The archive.

In 1906 Schumpeter defended mathematical economics; in 1949 he pleaded for historical analysis — a reversal only in appearance, Machlup argues, for the man never lost the one nor lacked the other. What held across four decades was a disciplined pluralism: theory, statistics, and history each earn their keep on the problems they suit, and the sectarian spirit of the Methodenstreit, which made each camp treat its method as the only scientific one, was the real enemy. Machlup follows Schumpeter from bare functional relations toward an eventual acceptance of causal language, and shows how the split between statics and dynamics turns methodological choice into substantive economics: equilibrium explains the circular flow, while the entrepreneur's discontinuous innovation drives development. Methodological individualism, he stresses, is a rule for building explanations, not a creed of laissez-faire.

It follows that the claim usually made for statistical induction and verification must be qualified. Material exposed to so many disturbances as ours is, does not fulfill the logical requirements of the process of induction.

An economist who objects that an argument is “too abstract” or lacks statistical verification is already discussing methodology, whether or not he welcomes the subject. In these brief chairman’s remarks, Fritz Machlup exposes the mismatch between economists’ professed indifference to methodology and the standards they routinely invoke. His distinction is precise: researchers cannot avoid using a method, but they can avoid explicitly discussing it—though their everyday criticisms often betray them. Opening with the comic spectacle of practical-minded economists gathered to discuss metaphysics, Machlup makes a compact case for bringing assumptions about knowledge into the open, without prescribing a particular method.

When does a more realistic economic model become a less useful one? In this contribution to a published methodological discussion, Fritz Machlup challenges the demand that a single theory capture every aspect of economic conduct. Responding chiefly to Paul Samuelson and Kenneth Boulding, he defends mathematics without granting it exclusive authority, and simplified models without mistaking them for complete descriptions. His treatment of the firm makes the stakes concrete: a model suited to price determination need not explain investment or managerial power, while even a firm’s survival depends on how the firm is defined. Readers encounter a precise distinction between realism and relevance—and an argument for combining disciplinary knowledge when a particular problem requires it, rather than constructing an all-purpose synthesis.

The addition of "admittedly realistic" variables into analytical models can be defended only if they significantly modify the results.

For the seller who feels himself one among very many, rivals are colleagues rather than threats—and it is this state of mind, not the sheer count of firms, on which Machlup rebuilds the theory of selling. He coins pliopoly for the pressure of potential newcomers, setting it beside polypoly, oligopoly, and monopoly, and defines a true monopolist by the triple absence of all three. Against businessmen who claim they price by average or full cost, he reinterprets such rules as competitive responses to expected demand elasticity, treating cartel ethics and break-even charts as evidence rather than refutation. The analysis ranges across perfect and imperfect polypoly, artificial scarcity and monopoly rents, and the kinked demand curve, always parting the economist's objective calculus from the trader's rough feel for the market.

The concept of the industry is nothing but an expedient device for ruling out negligible or too uncertain interdependence.

Monopoly, in this account, is less a market form than an institutional problem: every arrangement by which alternatives are restricted — business combinations and buyer power, union control of labor markets, and above all government policies that shelter favored groups from competition. Machlup credits antitrust with making cartel agreements less secure, yet judges the law of monopolization, the prohibition of trusts and mergers, a dismal failure. His sharpest reversal is that monopoly is often a product of public permission, manufactured through licensing, tariffs, patents, and marketing orders. He carries the same logic into labor, rejecting the purchasing-power theory of wage increases and denying that union monopoly offsets business monopoly — their effects, he argues, are additive rather than compensatory. First published in 1952, it remains his most sustained brief for open entry.

The economic policies of government are far-flung and many-sided. On many fronts, therefore, could government fight for competition and against monopoly if it so desired. It has not seen fit to do so.

A textbook can be admirably modern and still leave essential questions unanswered. In this review of Part III of Erich Schneider’s economics textbook, Fritz Machlup praises the lucid treatment of credit expansion and multiplier theory while testing the limits of its short-run macroeconomic framework. His objections are concrete: gold remains relevant to money creation, velocity need not be constant to matter, and capital theory cannot simply be excluded from an account of income and employment. The central tension is between explaining what follows if consumption and investment plans are realized and explaining why those plans may fail. Machlup’s combination of technical scrutiny and pedagogical appreciation shows how a textbook’s analytical strengths can coexist with consequential omissions.

Too often do we forget that one of the foremost tasks of economics is to explain and predict circumstances under which consumption and investment plans cannot be realized.

Harrod’s collected essays offer Fritz Machlup an occasion to distinguish intellectual priority from continuing theoretical relevance. In this short review, Machlup identifies early contributions to imperfect competition while welcoming Harrod’s later challenges to the doctrine of excess capacity and his reconciliation of full-cost pricing with the marginal principle. His sympathy is informed by striking parallels with his own work on sellers’ competition, though it stops short of full agreement on profit theory. Readers can discover where Machlup sees established theory as open to revision—and why historical documentation matters to that judgment. His complaints about missing publication details and an absent index give the favorable assessment a practical edge: these are essays he expects economists to consult and cite.

When does a research technique become an obstacle to understanding? In this joint review of books by John Madge, Arnold M. Rose, and Hans L. Zetterberg, Fritz Machlup challenges the elevation of observation, interviews, and experiments above the problems they are meant to illuminate. He faults Madge for subordinating theory to empirical research, while finding in Rose and Zetterberg alternatives that join logical deduction to empirical testing. Writing as an economist engaging sociological method, Machlup distinguishes pluralism about methods from relativism about truth. The review offers a compact way to examine why accumulated findings need explanatory connections—and why a measurement procedure must answer to the hypothesis being tested, rather than define in advance what science may ask.

Can economics expose hidden value judgments without abandoning abstract theory? In this 1955 review of Gunnar Myrdal’s The Political Element in the Development of Economic Theory, Fritz Machlup accepts the demand that economists make the normative premises of policy recommendations explicit, but resists the claim that scientific analysis is therefore necessarily evaluative. His sharpest objection concerns Myrdal’s proposal to ground economics in people’s social attitudes: how can conflicting, changeable dispositions supply the foundation that supposedly objective welfare concepts could not? Reviewing the English translation, Machlup also distinguishes the original argument from Myrdal’s revised methodological position. The result offers a precise way to separate values required for policy, interests that guide research questions, and judgments made within economic analysis.

Low recorded profits need not mean that monopoly costs society little: rents may be absorbed into inflated costs rather than appear in shareholders’ returns. In this contribution to a 1955 joint conference discussion, Fritz Machlup challenges reassuring estimates of monopoly’s effects while asking how much complexity economic explanation actually needs. His account of innovation distinguishes the incentive to invent from the social benefit of rapid imitation; his methodological argument distinguishes useful simplification from careless generalization. Responding to Clark and Weintraub, he defends competition without demanding that every model reproduce every feature of business behaviour. The reader encounters a pointed connection between policy and method: both monopoly’s costs and a theory’s usefulness can be misjudged when an easily measured quantity or an impressive label replaces a precisely framed question.

Can devaluation cure a trade deficit? The mid-century answer split into two camps, and this 1955 article refuses to let either win outright. Against Sidney Alexander's claim that his 'income-absorption' approach supersedes the older elasticities method, Machlup grants the weaknesses of relative-price reasoning — supply and demand curves for foreign exchange shift once devaluation changes costs and incomes — but shows that the accounting identity Y ≡ A + B, however clarifying, is no causal theory. Alexander's gravest omission is resource reallocation: devaluation can raise real income by moving resources into more valuable uses, an effect no marginal propensity to absorb can capture. Reasoning from identities, Machlup warns, tempts the analyst into implicit theorizing. Neither set of tools can be spared; both relative prices and aggregate spending are needed.

The trade balance is negative when the nation absorbs more than its income.

Between apriorism and a crude empiricism that would test every assumption in isolation, Machlup marks out a middle path for what 'verification' can mean in economics. He lowers the stakes deliberately: verification is not access to final truth but a disciplined comparison between what a theory implies and what inquiry discloses. His pivotal distinction separates particular historical propositions, checkable directly, from general hypotheses that yield conclusions only when joined to auxiliary assumptions about conditions and change. Fundamental postulates such as rational action need no independent sense-verification; they make conduct intelligible and are judged by the fruitfulness of the systems they support. Steering past both Misesian apriorism and Hutchison-style ultra-empiricism, and drawing on physics, Einstein, and Braithwaite, he holds that economics stays empirically disciplined while a hypothesis, at most, survives as not disconfirmed.

The hypothesis is confirmed if reasonable correspondence is found between the deduced and the observed, or more correctly, if no irreconcilable contradiction is found between the deduced and the observed.