Stranger Than Fiction vs. Milton Friedman: The Freedom of Surreality

The movie ‘Stranger Than Fiction’ was shown on the telly on Sunday. According to my wife, it was supposed to be ‘psychedelic,’ and she did not seem particularly interested in it. My interest, on the other hand, was aroused once I heard that. Often, I find movies more attractive when they are less realistic or when it is obvious that the movie is surreal.

A good movie has some important content; a message, a moral, or a story to tell. When one is free from the bounds of reality, it is much easier to highlight the important content and make it shine. (Many people like subtle stuff; I’m rather slow, however, and like clear, shiny things.) The content in a movie may have everything to do with reality independent of the visual similarity to reality and the logical structure. The same goes for comics, books, paintings, and any form of communication; when a comic assumes its full potential, it is not realistic in a visual sense. With the freedom that follows with surreality, it should be much easier to make a point or tell a story. And, when free from the bounds of reality, anything can happen. It makes it much more interesting.

Here’s where it gets surreal: While I was watching ‘Stranger Than Fiction’ and thinking about the attractiveness of surreality, I came to think of an article on positive economics by Milton Friedman (The Methodology of Positive Economics).  Friedman wrote that a theory would be more important and successful the lesser its assumptions agreed with reality; if a theory with assumptions out of line with reality could successfully explain empirical observations, it showed that the features not agreeing with the assumptions to be unimportant for the observed phenomenon.

[…] to suppose that hypotheses have not only “implications” but also “assumptions” and that the conformity of these “assumptions” to “reality” is a test of the validity of the hypothesis different from or additional to the test by implications. This widely held view is fundamentally wrong and productive of much mischief.  Far from providing an easier means for sifting valid from invalid hypotheses, it only confuses the issue, promotes misunderstanding about the significance of empirical evidence for economic theory, produces a misdirection of much intellectual effort devoted to the development of positive economics, and impedes the attainment of consensus on tentative hypotheses in positive economics.

In so far as a theory can be said to have “assumptions” at all, and in so far as their “realism” can be judged independently of the validity of predictions, the relation between the significance of a theory and the “realism” of its “assumptions” is almost the opposite of that suggested by [positive economics].  Truly important and significant hypotheses will be found to have “assumptions” that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense).[reference removed]  The reason is simple.  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 and permits valid predictions on the basis of them alone.  To be important, therefore, a hypothesis must be descriptively false in its assumptions; it takes account of, and accounts for, none of the many other attendant circumstances, since its very success shows them to be irrelevant for the phenomena to be explained.

To put this point less paradoxically, the relevant question to ask about the “assumptions” of a theory is not whether they are descriptively “realistic,” for they never are, but whether they are sufficiently good approximations for the purpose in hand.  And this question can be answered only by seeing whether the theory works, which means whether it yields sufficiently accurate predictions.  The two supposedly independent tests thus reduce to one test.

Friedman’s argument for ‘surreality’ is not the same as in the ‘Stranger Than Fiction’ example, I know, but it has a similar logical structure. (Or, my mind makes connections between random ideas, which of course may be the case.) Surreality implies freedom, and freedom is powerful both when making movies and constructing economic theory. No surprise there.

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