Does Roderick Long misdescribe Friedman?

Roderick Long in his interesting article “Realism and Abstraction in Economics: Aristotle and Mises versus Friedman” sets forth to prove Milton Friedman’s Methodology of Positive Economics guilty of employing Plato’s faulty view on abstraction instead of the proper Aristotelean one. I propose that Long misdescribes Friedman’s position and thus fails to achieve his stated goal of rebutting Friedman’s argument.

Let us begin with Long’s understanding of Friedman’s position:

Friedman’s mistake lies in taking a theory that incorporates ancestry, eye color, and so on to be the “logical extreme” of realism. But realism does not demand that all these extraneous traits be specified; it merely demands that their nonexistence not be specified either. [Long, p. 10]

Long does not attempt to explicate notions used by Friedman apparently assuming without proof that Friedman understands “realism,” “falsity,” and “adequacy” the same way Long does. The question is whether precisive approach to abstraction necessarily follows from Friedman’s article. I argue that it does not. At most we can say that Friedman does not exclue the use of precisive abstraction, because the only criterion for testing theories in positive economics is the conformity of their predictions with observation. In other words, Friedman abstracts without precision from particular conceptions of abstraction.

Friedman understands a hypothesis to be “realistic” when it accurately describes reality, so a “completely realistic” theory of wheat market:

… would have to include not only the conditions directly underlying the supply and demand for wheat but also the kind of coins or credit instruments used to make exchanges; the personal characteristics of wheat-traders such as the color of each trader’s hair and eyes, his antecedents and education, the number of members of his family, their characteristics, antecedents, and education, etc. …

Less realistic theory includes fewer propositions describing reality. In other words, theory with more “unrealistic” assumptions is more universal – it abstracts more strongly from particular time and place. Thus, it makes sense to say “the more significant the theory, the more unrealistic the assumptions.” I propose that when Friedman talks about “false” or “inadequate” theories, we should understand those terms in a non-precisive way. A theory to be completely “true” and “adequate” in Friedmanite sense, it would have to describe accurately whole reality. I stipulate that it is possible that Friedman himself might have understood those terms in precisive way, but it does not follow from what he wrote in The Methodology of Positive Economics. We should employ a charitable mode of interpretation, instead of one that leads to logical fallacies.

As for the perfect competition model with the counterfactual assumption of symmetric information which Friedman uses as an example. This model is without doubt an instance of Platonic idealization, that is – precisive abstraction producing an Universal which cannot be predicated of any concrete object or event. Nevertheless, one has to use such an Universal as a predicate to commit fallacy. What follows is that only an improper application of the perfect competition model constitutes a fallacy. Using Friedman’s term, this would mean overstepping “the limits of validity” of this model. (I do not claim that Friedman’s view of the limits of validity of counterfactual models is identical with Austrian view. I merely argue that there would be no contradiction to supplement his framework from The Methodology of Positive Economics with Austrian approach to limitations of counterfactual models.)