This seems to be an argument about definitions. To me, Friedman’s “average out” means a measurable change in a consistent direction, e.g. significant numbers of random individuals investing in gold. So, given some agents acting in random directions mixed with other agents acting in the same (rational) direction, you can safely ignore the random ones. (He argued.) I don’t think he meant to imply that in the aggregate people are rational. But even in the simplified problem-space in which it appears to make sense, Friedman’s basic conclusion, that markets are rational (or ‘efficient’), has been largely abandoned since the mid 1980s. Reality is more complex.
This seems to be an argument about definitions. To me, Friedman’s “average out” means a measurable change in a consistent direction, e.g. significant numbers of random individuals investing in gold. So, given some agents acting in random directions mixed with other agents acting in the same (rational) direction, you can safely ignore the random ones. (He argued.) I don’t think he meant to imply that in the aggregate people are rational. But even in the simplified problem-space in which it appears to make sense, Friedman’s basic conclusion, that markets are rational (or ‘efficient’), has been largely abandoned since the mid 1980s. Reality is more complex.