Michel De Vroey at Budapest Business School: detailed program

On 5-6th October 2017 Prof. De Vroey gives two lectures on the general evolution of modern macroeconomics.

In cooperation with the Institute of Economics and Methodology of Budapest Business School we invite you and your colleagues to Michel De Vroey’s lectures as the opening event of the new BGE Workshop series ‘Contemporary Thinkers in Economics’.
MICHEL DE VROEY, a celebrated and emblematic figure of the historiography of modern macroeconomics, is a professor emeritus at the Université catholique de Louvain and a visiting scholar at Sorbonne University (Paris) and Duke University (Durham, NC). Prof. De Vroey’s research area covers the history of economic analysis and the 20th century theories of the business cycle, in particular the history of macroeconomics. His recent book ‘A History of Macroeconomics from Keynes to Lucas and Beyond’ (Cambridge University Press, 2016) has become a widely acknowledged account of the history of modern business-cycle theory.


Prof. Peter Mihályi is a leading figure of the Hungarian academic life in economics and a researcher of the heterodox critique against modern macroeconomics. Currently Prof. Mihályi is the head of the Department of Macroeconomics at Corvinus University of Budapest and a visiting scholar at Central European University.



5 October, 17:00pm

Mainstream economics. Its rise and transformation
6 October 10:00am

The Lucas/Kydland and Prescott transformation of macroeconomics: An assessment
Location: Lotz-room, Budapest Business School, H-1055 Budapest, 29-31 Markó Str.



INEM 2017 Conference, Day 3

INEM 2017 conference has just ended on a rainy afternoon. I am full of memories and happy to have some new friends. It was another long day actually, so I need to focus on my overall feelings and insights instead of providing a detailed summary of the day. However, there were some very impressive presentations. Just to mention one, Max Düsterhöft and Thomas Schädlich analyse central bank communication in a language philosophical framework. They have some tricky aspects: clarity, for instance, measured in terems of the length of the sentences or grammatical simplicity. The authors digged down even to Wittgenstein’s language philosophy. It was really a thought-provoking presentation and I was so happy to see how thorough these guys are. Or to mention another talk, Caterina Marchionni in her talk outlined a program along which the achievements in economics can be made horizontal instead of following the common vertical pattern. New models in economics and oftentimes in science as such do not overwrite each other making the former constructs inadequate, but address new questions the preceding models did not pose at all. In my context these thoughts are really relevant for they are in support of my ideas about the complementarity of ‘rival’ theories. In Hungary there are intense debates around the relationship between mainstream economics and institutionalism, regarding the former as irrelevant because of its highly abstract nature. In my view the relationship is of complementing nature (each theory explains something), and this is the reason why I was so happy to listen to Caterina’s presentation.

Today I could gather a lot of general insights why methodology of economics is so important. John Davis in his talk devoted to agent-based modelling called attention to a thought of Brian Epstein according to which how we know something determines what we can know and whether we know anything at all. At the bottom line every discipline is methodology. This is a clear message.

During lunch I found myself in the delightful position of having a chat whit Brian Epstein. I know some works of his, moreover, some panelists directly referred to his thoughts during the conference. He is a real gentleman. At lunch suddenly turned to me and triggered a conversation about his ideas and my ideas and took the trouble to clarify his suggestions about modern business cycle theories. His point is very provocative. For him, the problem is not whether some elements of real-world social systems can be ommitted or not. It is widely believed in the physicalist reconstruction of economics that we have some fundamental laws and there are factors, mechanisms and the like in addition that disturb the working of these laws. For clarity, we oftentimes leave these factors out of the picture in order to focus on the consequences of the fundamental laws. Brain takes a sceptical stance. In his opinion, the microfoundations project is erroneous for such factors are also ommitted that make essential or constituent part of the phenomenon under scrutiny. So in the microfoundations project not only some factors of marginal importance are left out but some essential features of the social universe. This is the reason why the knowledge provided by the microfounded cycle models seem to be so distorted and indadequate.

It is a shocking experience. I think this critique is very effective – it is as destructive as the DSM-theorem. Bearing in mind the social logic of mainstream economics, these thoughts will be ignored for mainstream authors cannot block them.

But the talk with Brian convinced me of a very serious thing. Economists are really naive as far as methodology is considered. Brian could set up an effective critique because he is a philosopher. So, all in all, economics is in need of far more methodological considerations to make its fundaments more consistent. All of us, fellow economists, need to become methodologists first and foremost since it is the methodological circles, debates and the resulting considerations that can really strengthen our science… It is my strong belief.

It is time to say goodby to San Sebastian. I had wonderful four days. I hope we can continue discussing…


INEM 2017 Conference, Day 2

I had a superb view of the ocean from my window at the conference. Is it really a wonder that from time to time I got disorganized and was not able to pay attention to the presentations…? It is a shame, I know…


It was day 2. It was the longest day of the conference with panel presentations from as early as 9:30 up to 19:30. I was listening to so much talks that I need to select somehow or rather focus on my overall feelings and insights instead of a detailed and thematic descriptions of the sessions.

The first block of the day was devoted to experimental economics. There were some interesting points. For instance, Sreeja Jaiswal from India gave a talk about a practical application in which fileld experimental methods were used to evaluate the environmental impacts of some large-scale railroad investment activities. But it was Don Ross who took the morning and made my day. It was an old desire of mine to meet him in person and to attend one of his lectures. Today he presented some brand new (meaning really new) results regarding bundle sequences of choices. This issue may seem complicated at first sight, but at the bottomline you can easily take it in. People have a tendency not to regard some choices invididually and in separated form but they treat them in bundles. Don took an illustrative example: if my problem on a rainy Monday morning regards to have a jog or not to have, I will address the issue in a different way. I will ask myself: am I a serious runner? – and if so, I will go out for a run. It is my attitude towards running that is tested and not my temporary mood. Don and his collaborators created a very effective framework for testing this hypothesis. We the audience were proud to attend the presentation of these results.

After listenig to the majority of today’s preesentations I got under the impression that contemporary philosophy of economics despite its young age reached a post-modern phase. What am I talking about…? Researchers are working on well-defined topics and problems, but these projects are so closed that this closeness somehow hinders the possibility of mutual understanding. A research topic turns some researchers on but the remaing part may be completely ignorant of even the basic terms and problems. This is not an objection rather a concern. Even Jonathan Perraton’s lecture on Piketty’s book calls attention to this surmise. Jonathan underlied that Piketty made some troublesome or arbitrary methodological decisions, but his book is a hit notwithstanding. How is it possible? We live in a day and age when science shows the symptoms of industrial production. This process has its own explanation… Processing or even finding the relevant literature becomes more and more difficult and demanding, so it is no wonder that researchers are prone to work in intellectual isolation. This is the reason why research communities such Rotterdam’s EIPE or Helsinki’s TINT are so precious.

Actually, I am disapponted somehow by the fact that the dissemination of new ideas is rather slow. It is weird that in 2017 mainstream economics is still blamed for its selectivity. It is a fact of life I think. All sciences need to make selections, but I cannot understand why we should squeeze everything into economics. Economics is not political science. Economics is not ethics. Economics is not sociology – so I am wondering at the idea of making economics as a totalist discipline. We have several complementing disciplines. We should let them do their job.

So it was day 2. The grand lunch is on the way, the company are meeting at 20:30 at Palacio Miramar to have the lunch together, to go on discussing and to say goodby to the conference. Tomorrow is the final day.


INEM 2017 Conference, Day 1

An evening of a long and busy day. Day 1 of INEM 2017 is over, and for it is raining cats and dogs at the moment, I can spend some time writing this post. After having a wonderful breakfast I was heading to the conference centre. San Sebastian is situated in the Western area of the time zone, so at 6 AM when I usully wake up it is pitch black, while at 8 PM you can go for a walk in broad daylight. Funny. But anyway, the Palace is within easy reach, it takes only 15 minutes to get there. A light walk on the shore… an ideal start for the day. I love to watch animals walking up and down next to me. I can still picture myself at Duke University watching the large squirrel population. I named one of the squirrels ‘Brian’… here I met some seagulls. They are the local Bryans.


I need to remind myself about not forgetting about the conference… The day started at 10:30 with Julian Reiss’ talk. First, he gave us some practical sugesstions… where to eat, what to see, where to stay.. and the like. Then he had his presidental address under the title ‘Against epistocracy’. In this talk, Julian responded to some recent books (one of them is Jason Brennan’s ‘Against democracy’) about the challenges modern democracies face. In particular, the social role of scientists and experts should be strengthened, say the books. Why…? Laymen’s decisions are troublesome. So, according to Brennan and others, it is time for us to switch to epistocracy as epistocracy is likely to result in better decisions. This is simple instrumentalism. Epistocracy is better for it leads to better decisions.

We have some implicit assumptions at this point. There exists higher-order political knowledge that entails higher-order knowledge of the society and, what is more, this higher-order social knowledge is objective. This is not a necessity, however. There are values in the game with complex trade-offs among them. It is, too, very dubious to apply values to some situations. But the most fundamental question regards the alleged irrationality of the voters. According to Brennan, voters are ignorant, arrogant, misinformed nationalists (don’t dell them, please… they may feel offended). However, this portray is dependent on the notion of rationality we apply. The point is science, social science, does not necessarily lead to a consensus – or if so, this is only ‘accidentally’, resulting from some common biases of the sciences. Seeking a consensus is not the best way of solving a social problem. Maybe it is a wrong theory or a wrong methodology or some selective biases or even wrong social values that underlie a consensus. However, this answer seems as problematic as the basic question itself. One can reach such a conclusion only by depriving science of the ability of self-reflection. I think science can correct its own mistakes. But for Julian, there is no need for us to prefer science to non-scientific decision-making processes. He takes a sceptical view.

Brian Albrecht and Brian Kogelmann regarded models as foils. It is an interesting new way of addressing an age-old problem. We have descriptive models for sure, but we have models the best use of which is making contrast. They serve as the basis for comparison, so it is a virtue of them if they are NOT like reality. Some examples from literature were listed: foils are often applied in novels in order to highlight some characteristics of a protagonist. But I think something is still missing from this account. Is this enough to set up a model that is different from reality on purpuse…? I don’t think so. Suppose, I have a model according to which it is the storks that bring the new-born babies. Is such a model different from reality? Naturally. How can it help us understand reality? By making a contrast, we can know for sure that it is NOT the storks that bring the babies: reality is necessarily different from our model as we failed to use reality as the matter for our bricks to build models. There is a difference between unrealisticness and unrealisticness. Cooked-up assumptions are useless, they can have instrumentalist benefits at best.

Then Melissa Vergara Fernández talked about what philosophical theories say about model failure. Her point is interesting: even if we know the criteria for model success, these criteria cannot be used as a measure of theory fail. We need further criteria, for example expectations. It is expectations that make the difference between success and failure.

Matti Heinonen gave a talk about evidential looping effect which is a special form of feedback effects. However, there are serious differences. The way one classifies something will have an effect on the behaviour of the classified thing. For instance, if GDP-dynamics is regarded as of recession, it will have an effect on the investment decisions of private companies. On financial markets similar feedback effects are in the game: events are brought about individual agents with intentions and there are concepts the application of which have effects on behaviour and outcomes. For instance, a financial institution will change its behaviour in case it is reported as insolvent. In other words, using models and making predictions have effects on the behaviour of the analysed thing. I think this framework is an interesting new way of addressing the problem of self-fulfilling prophecies and spirals: if a recession is reported and the central bank cuts the rate of interest, private sector agents may regard this as a symptom of recession and will act accordingly by cutting investment activity. This may result in a spiral.

One more lecture deserves attention. It is Olga Koshovets and Taras Varkhotov’s ‘Neuroeconomics’. It is a very recent attempt to reconceptualize economics in biological terms. Maybe our very concepts can be replaced by biological notions. Maybe talking about neurotransmitters and biochemistry may be an effective framework to describe economic processes. For me, the most strinking thing was the consequence of this reasoning: economics will be a natural science. So, what proved imposissible to complete on physical grounds may be completed on biological grounds. Shocking. Neuroeconomics makes it possible to trace subjectivity back to neurophysiological predeterminacy. On these grounds neuromarketing has emerged very recently. Neuromarketing aims to understand the neurophysiological reactions of customers on the basis of their eye-movements or even mimicry. Filmmaking has already benefited from these striking results. Neuroeconomics is so recent that neuroeconomists now prefer publishing in biological-medical-biochemical journals for physically grounded economics may be averse to such achievements and theoretical developments.

I cannot resist to mention Margaret Schabas’ talk on Hume’s proto-statistical methods. In this lecture, Margaret made some really interesting points. For instance, she called attention to how extensively Hume used statistical data and how close he was to some modern concepts such as variance or regression.

It was day 1. It is time to go to sleep for tomorrow’s program is heavier than today’s schedule. Moreover, I am leaving the hotel on Thursday morning (my flight departs at 7:30) and it is problematic to get to the airport that ‘early’. Nonsense. I need to plan my way home… that I intended to be a light process. It’s a pity… Good night!


INEM 2017 Conference, Day 0

The day has come and I am on my way to San Sebastian, Spain. Even though I could spend almost two months without travelling to anywhere, travelling as such has not become more agreeable to me. Actually, I hate travelling – but flying… flying is something different. Whilst travelling by, say, train still seems to be an ordeal… or even a torture, I love to fly. I love the atmosphere of the airports, staring at my fellow passengers, guessing who they are and where they are heading to. On this day a year ago I was travelling to Durham which is still regarded as the greatest adventure of my life. Sipping my hot espresso at Budapest Airport terminal 2B, after struggling through the security check, all my memories are back… as if everything had happened the other day. I am thinking about my friends, Lisa, Paige, Victoria and the wonderful Duke Campus. But it is just nostalgy, nothing more.

But it is time to come back to present. I am making my way to INEM 2017, the exciting binannual conference of the International Network for Economic Method. This year a wonderful North-Spanish town, San Sebastian hosts the conference from Monday to Wednesday. There is an interesting venue: the full program has just been announced. However, the conference starts as early as on Sunday with a workshop (Capitalism, Technology, and Scientism: Threats to Democracy?) hosted by Philosophy of Economics working group. It is an interesting initiation that is really worth paying attention to. Melissa Vergara Fernández is charing this session. I met Melissa at the EIPE20 conference in Rotterdam this March and I have the privilge of working with her on the September special issue of Economics and Business Review. I am sure she will be one of the most influential philosophers of economics of the following years. 

What to do in San Sebastian…? San Sebastian is a beautiful town near the Ocean in the North-East of Spain… but today I am arriving very late, so no time for a sightseeing tour. The sessions start tomotrrow at 10:30, so in the morning and after the sessions I will have some time to visit the town and the shores. San Sebastian is not thar big: it is as large as my hometown. I have some maps, so it seems to be easy to come round all the beautiful places. My hotel is in walking distance from Palacio Miramar, the conference centre, so I can hardly wait to discover the surrounding districts of the town… the parish of Iglesia de San Vicente… the square of Plaza de la Constitución… or Bodega Donostiarra. Full of history. I am sure I will not have enough time to see everything, but there are some “must-sees” that I cannot miss. I need to be focused, admittedly.

That’s all for now. I am on my way and will get back with detailed daily reports on the presentaions. My lecture is on Wednesday in the “Macroeconomics” session.


Palacio Miramar



Iglesia de San Vicente



Plaza de la Constitución



Bodega Donostiarra


If It’s August, This Must Be Spain

Finally the organisers sent us the first information e-mail with regard to INEM’s 2017 conference. I could hardly wait for these instructions. This is going to be an exciting event and I am eager for August to come. The registration is now open – everything is carried out on-line. This is very modern, I must say. According to the Preliminary Programme, we have lots thought-provoking lectures and interesting panelists – lots of the faces familiar from Rotterdam. We are going to have a very heavy schedule: all the days start early in the morning and last until the evening. Yes, even 10-hour-long, busy workdays. 5930761917_233493219c_b

The conference is held at the beautiful Palacio Miramar, a palace built for the Spanish Royal Family at the end of the 19th century. We have the opportunity to continue the discussions even during the lunches, as the conference lunches are served right at the palace. This is not the only option, as there is a refectory in the building itself and there are a couple of restaurants within walking distance – however, I will opt for the official conference lunches in order to spend lunchtime in a good company. Moreover, my temporary residence is also within walking distance from the Palace. I think I will fly Iberia through Madrid. This is going to be a nice journey and an exciting intellectual adventure, of course.


INEM 2017 Conference at San Sebastian

“Dear Peter,

On behalf of the INEM executive board, we are pleased to let you know that your abstract has been accepted for presentation at INEM 2017 in San Sebastián, from August 28-30, 2017.”

International Network for Economic Method (INEM) is the leading international organisation and platform for economic methodologists. It has a bi-annual conference (the next event of this series is exactly the San Sebastian conference in August), a quarterly journal (Journal of Economic Methodology) and a book series (Routledge INEM Advances in Economic Methodology). These are the facts. INEM was called into existence by some leading US and European methodologists (some of them are closely tied to the Erasmus Institute at Rotterdam), so the collaboration between the European and overseas colleagues is extremely strong, vivid and fruitful here. This is the reason why INEM is so outstanding.

I am over the initial registration process as I confirmed my taking part. Now I have no detailed information about the venue, so I have no idea about either the sessions or the panelists. My lecture “Lucas on Method” is in the making. To be perfectly honest, I can hardly wait to arrive at San Sebastian, to attend as many lectures as possible and to write a detailed diary on a daily basis whit photos and short summaries. I hope I can meet some of my colleagues there again.  It is going to be a great fun.


EIPE 20 Anniversary Conference, Day 3

Some of you might cry of shame because today I skipped the plenary session. However, in the last few days I’ve had so heavy a schedule that I needed to make some time for taking some photos of the city (at least the neighbouring parts) and the campus. Success, I managed to take all the pictures I wanted.


Then I joined the parallel sessions. I could catch some interesting pieces. For example, Melissa Vergara Fernández devoted her speech the problem of what are philosophical theories of models good for. A lively debate was triggered by the speech, even Marcel Boumans gave his thoughts, but for me personally the most interesting point was this figure, below:


It clearly reveals how the structure of economic research has changed during the last few decades. This dynamics can really underpin the point that the balance between “theory and measurement” is radically moved towards the position of measurement without theories. I am afraid, the era of grand theories is over. Once and for all…?

Ahmet Dincer Cevik’s talk also triggered serious debates, even though his fundamental thought was right. Economic laws hold for a while, but later some laws may cease to exist, at least in a particular spatio-temporal environment. The conclusion he drew also seemed to be grounded: such a failure doesn’t corrupt the initial validity. But this is simple. This is how social world works. Physical reality is one and timeless-at least in human terms. But our social environment keeps changing, so it is not surprising if a law-like tendency happens to break down.

Lukasz Hardt noted an interesting feuture of scientific explanation. Sometimes even simple algebra proves to be useful in explaining social phenomena. For example, the fact that 33 cannot be devided by 2 with no remainder can explain the event that a mother is not able to divide 33 cherries between her two daughters without cutting. Cutting a cherry, of course.

The day and the conference was closed by an informal event when the founders of EIPE accompanied by some of their earlier students talked about the past, the present, and the future of EIPE.


It was really a fascinating three-day intellectual adventure. The conference has brought some new acquaintances or even friends-time will tell. There was a heavy load on me to take in so many new insights… but in the end I am happy but tired. It is about time for me to leave Rotterdam for my home that I am missing so much now. Now only a few things remained. I need to pack my suitcase, set my alarm clock and then get to the airport early in the morning. But I am doing so in the hope of coming back here once.

EIPE20 Anniversary Conference, Day 2

It is a tough day, and it is not over at all. Today’s plenary session was presented by Johanna Thoma and Francois Claveau at the Pavilion of the university. This is an iconic place of the campus. Johanna talked about preference-based instrumental rationality. I have got some new insights on rational choice theory. The outlines have always been clear, but I was curious about the details… how economists use this framework in practical terms. Now I see what the problem is. This theory helps us to explain human decisions on the basis of preferences and the rationality postulate. There are some extraordinary patterns in human decisions and some extraordinary sets of preferences, so the task to complete is to give a rational account of them within this theoretical framework. How can this model be modified so that phenomena out of the ordinary can be explained or understood as well?

Francois gave a speech on an interesting topic: Central banks as experts. It is rather personal, but this guy moved and acted (and actually looked) on the stage like Mark Zuckerberg. Funny. He walked up and down in a really cool style… but for me… this is strange. It is not good or wrong… just strange. For me the great economists of the 70’s and the 80’s have always been the models. To step up the stage, to walk to the desk, to put on the glasses and to read the lecture. In a calm and elegant way. This new thing… is just a show. But admittedly, the world has really changed. If you are a scientist… you need to be a showman as well. All in all, Francois’ lecture was interesting. He talked about central bank communication in a context where central banks are surrounded by the public as an epistemic community. His theory is called applied social epistemology. His work seems to be interesting as for revealing the hidden structures of the communication between central banks and the public.

Let’s see some interesting lessons from today’s panel sessions. Michael Joffe expressed his strong interest in biology. He always turns to biology in order to find a discipline that is used for scrutinizing some complex, heterogeneous and open-ended processes of reality. For him biology is an empirically-based causal theory. This is the method of natural sciences. That is, such disciplines start from reality itself-and this is the big picture to which economics makes a difference. It was nice to hear that he referred to F53 as a meta-theory directed to highlighting false causal mechanisms… but I am still dissatisfied because Michael depicted economics (as such) as the enterprise of missing the point. Models should capture a causal mechanism-but is it serious that ALL of our models fail to capture actual-plausible mechaisms…? I don’t think so…

Actually, Michael’s account seems to be a further item in the institutionalist critique. For example, the theory of money creation should be based on real/actual behaviour of real/actual agents, according to him. But for me this is clear that we have more options than capturing all the mechanisms vs. capturing nothing. Modern economics is about highlighting only one mechanism-meaning… one at a time. So we can be realists by setting up extremely abstract models. Michael wanted to call attention to the fact that some mechanisms are left out of our models. But I think this has always been on purpose!

Virginia Ghiara talked about Process Tracing as a means of testing and creating hypotheses. Now I am under the slight impression that Process Tracing is the macro-version of experimental economics. In both cases we are interested in collecting data on elementary human actions-it is the volume that makes the only difference. But these are only impressions…

Then there came my lecture. I was shocked at the very beginning because in the first minutes of the session Mäki Uskali joined us in the room. He is the leading international figure of the realist interpretation of modern economics, so it was my great pleasure to see him in the audience. I talked about the Friedman-Lucas-RBC line, on which Lucas performed a realist break, while Friedman and RBC were instrumentalists. Actually, I could surprise the colleagues. To my shock, Lucas is often labelled as an instrumentalist or anti-realist, but this view seems to be ungrounded. It all is about the methodology of creating unrealistic assumptions in order to set a realist theory-a theory that is directed at revealing the consequences of some plausible causal mechanisms. I don’t need to be an anti-realist just because I use unrealistic assumptions. By using appropriate assumptions I can tie my models to reality, no matter how unrealistic they are, provided they are set up from real constituents of reality.

This has been the day so far. Soon I need to leave for the anniversary party at Hotel Bazar.