ABSTRACT
Following the publication of Milton Friedman's classic work on the methodology of economics in 1953, few economists have challenged the assertion that the realism of assumptions is of little analytical consequence to economic theory and therefore to the formation of economic policy. In this case, Friedman brings to the fore the survival principle, which has played, either explicitly or implicitly, a critical role in theory-building in neoclassical economics. But if the conventional wisdom's framing of the survival principle is incorrect, then it should not serve as a standard by which to judge the rigors of competing economic theories. The major concern of this chapter is broadly related to the mainstream definition of the survival principle and its implication for economic analysis. The reformulation of the survival principle allows for the simultaneous existence of a whole array of firms ranging from highly x-inefficient to highly x-efficient.
