Positive Economics Essay Example | Topics and Well Written Essays - 750 words

Positive Economics - Essay Example Citing John Neville Keynes, Friedman identifies two types of science - positive science and normative science - whose relevance in economic theory depends on its practical application in economic policy (cited in Friedman 1966, p. 3). Whereas normative science deals with what ought to be, normative economics assists policy makers in crafting economic policies that ethically just, depending on the values they hold. In this regard, positive economics, through positive science dealing with "what is", guides policymaker's judgments by providing them with accurate predictive tools to ensure that sound economic policies are produced and that these policies yield results that they are expected to. Hence, positive economics would only hold value if their ability to predict economic phenomena accurately. In the words of Friedman, "[t]he ultimate goal of a positive science is the development of a 'theory' or, 'hypothesis' that yields valid and meaningful predictions about phenomena not yet obs erved" (p. 7). ... maintain objectivity given the imminent significance it holds on the public, as well the economist himself, how can economic theory gain the same confidence and respect wielded by its counterpart in the physical sciences To address this question, Friedman refers to the two elements constituting economic theory, and theory in general - its language and its method of reasoning. First, with regard to the language of theory, Friedman argues that "logistical completeness and consistency are relevant but play a subsidiary role to assure that the hypothesis says what it is intended to say" (p. 10). In this respect, empirical evidence that can be gathered through controlled experiments is only valuable insofar as it can assist in the prompt validation of a theory. It does not hinder the testing of a theory's hypothesis (p. 13). And consequently, it does not affect the ability of economic theory to predict phenomena. Second, with regard to a theory's substantive method of reasoning, Friedman calls attention to the manner that a theory's hypothesis is constructed and further tested. In this respect, Friedman critiques the manner that economists construct a hypothesis by making them "realistically accurate" to conform to empirical data. As Friedman notes, this manner of theory construction is not only impractical and inadequate, but insignificant as well. With regard to its impracticality, Friedman points to the logistical impossibility that surrounds the exercise of making sure assumptions are "realistically accurate." Hence, it is impossible to account for all the facts surrounding a phenomenon to be explained because this phenomenon constitutes a wide range of facts that are both relevant and irrelevant to a theory. It is also inadequate because, as Friedman notes, an