Thursday, August 16, 2007

Milton Friedman the Statistician

Interesting letter by Milton Friedman to George Stigler, quoted by Stigler's son, Stephen Stigler.

Dear George:

Many thanks for your (no) progress report. Sorry though not too surprised at your report of squabbling. The variability about the mean seems remarkably small - one university faculty, even the best, is pretty much like another.

Two points occurred to me that might be useful to you - though probably neither is since both are on the rational rather than practical level. Both are perhaps directed at Kozelka more than the others.

1. Sequential analysis has, as you know, been declassified. Both theory & applications will appear in some form or other in the near future. Its main application has been in industry, as you know. I would have rather special competence to teach sequential, &, if I came to Minnesota, Minnesota could be one of the first to reveal the secret weapon to an eager public.

2. As you know, I have been working on a manual on sampling inspection for the Navy. In that connection, I’ve had a chance to learn a good bit about quality control & acceptance inspection. It has occurred to me that business schools have been missing a golden opportunity. Quality control & the like have been monopolized by engineering schools. Largely as a result, I think, it has been very poorly developed along rather arbitrary and simple lines. It seems clear, however, that it pretty definitely involves economic considerations as well as technical considerations. It’s a rather nice economic problem to try to figure, only for one example, what kind of an OC curve a business firm ought to buy; or what multiple of σ they should use in setting control limits. Technical considerations do enter in - statistical & engineering. But they are, like in other economic problems, simply given data. The field could accordingly be developed at least as well in a business school as a branch of business management as in an engineering school. The business school that first takes it up, & gets someone to develop it along economic lines could, I think, make a killing.

I have developed some interest in the problem & would not be adverse to giving a quarter course or so in it. At the same time, it is obviously not something I would have any interest in for any long period. Consequently, I should just as soon not be committed to working in the field.

If you think, however, that it is the kind of consideration that might cut some weight, I would have no objection to your using it.

The first point, on sequential, you might well know of your own accord. The second is a bit more ticklish. If you want to attribute it to me, you might say I mentioned it in conversation - or something like that. You will know better than I how to put it, though.

Nothing much new on the New York front. As you know, a possible fight is brewing
between Fry & us over sequential applications.

How’s the family? Our’s is fine.

Many thanks,

Friedman, Milton (1992). Do old fallacies ever die? Journal of Economic Literature
Hotelling, Harold, and Margaret Richards Pabst (1936). Rank correlation and tests of significance involving no assumption of normality. Annals of Mathematical Statistics

Stigler, Stephen M. (1999). Statistics on the Table.
Thomas Bayes's Bayesian Inference
Who Discovered Bayes's Theorem?
The Dark Ages of Probability in England: The Seventeenth Century Work of Richard Cumberland and Thomas Strode
Francis Galton's Account of the Invention of Correlation
Thomas Bayes's Bayesian Inference
Gauss and the Invention of Least Squares

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