rather, public discussions could render problematic the framework within which the tasks of government action present themselves as technical ones.
To the extent that practical questions are eliminated, the public realm also loses its political function. This rise of technocracy has been alternatively depicted as the emergence of a "politics of productivity," an attempt to "ensure the primacy of economics over politics, to de-ideologize issues of political economy into questions of output and efficiency. According to Thomas Stapleford 10 , its origins should be traced back to the interwar years, when the social sciences adopted the "pursuit of objectivity" as a political strategy: "an effort to supersede the conflicts of a pluralistic society by crafting a domain of consensus that could form the basis for political action.
In the summary of Fourcade 2 :.
In this process of 'academicization' and 'disciplinarization,' economists migrated from salons and learned societies to universities and higher education establishments. The s through the s witnessed its emergence as a technique of government symbolized by the twin innovations of national accounting and macroeconometric modeling and, more gene rally, as a tool for the exercise of public expertise. Alongside academic institutions, public administrations and their associated research units turned into important producers of economic knowledge.
Government at all levels became the main purveyor of resources for the social sciences, which it channeled toward uses associated with new modes of social and economic regulations. While this narrative is not country-specific, Fourcade argues that the trajectory of economics in the United States stands out as the case where this "pursuit of objectivity" and quantification went further. Soon after its founding, in , the American Economic Association faced much contestation for its orientation toward social reform and its anti- laissez-faire stance. However, al ready in the beginning of the twentieth century, striving to establish its intellectual authority and reacting to a profusion of academic freedom cases, the association toned down its political commit ments and shielded itself with a discourse of scientific neutrality.
The discourses of US economists in general went through a similar transition, described by Mary Furner as a switch from "advocacy" to "objectivity" apud Fourcade, : Fourcade 80 attributes this process to "the notion that the new scientific methods and procedures of marginal analysis and statistics were the best defense against the perceived evils of radical political partisanship. In this context, quantification, the collection and analysis of economic statistics, gained centrality in the practice of economists, not only of the institutionalists, but also of the neoclassicals.
This was closely connected, in its turn, to an increasing attempt to apply the theoretical tools to concrete problems of government. The widespread participation of economists in the US war effort - Paul Samuelson called World War II the "economist's war" Fogel, : - not only spurred the development of applied branches of economics, but also trained several economists in techniques that would pro ve influential in the postwar theoretical literature. In addition, McCarthyism reinforced the tendency to conceal political inclinations behind scientific neutrality Morgan and Rutherford, : ; Fourcade, The consolidation of scientism was unmistakable, being complemented by the demise of institutionalism and, more generally, of interwar pluralism and the establishment of the theoretical hegemony of neoclassicism Morgan and Rutherford, ; Morgan, The rise of technocracy and the parallel transformation of economics are very clear.
However, they were not able to complete the tasks set out for them.
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On the one hand, the nature of liberal democracies, however limited, prevented the complete emptying of the political content of democratic decisions. Dissent could not be eliminated from the public sphere and the technical nature of social problems could not go unquestioned. On the other, the nature of the social sciences hindered the complete elimination of theoretical controversy. Positive economics could not purge its inherent normativity and the ideal of objectivity had to remain an ideal.
Through the gap left open by the incompleteness of these developments, neoliberal thinking was able to rise.
Despite the difficulty of defining it - which owes much to the variety of approaches included under this single label see, for instance, Van Horn and Mirowski, : -, most strands of neoliberalism can be characterized as a "thoroughgoing reinvention of the classical liberal tradition" Mirowski, In Van Horn and Mirowski's words, "'The Market' would not naturally conjure the conditions for its own continued flourishing, so neoliberalism is first and foremost a theory of how to reengineer the state in order to guarantee the success of the market and its most important participants, modern corporations.
Neoliberalism's tension between technocracy and laissez-faire has been interpreted by some, following the work of Michel Foucault, as a way to deal with a constitutive tension of liberalism see, for instance, Madra and Adaman, Since "the organisation and management of conditions of freedom inevitably entail the expansion of government control" Madra and Adaman, , neoliberalism's reaction was an attempted "economisation of the social," that is, to recast human interaction as a market-like competitive process and to adapt government policy so that it mirrors market processes and it resorts to the deployment of artificial economic incentives.
That is what has been called the neoliberal mode of governmentality Madra and Adaman, The extension of the logic of economic rationality beyond its usual domains - usually called economic imperialism Fourcade, : -, reaching the realms of politics and the family, for example, is connected to the rise of neoliberal thinking and its combination of technocracy and laissez-faire. Though neoliberal thought is generally described as the transnational product of a collaborative network of intellectuals working in different national contexts, which cannot be fully grasped by focusing in any one of its national variants, the work of the Chicago school and of Friedman, its most prominent public face, show in a particularly striking form many of the general characteristics described above Mirowski and Plehwe, , and Jones, Reinvent liberalism, that is, by combining technocracy and laissez-faire.
In the words of Fourcade 95 , the "Chicago method Going back to Friedman's methodological claims it is now possible to argue that its tensions are related to the tensions of neoliberalism. The technocratic aspect of the latter appears in Friedman's leaning towards an instrumentalist methodology and his emphasis on the importance of empiricism. Boland himself pointed out this connection, asserting that according to instrumentalism "theories are only constructed to be instruments of policy.
As have been noted, this puts Friedman in a larger tradition in the history of economics, which emphasizes empiricism as a guarantee of objectivity and scientific neutrality.
This connection, moreover, had concrete aspects. After receiving an undergraduate degree at Rutgers University in the early s, having been the student of Arthur Burns one of Mitchell's closest students and collaborators , Friedman spent most of the following decade engaged in public ser vice Hammond, : From to , he worked first as an economist in the National Resources Committee and then as a researcher at the NBER, both institutions deeply under Mitchell's influence.
This experience unequivocally left its mark on Friedman's approach: Hirsch and de Marchi and Stapleford dwelled on the many similarities between Mitchell's methodology and Friedman's. Later, from to , Friedman had work experiences first at the U. His work at the latter involved "finding the optimum size and number of pellets in antiaircraft shells, designing proximity fuses for antiaircraft projectiles, and developing sequential analysis and sampling inspection techniques.
Interestingly, Hammond 13, fn. This emphasis on policy characterizes the Chicago school more generally: "the policy applications of Chicago economics were not accidental byproducts of a research program focused primarily on the internal development of economic theory. Chicago economists constructed a form of economic knowledge But what is really distinctive about their work is the way this orientation is coupled with a lais sez-faire ideology.
While the technocratic inclination is shared by economists with Left-wing beliefs, like the early members of the Cowles Commission, for instance, in Chicago it represented the co-optation of the "engineering mentality Once more, Friedman is a remarkably illuminating example. What he calls his "popular economics" like his Capitalism and Freedom , from , to distinguish from his "scientific economics," is famous precisely for its open advocacy of laissez-faire.
Mitchell, for instance, from a similar methodological standpoint, was critical of neoclassical economics because, according to him, it did not result from the continuous interaction between empirical observation and theoretical for mulation, which was the appropriate procedure to produce knowledge Hirsch and de Marchi, Friedman, however, defended neoclassical theory, but did not put forward evidence that it had been derived in accordance with the methodology he espoused.
In the methodology paper, he states that "[e]xisting relative price theory, This uneasy relation between his methodological claims and his defense of Chicago price theory, as has been noted above, is reflected in his peculiar empiricism and in the realist or pragmatic leanings of his methodology. It is also tellingly illustrated in his correspondence with Edwin B. Wilson, from Stigler, Pressed to indicate good works in economics that could serve as successful examples of avoiding sterile formalism, Friedman comes up with a list of five books, including one from Mitchell, one from Burns and one co-authored by the two of them.
Then, he adds:. Knight , Risk, Uncertainty, and Profit. This is clearly an extremely good and important book.