ABSTRACT
This chapter looks at the potential substantive significance of the realism of assumptions for economic welfare and economic justice by way of its effect on the analytical predictions of economic models and the policy implications of these predictions, as well as the effect it might have on the scope and breadth of economic analysis. Economic analysis and policy flow from economic models either explicitly or implicitly. For Milton Friedman economics is an empirical science insofar as analytical predictions must always relate to real world economic questions and be tested in terms of their fit with the facts. Friedman’s example of his methodological approach from the economic realm, proffers a similar moral to the one provided in the parable of the expert billiard player. 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.
