Reconstructing Friedman’s exposure to Weberianism

Knight’s intellectual power and his influence on Friedman are highly difficult to characterize. Consequently, it is also difficult if not impossible to reconstruct the channels through which Friedman might have been exposed to Weberian effects. A possible channel was Knight’s formal and informal environment, for example Knight’s dinners on Sunday evenings―Friedman is reported to have been a member of this eminent intellectual circle (Emmett, 2015). One would need to engage in dubious speculations to highlight the significance of the Knight circle. However, it is Knight’s personal impact that Reder (1982, p. 6) underlines as the main channel of his influence.

From the middle of the 1930s Stigler (1985, p. 2) reports even a Weber seminar he himself attended. According to Edward Shils’ commentaries, the seminar was in 1936, built on the close reading of the original German edition of Weber’s Wirtschaft und Gesellschaft (Economy and society), a highly important text in methodological terms (Scaff, 2011, p. 209). Friedman also attended the seminar, however, Shils (1981, p. 184) reports him to have lost his interest in Weber and started to show up only sporadically. This episode makes the intellectual connection between Weber and Friedman doubtful and implausible. In this context, Hoyningen-Huene draws attention to Knight’s compilation published in 1935 (The ethics of competition), co-edited by Friedman. From this fact and the editorial Hoyningen-Huene (2017, p. 12) infers that Friedman was likely to thoroughly know Knight’s Economic theory and nationalism and hence to be exposed to some Weberian effects.

This paper of Knight is commonly regarded as his most famous methodological work (Emmett, 2006, p. 113). For Knight, applying ideal types in economics is an explicit requirement. By meeting this requisite, theory gets far from reality, though acquires universal validity where mechanical analogy is justified to apply. However, for real economic actors and economic actions differ from their theoretical counterparts, caveats about the limited applicability of the theory still hold. Even though Knight gives no explicit references to Weber, it is Weber Knight echoes when describing neoclassical theory as a framework built from ideal types. Despite all the restrictions, Knight believed theory to be instrumental in understanding real societies (Knight, 1935, pp. 277-284).

Being highly brief and complex, not only is the text difficult to analyse, but a careful reconstruction also requires us to be cognizant of both Knight’s oeuvre and Weber’s related ideas. Even though it results from Knight’s reasoning that making the theory similar to reality is a methodological fault (Emmett, 2006, p. 114; Emmett, 2015), we ought to bear in mind the fact that Knight identified real behavioural patterns in economic laws (Knight, 1924/1999, p. 29). This is the reason why Knight is implausible to have abandoned elements of reality as the building blocks of theory. However, this is unnecessary as Knight, treading Weber’s footsteps, underlined how economists can be realists by constructing unrealistic assumptions. There is no need to introduce the current debates in which Knight’s argument is still relevant (Mäki, 2009a). For Knight, through its ideal types neoclassical economics describes not real behaviour but patterns deduced under ideal-utopian conditions. This is unavoidable in order that economics, first, could focus on the forms of actions and, second, could preserve its practical relevance.

Thus, the conditions of the connection between Weber and Friedman are fraught with ambiguity. In this context it proves useful to analyse Friedman’s methodological principles. If I succeeded in highlighting some of Friedman’s tenets that can be directly or indirectly traced back to Weber, ambiguities around the exact nature of the connection would be of secondary importance. It must be noted that Eric Schliesser (2011) identifies some Weberian effects in Friedman’s theory without the intention of demonstrating Friedman’s direct Weberian erudition. Schliesser traces Friedman’s Weberian reminiscences back to Parsons, to whom there exists an explicit reference in Friedman’s personal notes to Viner’s Econ 303. Through Friedman, moreover, Schliesser extends these Weberian effects even to Stigler. Assuming a multitude of possible sources is unharmful to the idea of the (direct or indirect) connection between Weber and Friedman.

Friedman’s famous F53 is an epigrammatic and widely debated summary of his methodological doctrines. In the text Friedman uses the very Weberian term ‘ideal type’ for seven times. Of these instances, there are six clear cases, whilst in one case he mentions ideal and real entities, which bears resemblance to the rather informal fashion as Knight (1935, pp. 277-278) discusses ideal concepts or ideal behaviour. Besides the Weberian terminology the circumstance is also worth attention that Friedman characterizes the relationship between economic models and reality in a Weberian fashion―that is, his explication is in accordance with Weber’s notions. For Friedman economic models built upon ideal types ‘are designed to abstract essential features (i.e. ‘only the forces that the hypothesis asserts to be important’) of complex reality’ (p. 9) some elements and mechanisms of which are omitted from models―elements and mechanisms that can disturb the functioning of the ideal-typical core. Ideal-typical models are by no means designed for description. By contrast, hypotheses underlying significant theories ‘will be found to have “assumptions” that are widely inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense)’. ’A theory or its “assumptions” cannot possibly be thoroughly “realistic” in the immediate descriptive sense so often assigned, to this term’. ’Any attempt to move very far in achieving this [highly descriptive] kind of “realism” is certain to render a theory utterly useless.’ Friedman rewords Weber (1904/1949, p. 80) when explaining: ’A hypothesis is important if it “explains” much by little, that is, if it abstracts the common and crucial elements from the mass of complex and detailed circumstances surrounding the phenomena to be explained […]. To be important, therefore, a hypothesis must be descriptively false in its assumptions’. Consequently, descriptive accuracy is unnecessary for ‘a simpler theory’ to work ‘well enough’ (pp. 14-32).

Along these lines, Friedman provides an analysis of the modelling strategy of Marshallian neoclassical economics (pp. 35-7). Neoclassical economics assumes perfect competition without regarding that as a manifest characteristic of reality. If we give credit to the suggestion that models are not designed to describe reality, abstract economic theory becomes uncriticizable on such grounds. General equilibrium is only an ‘engine’ in the Weberian sense (Clarke, 1991, p. 252), constructed to analyse the world―a statement Lucas also echoed later (Snowdon & Vane, 2005, p. 281). By designing ideal types to highlight some relevant facets of reality we make it possible to analyse a chosen mechanism as an element of the complex causal structure. Here lies the most striking puzzle of this model-building strategy for we are to bring facets of reality to the fore so that our model could be adequate about the problem under scrutiny (p. 42) (Weber, 1904/1949, p. 78). Applying this strategy, we can answer the question whether a postulated causal mechanism contributes to the emergence of some social phenomena―this is exactly the reason why we carry out empirical tests. Socio-economic actuality is full of entities differing in a multitude of aspects, though we have ideal types to accentuate characteristics and mechanisms that real entities share.

Besides the Weberian parallelisms we can find some passages in F53 where Friedman echoes Knight’s critique on neoclassical economics. In such a statement, Friedman suggests as an obstacle to objective economics ‘the fact that economics deals with the interrelations of human beings, and that the investigator is himself part of the subject matter being investigated in a more intimate sense than in the physical sciences’ (p. 4). Here Friedman directly reflects Knight’s parable on a drawer drawing a picture on himself in the act of drawing, which would apply a troublesome and infinite regress (Knight, 1935, p. 280). It is also Knight whom Friedman resounds in his short discussion on the shortcomings of dynamic monetary macroeconomics. Here Friedman refers to the problems in analysing ‘the process of adaptation of the economy as a whole to changes in conditions’ (p. 42). It is exactly the line along which Knight (1935/1999, p. 154), drawing attention to the limits of the physicalist conceptual matrix, circumscribed the territory of neoclassical economics.

References

Clarke, S. (1991). Marx, marginalism and modern sociology. London: Macmillan.

Emmett, R. B. (2006). Frank Knight, Max Weber, Chicago economics and institutionalism. Max Weber Studies, 6(1), 101-119.

Emmett, R. B. (2015). Frank H. Knight and the Chicago school. Conference presentation, ‘The legacy of Chicago economics’, 5 October 2015. Chicago: The University of Chicago.

Hoyningen-Huene, P. (2017). Revisiting Friedman’s F53. Popper, Knight, and Weber. Unpublished manuscript. Retrieved July 23, 2017, from http://philsci-archive.pitt.edu/12910/1/Friedmans%20F53.pdf

Knight, F. H. (1924/1999). The limitations of scientific method in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 1-39). Chicago: The University of Chicago Press.

Knight, F. H. (1935). Economic theory and nationalism. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 277-359). Freeport: Books for Libraries Press.

Knight, F. H. (1935/1999). Statics and dynamics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 149-171). Chicago: The University of Chicago Press.

Mäki, U. (2009a). Unrealistic assumptions and unnecessary confusions. In U. Mäki (Ed.), The methodology of positive economics (pp. 90-116). Cambridge: Cambridge University Press.

Reder, M. W. (1982). Chicago economics. Permanence and change. Journal of Economic Literature, 20(1), 1-38.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

Schliesser, E. (2011). “Every system of scientific theory involves philosophical assumptions” (Talcott Parsons). The surprising Weberian roots to Milton Friedman’s methodology. In D. Dieks, W. J. Gonzalez, S. Hartmann, T. Uebel, & M. Weber (Eds.), Explanation, prediction, and confirmation (pp. 533-543). Dordrecht: Springer.

Shils, E. (1981). Some academics, mainly in Chicago. The American Scholar, 50(2), 179-196.

Snowdon, B., & Vane, H. R. (2005). Modern macroeconomics. Its origins, development and current state. Cheltenham: Edward Elgar.

Stigler, G. J. (1985). Frank Hyneman Knight. Center for the Study of the Economy and the State working paper No. 37. Chicago: The University of Chicago.

Weber, M. (1904/1949). “Objectivity” in social science and social policy. In M. Weber, E. A. Shils, & H. A. Finch (Eds.), The methodology of social sciences (pp. 50-112). Glencoe: The Free Press.

250px-Portrait_of_Milton_Friedman

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s