The Genesis of 'Positive Economics' and the Rejection of Monopolistic Competition Theory: A Methodological Debate

In 'The Methodology of Positive Economics' (1953), Milton Friedman linked the adoption of a falsificationist methodology to the rejection of monopolistic competition as a valid assumption, thus elaborating a point made earlier by George Stigler in 'Monopolistic Competition in Retrospect' (1949). Both failed to demonstrate that the alternative assumption of perfect competition would perform better under falsificationist rules. These rules themselves are an expression of the ambition to establish an economic science rather than a convincing framework for research. Monopolistic competition theory became the main target of attack, as it highlighted the problematic nature of empirical research interested in perfectly generalizable results.