The Types And Functions Of Economic Assumptions

The western mainstream economics is mainly a deduced principle based on a series of assumptions. The problem of assumptions is vital to the basic structure of the western economics. There have been a lot of debates over realism of assumptions. In 1953, Milton Friedman published "The Methodology of Positive Economics", its main viewpoint is: the only relevant standard to test a theory is comparison between its prediction and experience, the realism of assumptions in theory has nothing to do with testing theory. Friedman's thesis has been leading to time-consuming debates over the problem of assumptions; Paul Samuelson named it "F-twist". He wanted true assumptions, because unrealism assumptions necessarily bring out unrealism implications through logical reasoning. Some other scholars argued there are different kinds of assumptions, and different assumptions have different realism. The key to solve the problem of assumptions and untwist the F-twist is to classify the assumptions. Machlup. Melitz, Musgrave and Maki are among these scholars. The problem of "realism of assumption" essentially is one which on earth is the standard of testing a theory, comparing assumptions with reality or comparing implications with reality. It is a basic problem with characteristic of philosophy, and was called the most important problem in the economics methodology. This article explores the assumptions comprehensively on the basis of these scholars, and classifies the assumptions from different perspectives. This article argues the major assumption of rational atomistic individuals used by the mainstream economists should be relaxed. The auxiliary assumptions such as negligibility assumptions, applicability assumptions and joint negligibility assumptions should be realistic. The F-thesis is problematic. In order to increase the justification of a theory, setting up assumptions as realistic as possible is the best strategy.