History of Economic Thought in Hungary

As for a theoretical economist or a methodologist the current state of the history of economic thought and its heritages in the country where he was educated is an important thing. It has been in my mind for a long time to write a post on this topic because Hungary is a special case, I am sure. It is worthwhile to consider the theoretical foundations which a methodologist must rely on when looking for his own way.

As far as I know there are two authors who had strong influences on the history of economic thought in Hungary: one is Marx and the other is Prof. Janos Kornai. Obviously these two sources cannot be taken as independent from one another. Hungary was closed behind the Iron Curtain for decades, so quoting Marx was an inevitable component of all the scientific publications, not only in economics but in all disciplines from political science to literature or aesthetics. Marx was a serious distorting factor for sure. While in Western Europe Marx, interpreted as having placed his system upon the never-proved axiom of the labour theory of value, has been regarded as an unsuccessful effort to renew economic thinking (for instance, the well-known Keynesian historian of the economic thought Phyllis Deane treated Marx in this way), in Hungary Marx is taken somehow as an intellectual complementary to Keynes and one of his predecessors. The Hungarian edition of Keynes’ General Theory was published in 1965, some 30 years later than the first English edition. During this 30-year-long period Hungarian professionals were totally imbued with Marxism. The most important contribution of Keynes was thought to be the idea of central planning, so for the Hungarian economists taking Marx as their intellectual foundation Keynes was not considered to be able to convey any new or important messages, not only in political but also in theoretical terms. In the years after 1965 one can hardly find any publications on Keynes, so the deep-structure of his system remained intact and unrevealed. Only a few historians of economic thought proved to have achieved an in-depth understanding of Keynes.

Kornai treated mainstream economics as a highly idealized system and, consequently, as a failure. Many contemporary economists are still under the impression of this age-old idea. They still tend to choose inadequate measures to judge mainstream theories: these measures are grounded upon the fundamental idea of directly comparing abstract theories to reality. This is nonsense and this act of theirs is a clear manifestation of a misunderstanding of the theoretical developments in modern economics and methodology. For them an abstract-idealized theory is necessarily a failure, since it cannot grab all the essential features of real macro-economic systems. They are not familiarized with the idea that abstract theories are usually directed at revealing only some of the mechanisms of real socio-economic systems. One at a time.

In contemporary methodology an idea has been striking root according to which mainstream economics should be regarded as a thesaurus of conditional theorems. In other words, the exact content of these theories should not be separated from the underlying simplifications and assumptions. This idea has become a commonplace in Western methodology by this day and age (for instance, see Frank Hindriks’ detailed analysis on the Miller-Modigliani theorems), and this is the idea which was chosen as the backbone of The Theory of New Classical Macroeconomics. Admittedly, I myself was influenced by Marxism in the very beginning. As an open-minded young researcher I was governed by my professors, and some of them have been strongly influenced by the sharp rejection of mainstream economics. This is the reason why I used John Weeks’ Critique as an intellectual basis in Chapter 1 of the monography… so this work on new classicals should be taken as a struggle to say good-bye to the old-school of the history of economic thought in Hungary. The whole publication is dedicated to one effort: how to break away from the narrowest interpretation of mainstream economics.

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