Assumptions Controversy

Today, any reference to an ‘assumptions controversy’ immediately calls to mind the many critical reactions to Milton Friedman’s famous 1953 essay. But historians of economic thought will also point out that there was an assumptions controversy going back to the mid-19th century involving John Stuart Mill, John Elliot Cairnes and Nassau Senior (for an excellent review of this ‘old’ assumptions controversy, see Hirsch 1980). This old controversy was mainly between Mill and Senior and was about whether economics was an empirical science or a hypothetical one. The controversy was mediated by Cairnes and ultimately decided in his favour. For Cairnes, economic theory was true ‘because it rested on premises which were undeniably true’ (Hirsch 1980, p. 105). But any application of theory can be compromised by ‘disturbing causes’ and so the application needed ‘to be compared with the facts’ to see just what disturbing causes needed ‘to be added in specific instances to make theory and facts...