[cross-posted at Liberty & Power]
My QJAE article “Realism and Abstraction in Economics: Aristotle and Mises versus Friedman,” an Austro-Athenian critique of the late Milton Friedman’s 1953 essay “The Methodology of Positive Economics,” is now finally available online. (An early draft has been online for a while, but is now superseded by this final version.)
In response to complaints (e.g. from Austrians) that neoclassical economic models are unrealistic, Friedman had argued that economic models can’t be realistic because they must necessarily abstract from all the myriad details. I argue that Friedman’s reply is based on a confusion about the nature of abstraction that can be cleared up by appeal to the Aristotelean Scholastics’ distinction between precisive and non-precisive abstraction, a distinction revived in Ayn Rand’s theory of concept-formation as measurement-omission, and implicit in Ludwig von Mises’s criticism of Max Weber. I also make a few points about prediction vs. explanation and Friedman’s critique of apriorism.