Verification is Verification of the Real. The Real is the Verifiable.

The macroeconomic scientist must have a cognitional theory.  The real is not the ‘already out there now’; objectivity is not merely animal extroversion; verification is not merely ‘taking a look‘.  What science verifies is to be found in general affirmations. Continue reading

Ray Dalio Regarding Debt Crises

A recent interview of Ray Dalio (Bridgewater Associates) is available on YouTube. An  introduction to Mr. Dalio’s thinking is available on the Bridgewater website’s home page under the title The Economy, How the Economic Machine Works.

The final paragraph of this Post is as follows: We hope that Mr. Dalio will study Bernard Lonergan’s Macroeconomic Dynamics: An Essay in Circulation Analysis (CWL 15) to advance his present considerable understanding further – from a self-described “mechanic” to a theorist of circulation analysis, whose formulations are precisely explanatory, compelling to the private sector of the economic process, and verifiable by econometricians.  We hope that, as a person of influence, Mr. Dalio will convey a more advanced, explanatory understanding of the pretio-quantital economic process to the nation and to the world.

In particular, Mr. Dalio should not speak shallowly and haphazardly of “common prosperity”; rather he should understand and master Lonergan’s theory of the basic-expansionary phase of the pure cycle of expansion.  One of the motives driving Lonergan to seek and discover the science of the objective economic process was to establish scientific grounds for social policy.  Unlike in totalitarian countries where people are free to be an ant, here human persons are free to think and learn and free to conduct themselves according to the norms and precepts of the objective economic process. … … We now offer some pointers; as we say in the Welcome: Continue reading

Alan S. Blinder, Wall Street Journal, Wednesday, December 29, 2021

Alan S. Blinder had an article in the Wall Street Journal of 12/29/2021 entitled “When It comes to Inflation, I’m Still on Team Transitory.”  Unlike many financial talk-show prognosticators, Professor Blinder did more than recite a bunch of hunches. He decomposed indexes (both CPI, PCE) and analyzed their measures of inflation in 2021.  He implicitly acknowledged Functional Macroeconomic Dynamics’ surplus circuit and he acknowledged that it takes time to implement capital expansion in order to cure supply shortages. He correctly reminded the readers that the government was forced to take extraordinary monetary actions to mitigate the Covid slowdown.  He implicitly characterized as probabilistic predictions by himself and others, including his prediction of “transitory inflation.” He asked, “What could make Team Transitory wrong?” Prof. Blinder is to be credited for being somewhat analytical and providing useful details.  However, the following comments are offered in order to a) improve the sketchiness of Walrasian macrostatics by means of Lonergan’s scientific systematics, and b) properly assign responsibility to avoid or correct inflation and unemployment.  (Click here)

Debunking Marx’s “Exploitation”; The “Iron Law” of Consumer Expenditures; (CWL 15, footnote 34; CWL 21, ftnt. 14 [Editor’s Intro] and 87)

In explaining the normative pure cycle of economic expansion for which the process has a systematic exigence, Lonergan redefinedcosts” and “profits”,

There is a sense in which one may speak of the fraction of basic outlay that moves to basic income as the “costs” of basic production.  It is true that that sense is not at all an accountant’s sense of costs; … But however remote from the accountant’s meaning of the term “costs,” it remains that there is an aggregate and functional sense in which the fraction… is an index of costs.  For the greater the fraction that basic income is of total income, the less the remainder which constitutes the aggregate possibility of profit.  But what limits profit may be termed costs. Hence we propose ….to speak of (c’O’  = p’a’Q’) and (c”O” = p”a”Q”) as costs of production, having warned the reader that the costs in question are aggregate and functional costs…. [CWL 15, 156-57] Continue reading

A Commonsense Descriptive Utterance Is Redefined As An Abstract Explanatory Conjugate; CWL 15, footnotes 26 and 27

A distinction has been drawn between description and explanation.  Description deals with things as related to us.  Explanation deals with the same things as related among themselves.  The two are not totally independent, for they deal with the same things and, as we have seen, description supplies, as it were, the tweezers by which we hold things while explanations are being discovered or verified, applied or revised. … [CWL 3, 291/316]

Lonergan’s basic explanatory terms are rates of so much or so many every so often; i.e. the foundational and superstructural explanatory terms of the economic process are velocities.  What at first seem to be everyday commonsense descriptive utterances are “remeaningized”, given another meaning, or redefined, and precisely distinguished and related as functional point-to-point activities or functional point-to-line activities; and they are scientifically employed as abstract technical terms in an explanatory formulation.

Continue reading

Understanding the Causes of Boom or Slump, Inflation or Deflation

(Lonergan’s) massive part-time investment of his surplus intellectual energy in an effort to understand the “causes” of the Depression was a response specifically to the boom and bust dimension of that problem.  His response came in his exploration of the functional correlation between production, exchange and finance in an economy.  Central was the question, how in aggregate in an economy does money circulate?  His subsequent insights led him to divide it into distinct basic and surplus circuits causally interacting with a redistribution financial zone.  As a result he was able to show how with better financial management of that circulation the emergent standard of living of an economic community could advance cyclically to a higher level without any downward negative swings. [Mathews, 2009, 150] Mathews’ website

The economic process is a whole dynamic organic process constituted at once by dynamic production, exchange and finance, in conformity to principles and laws of concomitance, continuity, equilibrium and solidarity. Continue reading

Senator Tom Cotton’s Article in The Wall Street Journal (12/2/2021)

In the Wall Street Journal of Thursday, 12/2/2021, Senator Tom Cotton had an article entitled ‘No’ on Jerome Powell at the Fed. Senator Cotton was correct regarding a) the possibility of worst-case and less-catastrophic scenarios of inflation, b) the possibility of inflation wiping out wage gains, and c) that the result of the Fed’s policies is to boost prices in both the basic consumables (point-to-point) circuit and in the Redistribution Function’s secondary stock and bond markets.

Senator Cotton, as always, is to be admired for his courage; but he and all in government and the private sector must learn the principles and laws of how the objective economic process actually works.  A lot depends on a knowledgable government acting in the best interests of the entire populace of free people. Some would say it’s a matter of the survival of human liberty.

As we’ve quoted many times, both inflation and deflation are swindles. (Click here and here and here and here) Continue reading

Accepting the Challenge of Serious Education

A surplus expansion calls for saving, and a massive surplus expansion calls for massive saving.  In contrast, the basic expansion calls for ever-increasing consumption.  So the practical wisdom cherished in the surplus expansion (save and invest) has to give way to a quite different practical wisdom (employ for consumption) in the basic expansion. … Now to change one’s standard of living in any notable fashion is to live in a different fashion.  It presupposes a grasp of new ideas.  If the ideas are to be above the level of currently successful advertising, serious education must be undertaken.  Finally, coming to grasp what serious education really is and, nonetheless, coming to accept that challenge constitutes the greatest challenge to the modern economy. [CWL 15, 119]

Larry Summers is Right on the Money and Right on the Money

On this weekend’s Bloomberg Wall Street Week, Larry Summers is right on the money and right on the money. (sic)  In the light of all we’ve said about a) the explanation of inflation, b) the ineffectiveness of the Fed’s tools and the ineptness of the Fed’s actions re money supply and interest rates, c) the distribution of income between the two circuits based on the phase of the objective process, etc, judge for yourself. Continue reading

Scientific Generalization by Functional Analysis of the Network of Interdependent Rates

The non-Euclideans moved geometry back to premises more remote than Euclid’s axioms, they developed methods of their own quite unlike Euclid’s, and though they did not impugn Euclid’s theorems, neither were they very interested in them; casually and incidentally they turn them up as particular cases in an enlarged and radically different field. Continue reading