Knight, conveying Weberian tenets

Frank H. Knight played a significant role in Weber’s American reception. Due to his contribution the University of Chicago grew one of the American centres of Weberianism (Scaff, 2011, p. 199). Even though the birth of his interest in Weber is shrouded in mystery, by the time he arrived at Chicago (1928) he had certainly nurtured an in-depth knowledge of Weber’s social scientific methodology and comparative historical sociology (Emmett, 2006, p. 107). Knight’s attraction to Weber remained intense even up to the 1940s. In these years he applied Weber’s tenets as a fundament upon which he could build his complex social scientific approach. Even though his explicit references to Weber were rather scarce (Noppeney, 1997, p. 328), and they were so especially from the 1930s, for Knight Weber remained the most influential intellectual authority throughout his career. Knight was reliant upon Weber in understanding the formation of capitalism, in rethinking economic methodology and in the economic interpretation of history (Emmett, 1999, pp. xiii-xv).

Knight’s most interesting methodological tenets regard the relationship between neoclassical economics and the broadly interpreted social scientific disciplines. He exerted his methodological considerations in a series of publications one of the recurrent thoughts of which is that physics-based neoclassical orthodoxy has only highly limited relevance―however, on its carefully circumscribed territory it meets the standards of modern science (Noppeney, 1997, p. 334). It is interesting to realize that Knight in these texts, while arguing for the irrelevance of neoclassical economics outside its territory, identifies its genuine scope. Here, he regards orthodoxy as a useful and relevant system.

The possibility of extending physical concepts to economics is qualified. Thus, the most acute methodological problem of the development of economics for Knight was to carefully demarcate the scope of neoclassical economics. Even though Knight stinted this territory, he was ready to admit neoclassical theory conveying true knowledge of reality (Knight, 1935, p. 286). Because of abstraction we can have partial truths only. Neoclassical tendency laws have universal validity without providing comprehensive causal descriptions of the phenomena on their territory. The circumstances under which formally deduced economic laws can perfectly emerge in reality are unlikely to set in―which would be undesirable in social-political terms (Knight, 1956, p. 270). Knight, however, regarded the fundamental laws of neoclassical economics and the assumptions underlying the ideal type of homo oeconomicus (Knight, 1944, pp. 293-305) as the obviously existing characteristics of reality (Knight, 1924/1999). As something that as behavioural tendencies are hidden behind the complex and chaotic socio-economic reality (Knight, 1921, pp. 4-5).

In order to understand economic and life he was determined to set up a framework that is sensitive to the fact that social reality is never like the abstract ideal types of neoclassical orthodoxy. Thus, Knight drew attention to a complex causal analysis in which the nature of the processes under scrutiny is a concern. From the content and the form of economic actions he considered economic laws to be able to describe the static form only. Instrumentally rational individual behaviour accessible to mathematical description (Knight, 1972, p. 7) emerges in a framework the elements of which (views, beliefs, attitudes and institutions) are subjected to continuous development. The very nature of the process itself makes the physicalist approach unable to describe this comprehensive evolution. For him, the extensive usage of the ceteris paribus clause was justified only when the abstracted changes were negligible (Knight, 1935/1999). In his view, there exists only a limited possibility to resolve the tension between statics and dynamics within the theory (Knight, 1922/1935, p. 20). Even though we can identify the static laws and the key variables of the economic sphere of life, however, analysing the evolution of the dynamic framework is well beyond the territory of neoclassical economics. To this end, neoclassical theory needs historical analysis in understanding real social processes (Noppeney, 1997, pp. 322-323; Knight, 1972, p. 6) for this is the only way to scrutinize the differences between the theoretical outcomes and reality (Knight, 1944, pp. 308-310).

Knight took the stance of methodological pluralism, in which the interpretation of economic actions exhorts us to utilize all the social scientific disciplines. In this context neoclassical economics is only one of the suggested approaches (Knight, 1972, p. 10). His ultimate purpose was to establish an interpretative complex social science in which theoretical economics is complemented by other approaches including both the humanities and the entire field of social disciplines. In such a framework we can analyse human actions in the broader context of social reality (Fu-Lai Yu, 2002, p. 4). Knight expected the involvement of these approaches to enhance both the complexity of causal understanding and the predictive success beyond the possibilities of neoclassical theory (Knight, 1940/1999).

References

Emmett, R. B. (1999). Introduction. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. vii-xxiv). Chicago: The University of Chicago Press.

Emmett, R. B. (2006). Frank Knight, Max Weber, Chicago economics and institutionalism. Max Weber Studies, 7(1), 101-119.

Fu-Lai Yu, T. (2002). The economics of Frank H. Knight. An Austrian interpretation. Forum for Social Economics, 31(2), 1-23.

Knight, F. H. (1921). Risk, uncertainty and profit. Boston: Houghton Mifflin Company.

Knight, F. H. (1922/1935). Ethics and the economic interpretation. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 19-40). Freeport: Books for Libraries Press.

Knight, F. H. (1924/1999). The limitations of scientific method in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 1-39). Chicago: The University of Chicago Press.

Knight, F. H. (1935). Economic theory and nationalism. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 277-359). Freeport: Books for Libraries Press.

Knight, F. H. (1935/1999). Statics and dynamics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 149-171). Chicago: The University of Chicago Press.

Knight, F. H. (1940/1999). “What is truth” in economics? In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 372-399). Chicago: The University of Chicago Press.

Knight, F. H. (1944). Realism and relevance in the theory of demand. Journal of Political Economy, 52(4), 289-318.

Knight, F. H. (1956). The role of principles in economics and politics. In F. H. Knight, W. L. Letwin, & A. J. Morin (Eds.), On the history and method of economics. Selected essays (pp. 251-281). Chicago: The University of Chicago Press.

Knight, F. H. (1972). Social science. Ethics, 83(1), 1-12.

Noppeney, C. (1997). Frank Knight and the historical school. In P. Koslowski (Ed.), Methodology of the social sciences, ethics , and economics in the newer historical school (pp. 319-339). Heidelberg: Springer.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

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Chicago business-cycle models: from Weber through Friedman to Lucas. A selected bibliography

The most important methodological works of Weber:

Weber, M. (1949). The methodology of the social sciences. Glencoe: The Free Press. Translated by: Shils, E. & Finch, H.

Weber, M. (1968). Economy and society. New York: Bedminster Press. Translated by: Wittich, C.

Weber, M. (2012). Collected methodological writings. London: Routledge. Translated by: Bruun, H.H.

Weber’s reception in the United States:

Derman, J. (2012). Max Weber in politics and social thought. Cambridge: Cambridge University Press.

Scaff, L. A. (2011). Max Weber in America. Princeton: Princeton University Press.

Scaff, L. A. (2014). Max Weber in the United States. SocietàMutamentoPolitica, 5(9), 271-291.

Knight’s major Weberian works:

Knight, F. H. (1921). Risk, uncertainty and profit. Boston: Houghton Mifflin Company.

Knight, F. H. (1922/1935). Ethics and the economic interpretation. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 19-40). Freeport: Books for Libraries Press.

Knight, F. H. (1924/1999). The limitations of scientific method in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 1-39). Chicago: The University of Chicago Press.

Knight, F. H. (1933). The economic organization. New York: Harper.

Knight, F. H. (1935). Economic theory and nationalism. In F. H. Knight, M. Friedman, H. Jones, G. Stigler, & A. Wallis (Eds.), The ethics of competition and other essays (pp. 277-359). Freeport: Books for Libraries Press.

Knight, F. H. (1935/1999). Statics and dynamics. Some queries regarding the mechanical analogy in economics. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 149-171). Chicago: The University of Chicago Press.

Knight, F. H. (1940/1999). “What is truth” in economics? In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. 372-399). Chicago: The University of Chicago Press.

Knight, F. H. (1944). Realism and relevance in the theory of demand. Journal of Political Economy, 52(4), 289-318.

Knight, F. H. (1956). The role of principles in economics and politics. In F. H. Knight, W. L. Letwin, & A. J. Morin (Eds.), On the history and method of economics. Selected essays (pp. 251-281). Chicago: The University of Chicago Press.

Knight, F. H. (1972). Social science. Ethics, 83(1), 1-12.

Works on the Weber-Knight connection:

Emmett, R. B. (1999). Introduction. In F. H. Knight, & R. B. Emmett (Ed.), Selected essays (Vol. 1, pp. vii-xxiv). Chicago: The University of Chicago Press.

Emmett, R. B. (2006). Frank Knight, Max Weber, Chicago economics and institutionalism. Max Weber Studies, 7(1), 101-119.

Noppeney, C. (1997). Frank Knight and the historical school. In P. Koslowski (Ed.), Methodology of the social sciences, ethics , and economics in the newer historical school (pp. 319-339). Heidelberg: Springer.

 

Works on Knight’s relationship to Chicago economics:

Emmett, R. B. (2009). Did the Chicago school reject Frank Knight? Assessing Frank Knight’s place in the Chicago economics tradition. In R. B. Emmett, Frank Knight and the Chicago school in American economics (pp. 145-155). London: Routledge.

Emmett, R. B. (2010). Specializing in interdisciplinarity. The Committee on Social Thought as the University of Chicago’s antidote to compartmentalization in the social sciences. History of Political Economy, 42(S1), 261-287.

Emmett, R. B. (2011). Sharpening tools in the workshop. The workshop system and the Chicago School’s success. In R. Van Horn, P. Mirowski, & T. A. Stapleford (Eds.), Building Chicago economics (pp. 93-115). Cambridge: Cambridge University Press.

Emmett, R. B. (2013). Frank H. Knight and the Committee on Social Thought. Contrasting visions of interdisciplinarity in the 1950s. Retrieved from http://dx.doi.org/10.2139/ssrn.2307185

Emmett, R. B. (2015). Frank H. Knight and the Chicago school. Conference presentation, ‘The legacy of Chicago economics’, 5 October 2015. Chicago: The University of Chicago.

Reder, M. W. (1982). Chicago economics. Permanence and change. Journal of Economic Literature, 20(1), 1-38.

Van Horn, R., & Mirowski, P. (2009). The rise of the Chicago school of economics and the birth of neoliberalism. In P. Mirowski, & D. Plehwe (Eds.), The Road from Mont Pèlerin (pp. 139-180). Cambridge: Harvard University Press.

Milton Friedman’s Weberianism:

Hoyningen-Huene, P. (2017). Revisiting Friedman’s F53. Popper, Knight, and Weber. Unpublished manuscript.

Schliesser, E. (2011). “Every system of scientific theory involves philosophical assumptions” (Talcott Parsons). The surprising Weberian roots to Milton Friedman’s methodology. In D. Dieks, W. J. Gonzalez, S. Hartmann, T. Uebel, & M. Weber (Eds.), Explanation, prediction, and confirmation (pp. 533-543). Dordrecht: Springer.

 

Fulbright chronicle #1

“Dear Dr. Péter Galbács,

Congratulations! On behalf of the Fulbright Board of Directors in Hungary, I am pleased to inform you that you have been selected for a Fulbright Research Award for 4 months during the 2018-2019 academic year in the United States. We hope there will not be any obstructions in executing your grant. We will be pleased to welcome you among our Fulbright grantees and truly believe that your time in the United States will prove to be a successful and productive experience.”

I cannot tell you how happy and proud I am. From time to time I stop for a minute to tell myself that it feels as if it was a dream that has come true. But then I realize it IS a dream that has come true. The planning process has just started. There are a lot of details to consider since an important part of my project is to do extended library research at Duke and Chicago libraries. I am excited, admittedly.

Soon I will try to tell you more about both the process and my project, but today I would like to take pride in my award and to be simply happy.

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Realism vs. instrumentalism along the Friedman-Lucas-RBC line

Providing methodological analyses is a possible (and required) contribution to the historiography of modern business-cycle theories. As far as the Friedman-Lucas-RBC line of evolution is considered, it seems to be clear that as we approach the end of this story there is instrumentalism and nothing else in the commentaries. Today the only question is Friedman’s instrumentalism: there have been some intellectual efforts devoted to arguing for Friedman’s realism. Uskali Mäki’s ‘Unrealistic assumptions and unnecessary confusions‘ and Kevin Hoover’s ‘Milton Friedman’s stance. The methodology of causal realism‘ published in ‘The methodology of positive economics‘ are perhaps the most powerful initiations towards this direction. However, it is still the instrumentalist approach that seems to be the standard interpretation (see Paul Hoyningen-Huene’s very recent draft). Whether one focuses only on F53 or scrutinizes the text within Friedman oeuvre makes the difference. In the former case, Friedman can more easily be regarded as instrumentalist, whilst in the latter case there is a tendency for Friedman to be considered as a realist. This generalization, however, is problematic for it is not that difficult for us to find some works of Friedman in which it is instrumentalism that provides the principle of theorizing. Elsewhere I pointed out that Friedman’s Phillips curves are the manifestations of pure instrumentalism. In these models all the assumptions are designed in order that Friedman could achieve the desired theoretical outcomes.

As for Lucas, his instrumentalism seems to be unquestionable. As far as I can consider, the arguments for his instrumentalism are built upon some statements made by Lucas. Here are some examples:

Insistence on the ‘realism’ of an economic model subverts its potential usefulness in thinking about reality. […] On this general view of the nature of economic theory then a ‘theory’ is not a collection of assertions about the behavior of the actual economy but rather an explicit set of instructions for building a parallel or analogue system – a mechanical, imitation economy. A ‘good’ model, from this point of view, will not be exactly more ‘real’ than a poor one, but will provide better imitations. (Lucas 1980: Methods and problems in business cycle theory)

Or:

One can ask, for example, whether expectations are rational in the Klein-Goldberger model of the United States economy; one cannot ask whether people in the United States have rational expectations. (the Lucas papers, Box 13, Robert Barro folder)

The message common in these quotations is simple: features of the agents or environment designed in the models should not be looked for in reality. These are features of the model but not that of reality.

When Uskali Mäki started arguing for the realism in economics, he placed his arguments on the fact that it is possible for us to seize some aspects of reality via highly unrealistic models (Realistic realism about unrealistic models). Isolation leads to models which are not like reality, however, in some important aspects they can still bear resemblance to the depicted part of reality. To be perfectly honest, I am a bit confused when reading some analyses about Friedman, Lucas and modern macro. The realist interpretation of F53 seems to be rather weird. When Friedman is talking about the leaves of a tree modelled as if they were rational utility-maximizers, it is very difficult for us to argue for his realism, in spite of the abundance of technical details in his F53 that can easily be reconciled with a realist stance. But the real question is how far we can go along the argumantation for the realism of unrealistic models…? What does Lucas’ instrumentalism stand in? I think emphasizing his insistance on unrealisticness will not do in this respect – or if it will, then Friedman must be an instrumentalist too. All in all, focusing on the unrealistic features of economic models is not decisive in terms of the realist-instrumentalist debate. As Elay Shech emphasizes it in his ‘Scientific Misrepresentation and Guides to Ontology: The Need for Representational Code and Contents‘, misrepresentation is an endeavour when the modeller tries to distort some elements of reality whilst insisting on conveying some reliable information about the modelled system. Shech’s example is the political caricature.

So, I think, it is not enough to underline the distinction between models and reality. Both realist and instrumentalist models in the highly abstract neoclassical mainstream are not like reality. The decisive features of models must be found somewhere else. Now I am inclined to think that it is the purposes of the modellers that we need to study first and foremost. We cannot reach decisions about the realism and instrumentalism of models on the sole basis of the models themselves. Whilst they are important in this respect, we need to consider the modellrs’ intentions.

The true story of a fake paper

Time and again I tell my students about how science works. This is a twofold task, since in order to cover all the aspects of modern science we need to detail both the fuctions and the malfunctions of science. I am a fan of science and economics, thus I want to make young scholars and professionals of the future more cognizant of the dark side of science. Doing so, I may help them to avoid serious mistakes and the best way of raising the standards is to show negative examples. I believe in a realiable science. What is more, as part of the International Peer Review Week every year I do my best to shed some light on the vital role peer reviewers play in modern science. One of my favourite examples is the famous ‘Get me off your f***ing mailing list‘ paper by David Mazières and Eddie Kohler, but the other day I realized I cannot tell the whole story. There are some details that may be interesting of which I know almost nothing. In this short blog post I will try to fill some lacunas of my knowledge about this funny example of modern science.

The paper is from 2005. This is the year when two scholars decided to write a paper to emphasize the negative aspects of science. There is a problematic model in international scientific publication in which publishers of dubious value make efforts to produce journal articles and books with no scholarly value. Whilst such publising houses try to appear to be reliable, internationally acknowledged institutions with well-founded reputation, they are only realizers of an unfortunatly wide circle of predatory publishing policy. In this policy, scientific value is not a concern. Here everything is about money: any paper can be published if the author is willing to pay for it. Such publishers promise researchers an exceptionally quick review phase and after publication an extraordinary wide range of future readers and a large number of citations. However, the published papers are rarely worth attention, so actually these papers are not likely to have any readers at all. Predatory journals follow a rather annoying editorial policy. I remember, some days after the EIPE 20 conference this year I was also contacted by a journal only to be asked to become a member of the editorial board. To my surprise, the editorial board was full of real people, real scientist who were not careful enough to keep away from a predatory journal. They are used by the predatory publishers to hide the true nature of their policy. These publishers tend to send spam e-mails to their targets, this is the reason why Mazières and Kohler were upset enough to write the paper that consists of the repeated sentence ‘Get me off your f***ing mailing list’.

Actually, Mazières and Kohler’s paper was prepared for the 9th World Multiconference on Systemics, Cybernetics and Informatics to protest against the low stadards of acceptance expressed by the organizers of the conference. In fact Mazières and Kohler are excellent scientists. David Mazières is a professor of Computer Science at Stanford University. He received a BS in Computer Science from Harvard in 1994 and a Ph.D. in Electrical Engineering and Computer Science from MIT in 2000. Eddie Kohler is the Microsoft Professor of Computer Science at Harvard at the moment. He received a BS (1995) and then a MS (1997) and a Ph.D. (2001) in Electrical Engineering and Computer Science, MIT.

In 2014, the story of the paper continued. That year Peter Vamplew (Federation University, Australia) after receiving some spams from the International Journal of Advanced Computer Technology submitted the paper to the editors. He must have been surprised by the fact that the paper was sent to reviewers and rated as an excellent paper worth publishing. Moreover, the journal was really ready to publish the paper in exchange for a 150 USD fee. Of course, Vamplew refused to pay.

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Michel De Vroey at Budapest Business School – A short summary

On 5-6th October Michel De Vroey visited Budapest Business School to give two lectures on the evolution of modern macroeconomics. Michel is a well-known historian of modern macroeconomics with a special interest in the theories of the business cycle; professor emeritus of the Catholic University of Leuven and a visiting scholar at a lot of prominent universities including the Sorbonne of Paris and Duke University of Durham, NC. He is the author of some widely read and acknowledged books written both in English and in French and a series of important papers.

Prof. De Vroey has earned the admiration of the professionals in the field of the history of economics by his enormous knowledge, by his outstanding ability to reorganize some well-known facts in strikingly new ways and by his courage to trigger new debates in which we can reopen some old questions in order to move towards a new consensus. His thought-provoking ideas pave the way for a more in-depth understanding of the history of our discipline. He is one of the few who have already realized that the history of economics can hardly be discussed without exploring the methodology of economics. In his recent book, The history of macroeconomics from Keynes to Lucas and beyond, the history of modern macro becomes an exciting story of revolutions along the way to a unified big picture of seemingly conflicting ideas. As I had the privilige of being his host during his staying, we could have discussions about a lot of exciting topics and I found myself in the delightful position of getting to know him personally while sipping coffee. He is a great arguer with firm and solid views on his field of interest… an experienced researcher with thorough insights on the socialisation conditions of theoretical economics and the history of economics as a discipline… and a powerful master of making science.

His Budapest lectures were grandiose assessments of the methodological and theoretical transitions of modern business-cycle theories during the 20th century. In his ‘Mainstream economics: Its rise and transformation’ speech (based on his recent working paper The rise of a mainstream in economics co-authored by Luca Pensieroso) Prof. De Vroey discussed and evaluated the process through which mainstream economics has emerged as a methodological standard. This assessment seems to be a novel approach to the mainstream–non-mainstream relationship, so the Hungarian audience deeply interested in institutional economics found the lecture highly stimulating.

Michel’s second lecture was focussed on his recent book mentioned above. Here Michel discussed the Keynes-Lucas and the Lucas-RBC transitions. The audience were guided through the dynamic evolution of modern macro starting with Lucas’ early years (an applied economist) and the Lucas-Rapping papers, through the emergence of neo-Walrasian macroeconomics and the new standards for a ‘good’ theoretical research to the outburst of Kydland and Prescott. The lecture was closed by an intense debate. I hope Hungarian professionals found the lectures as thought-provoking as I did.

 

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Editorial: The methodology of contemporary macroeconomics

The Editorial Board of Economics and Business Review intended to devote this special issue to the emerging field of the philosophy of economics. This subdiscipline of our profession is rather in its youth, however, showing the signs of maturity. Philosophy or methodology of economics has several international organizations, leading journals and even book series—all of which serve only one purpose: to interlink those researchers who make considerable efforts to approach our traditional problems from a different point of view. As Polish researchers are particularly active in this field, the pleasure was mine when the EBR asked me to join this interesting project as a guest editor. I am really indebted to the Editorial Board for initiating me in the tough process of setting up this issue from the first occurrence of the idea. Thanks to our joint efforts, we could team up prominent and illustrious authors to share their thoughts regarding the sophisticated question of the methodology of contemporary macroeconomics. It is an additional source of pleasure for me that we really have an international cooperation of authors from the United Kingdom through the Netherlands and Poland to Hungary, where even the ages of our contributors show a great variety. It was an explicit editorial policy of ours to encourage the dialogue between researchers of different ages and countries. By having rejoinders to all our papers, we have both interesting pairs of senior and early-stage researchers and the hope of creating the possibility of new and burgeoning research links.

Why macro, you may ask. We are living in an age where the former myth of stable macroeconomies is dead once and for all. After severe world economic turbulences, macroeconomics faced serious challenges. Even though it is exactly such recurrent episodes of falls and rises in general macroeconomic performance that gave birth macroeconomics some decades ago, since 2008 there have been several voices claiming that modern macroeconomics, be it business-cycle theory or growth theory, has lost its relevance as to practical economic policy. Understanding business cycles has been a central topic in modern macroeconomics for decades. Business cycles are complex phenomena, so the underlying causal structure is difficult to disentangle. Different schools of the economic thought have attributed different causes to the same event. Neoclassical orthodoxy tries to address the problem in a choice-theoretic framework, while heterodox currents challenge this approach by emphasizing a multitude of possible social, institutional or even political causes. Due to these efforts, by now we not only have known a great deal about the nature of business cycles but also about the possible ways of treatment. The high importance of these theories is indicated by the number of Nobel prizes awarded for the related achievements.

However, it is easy to realise that the difference between the approaches stems from the difference between the methodologies along which the traditions try to address their chosen problems. Locking away in their own methodologies has triggered a demarcation between the different schools. This process of sharpening demarcation has led to an unfavourable situation in which different schools cannot even communicate with one another, despite all of them contribute to the highly complex endeavour of understanding capitalist economies. This is the reason why I think that the understanding of methodologies must be the first step to the understanding and the reconciliation of the different thoughts in economics. By this special issue we tried to create a new platform for sharing ideas in order that at least our contributors could start new dialogues.

As guest editor I have the privilege of giving a short introduction of the six papers and rejoinders included in this special issue. There occurred some topics around which the contributions of our authors can be easily grouped. Such a topic was János Kornai’s oeuvre. Janos Kornai is still the most influential economist in Central Europe who devoted several magnum opuses to the understanding of the command economy. Thanks to him, we know a great deal about this episode of economic history today. However, his works are not only memories of the past. It is sad but true that Central European economies inherited several problems of the preceding socialist era. Our current macro-social problems can easily be traced back to the crisis phenomena of socialism. Corruption, the over-emphasized role of the state, poverty, wage tensions or inadequate education: all these challenges are rooted in the past and for the ultimate sources of our present-day problems stem from the past, we also need to look back on the past when it comes to formulizing our solutions. But for Kornai’s intellectual efforts, I am sure we would be hopeless at even realizing the problems, let alone seeking the answers. As Janos Kornai was awarded a Doctor Honoris Causa from Poznań University of Economics already in 1978, it was an explicit editorial policy to place emphasis on the assessment of his intellectual heritage and to render a tribute on occasion of his 90th birthday.

Accordingly, László Csaba reviewed Kornai’s oeuvre from a unique point of view. For Kornai’s critique of the neoclassical orthodoxy is still relevant, László Csaba gave a detailed analysis of the relationship between formalized mainstream economics and Kornai’s comparative economics. This is the line along which Kornai’s lifework unfolds. In contrast, Prof. Peter Mihályi focused on one item of Kornai’s lifework. In 1972 Kornai published his most debated book under the title Anti-equilibrium which was supposed to be a grandiose mainstream-critique. Even though as a critique this work of Kornai could only moderately succeed overseas, in Europe and especially in Central Europe Anti-equilibrium triggered a completely new line of thinking. As a result a new standard emerged to address the relationship of macro-models to reality. A more direct relationship has become established recently which has led to the need of a dedicated European Economics. However, oftentimes Anti-equilibrium is still regarded as Kornai’s most influential book, having opened the avenue for new research initiatives. In this vein Peter Mihályi devoted his paper to a simple micro-level observation provoked by the Anti-equilibrium according to which there are some common symptoms both in command and competitive economies. Peter Mihályi’s paper proved to be a genuine example as to how to interconnect micro- and macro-levels outside the mainstream camp.

Following the problems of the micro-foundations project of modern macroeconomics, Michael Joffe turned his attention to a micro-founded theory of economic growth. As is well-known, the microfoundations make up one of the most problematic areas of modern macroeconomics. Not even the mathematical tractability of the project is often-questioned, but also the very idea of placing macroeconomics on a microeconomic footing is widely debated.  Michael Joffe takes a sceptical attitude towards mainstream growth theories for these models in his view fail to give account of even the main features of economic growth. His answer is to suggest a more comprehensive approach to include more factors than the commonly known growth theories. Michael Joffe’s paper proved to be a thought-provoking initiation in addressing a well-known problem from an ignored point of view.

It is time to say something positive about neoclassical orthodoxy and modern macroeconomics as such. It is Pawel Kawalec who undertakes this task which seems considerably difficult to complete in a day and age when counter-mainstream currents are growing in both strength and intensity. Very recently Paul Romer made an effective attack against DSGE-models on methodological grounds. Pawel Kawalec made efforts to dig deep in order to take up the quarrel of DSGE-models at the root of the problem. By so doing Kawalec turns to the history of economics, so his paper is part of a growing number of treatises that take the history of economics and economic methodology as two interconnected and closely related subdisciplines. Judged by scientific representation standards DSGE-models seem to meet the common epistemic standards of scientific research.

Jerzy Osiatyński, a former student of legendary Polish economist Michał Kalecki, outlines ways as to how Kalecki contributed to the evolution of Keynesianism in the decades after the publication of Keynes’ General theory. As Keynesianism, especially the Keynesian approach to large-scale macroeconomic fluctuations, has become an idea different from the mainstream business-cycle approach, these insights invite the reader to consider theoretical economics as a complex discipline. One could hardly find a better account of how different approaches complement each other in economics.

At the end of this editorial note, it is time for me to call upon our contributors to speak for themselves. I hope, this special issue will turn out to be a trigger for new lines of discussion and for a partnership of our authors.

Peter Galbács

Guest editor

Economics and Business Review 3(3) is online now.

Contents

Jerzy Osiatyński: Kalecki – a pioneer of modern macroeconomics;

László Csaba: Comparative economics and the mainstream;

Michael Joffe: Evidence and the micro-foundations of economic growth;

Paweł Kawalec: Perspectival representation in DSGE models;

Peter Mihályi: The motivation of business leaders in socialist and market-based systems (An essay to celebrate the 90th birthday of János Kornai);

Peter Galbács: Methodology…?! Why? Some methodological aspects of the controversy between mainstream economics and institutionalism;

Izabela Bludnik: Rejoinder to Kalecki – a pioneer of modern macroeconomics by Jerzy Osiatyński;

Melissa Vergara-Fernández: Rejoinder to Comparative economics and the mainstream by László Csaba;

Emma Hamilton: Rejoinder to Evidence and the micro-foundations of economic growth by Michael Joffe;

Marcin Kolasa: Rejoinder to Perspectival representation in DSGE models by Paweł Kawalec;

Mariusz Maziarz: Rejoinder to The motivation of business leaders in socialist and marketbased systems by Péter Mihályi;

Beata Stępień: Rejoinder to Methodology…?! Why? Some methodological aspects of the controversy between mainstream economics and institutionalism by Peter Galbács;

Zsófia Török Martina: Book review: Anthony Elson, The global financial crisis in retrospect;

Máté Szalai: B. Hámori, M. Rosta, (Eds.), 2016. Constraints and driving forces in economic systems – studies in honour of János Kornai.

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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.

Discussant: PETER MIHÁLYI

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.

 

Program:

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.

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