[11/21/19] There is a further type of insight that arises immediately from the data. Such is the grasp (insight, or act of understanding) that precedes and grounds the definition of the circle. Such was Galileo’s insight formulated in the law of falling bodies. Such was Kepler’s insight formulated in the laws of planetary motion. Such was Newton’s insight formulated in the theory of universal gravitation. Such has been the point in the now well established technique of measuring and correlating measurements. Such is the goal of classical heuristic structure that seeks to determine some unknown function by working out the differential equations, of which the unknown function will be a solution, and by imposing by postulation such principles as invariance and equivalence …Fourthly, it notes that this intelligibility, immanent in the immediate data of sense, resides in the relations of things, not to our senses, but to one another. Thus, mechanics studies the relations of masses, not to our senses, but to one another. Chemistry defines its elements, not by their relations to our senses, but by their places in the pattern of relationships named the periodic table. Biology has become an explanatory science by viewing all living forms as related to one another in that complex and comprehensive fashion that is summarily denoted by the single word, evolution. [CWL 3, 77-78/100-102] [#57] (Click here for previous “Single Paragraphs”)
[11/16/19] 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 (or total outlay), 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’ and c”O” as costs of production, having warned the reader that the costs in question are aggregate and functional costs… . [CWL 15 156-57] [#56]
Diagram of Rates of Flow
[11/19/19] Taking into account past and future values does not constitute the creative key transition to Functional Macroeconomic Dynamics. Those familiar with elementary statics and dynamics will appreciate the shift in thinking involved in passing from (static) equilibrium analysis … to an analysis where attention is focused on second-order differential equations, on d2θ/dt2, d2x/dt2, d2y/dt2, on the primary relativities of a range of related forces, central, friction, whatever. Particular secondary boundary conditions in Functional Macroeconomic Dynamics, past and future pricings and quantities, are relatively insignificant for the analysis of the primary relativity immanent in, and applicable to, every instance of the process. What is significant is the Leibnitz-Newtonian shift of context. [paraphrase in part of McShane, 1980, 127] [#55] (Click here for previous “Single Paragraphs”)
[11/18/19] No doubt Keynes was an economist first and a methodologist second, but he was none the less very articulate about his theorizing……..Lonergan, for his part, is perhaps a methodologist first and an economist second, but, as we shall see, he was able to push his economic reflections further than Keynes because he had a firmer grasp of the essentials of an effective theory. [Gibbons, 1987] [#54] (Click here for previous “Single Paragraphs”)
Economic process – like other world processes – has an immanent intelligibility consisting of primary relativities which can be applied to the coincidental secondary determinations which occur throughout time in a non-systematic manifold. Economic process is constituted by schemes of recurrence under the dominance of abstract principles and laws; nevertheless, the actual concrete workings of the economic schemes of recurrence are shot through and throughout time with indeterminancy. So, it is a fact that prediction is impossible in the general case, since the concrete patterns of events occurring throughout time are a non-systematic aggregate. Thus, the point-to-line and higher correspondences are based upon the indeterminacy of the relation between current surplus products and the ultimate later basic products that eventually exit the dynamic process and enter into the standard of living.
An event in an economic scheme of recurrence has a diverging series of conditions. Continue reading
We have arranged this Topic into four parts:
- Part I: The Disorientations of Macroeconomists
- Part II: Principles and Precepts of Analysis
- Part III: A New Textbook, Lonergan’s Macroeconomic Dynamics: A Textbook in Circulation Analysis
- Part IV Comments on The Federal Reserve’s Current Framework For Monetary Policy: A Review and Assessment, by Janice C. Eberly, James H. Stock, and Jonathan H Wright.
Part I: The Disorientations of Macroeconomists
One cannot help but admire and be grateful to the Federal Reserve Bank for its Flow of Funds matrices and the National Bureau of Economic Research for its GDP tables. Great information, well done! However, the Fed, the NBER, and the proponents of the DSGE methodology suffer from fundamental disorientations. The NBER’s descriptive, commonsense, national-income accounting must integrate the Fed’s data on credit and to be recast to provide an explanatory systematization of interdependent flows of products and money. Devotees must reorient themselves. (Continue reading)
One cannot help but think that Bernard Lonergan had functional macroeconomic dynamics clearly in mind as he treated the intelligibility of world process in CWL 3, Insight: …, which is very much an implementation of the act of understanding of mathematicians and natural scientists. In his understanding of mathematics, the natural sciences, and the science of macroeconomics in particular, he grasped that the explanation of the dynamic concrete process is expressed by a mathematical conjunction of component abstract primary relativities with component concrete secondary determinations from the non-systematic manifold. And these secondary determinations, such as particular prices and quantities, are to be interpreted in the light of the significant, abstract, explanatory variables rather than in the obscurity of the IS-LM, and AD-AS models. (Continue reading)