We try to prescind from psychology and to concentrate on formulating macroeconomics as the objective explanatory science of the dynamic economic process involving values. However, in two previous posts, we have seen fit to point out the importance of culture in the hierarchical scheme of human values. Click here and here.
Our references in this section are [Burley, 1992-2] and [Burley and Csapo, 1992-1].
Burley, Peter and Csapo, Laszlo, (1992) Money Information in Lonergan-von Neumann Systems, Economic Systems Research, Vol 4, No. 2, 1992 [Burley and Csapo, 1992-1]
Burley, Peter (1992) Evolutionary von Neumann Models, Journal of Evolutionary Economics 2 , 269-80 [Burley, 1992-2]
We consider a game-theoretic, von Neumann model of the transitional process from an initial stationary state to a more abundant stationary state, with matrix A of inputs and matrix B of outputs containing explanatory functional variables. (continue reading)
.I. Summary of the Analysis: Heuristic, Observations, and Discoveries
.II. Summary of the Argument (verbatim from CWL 15, 5-6)
.III. Supplement to the Summaries
I do not have a video capability on this website, but perhaps the reader could, in his/her imagination, superpose simultaneously upon the Diagram of Rates of Flow several key formulas and images. This exercise and self-testing should be beneficial to the serious student. In addition to seeing and having insight into each image in a sequence, the reader would, by superposition see the inner workings and interrelations of the velocities and accelerations all at once in interdependence rather than alone and separately. The superpositioning of each diagram with its formulas offers the opportunity to consider the ideas and schemes one-at-a-time. one-against-one, and all-at-once. An imagining and understanding and affirming would bring home to the reader’s mind the full complexity of the always-current, purely dynamic, organic process. And it would help the reader to appreciate the wisdom in Lonergan’s orderly presentation.
Here is a list of key formulas and images to be considered: Continue reading
“δὶς ἐς τὸν αὐτὸν ποταμὸν οὐκ ἂν ἐμβαίης.” (Heraclitus)
“No man ever steps in the same river twice.” (translation of Heraclitus)
Each of the 1970’s, 1980s and current 2020s has featured its own unique and nuanced combinations of circulating flows of products and money in phases of normative expansion, divergent boom; and corrective contraction. The flows of these decades are not all identical flows which anyone can simply reference to justify a present shallow opinion.
The Wall Street Journal of Monday, August 7, 2023 included Alan S. Blinder’s reply to John H. Cochrane. (See the two posts below on this Home Page.) Continue reading
The Wall Street Journal of Wednesday, August 2, 2023 featured an article by John H. Cochrane (Hoover Institution and Cato Institute) entitled What We’ve Learned About Inflation.
Alan S. Blinder (Princeton) had an article in The Wall Street Journal of Thursday, 7/20/2023 entitled Team Transitory Had a Point About Inflation
Prof. Blinder was concerned to relate the recent and current inflation to a) supply shocks, and b) the speed and extent of the manipulation of interest rates. Our concern is rather to explain the recent and current inflation as formally caused, and thus explained rather than merely postulated, by a) the recent flooding of the economic system – given its capacity, state of productivity, and phase of expansion – with trillions of dollars of free money, and b) the circulation of those inflation-causing trillions of free dollars throughout a) tiers of income and propensities to consume, and b) two productive operative circuits and the unproductive Redistributive Function, in which sit the stock and bond trading operations. Continue reading
There is sufficient content in this Section 26 to serve as the basis of an impressive graduate thesis featuring explanatory first- and second-order differentiations of interdependent functional activities implicitly defined by their functional relations to one anther. The set of equations would constitute a significant part of a complete explanatory theory.
Part I: Introductory
Part II – Divergent Flows of Products and Money; Consequent Inflation or Deflation
Case A: The problem of an inadequate rate of saving in a surplus expansion; I”/(I’+I”)
A note re stagflation stifling a full surplus expansion
Case B: The problem of an excessive rate of saving in a basic expansion
Part III – Outline of Traditional Theory’s Lack of Understanding re Artificially Manipulating Interest Rates
Part IV – Selected Excerpts and Comments Relevant to CWL 15, Section 26, “The Cycle of Basic Income,” pages 133-44
First, suppose an initially equilibrated economy. Then, suppose that a lagging, though severe, inflation is effected by an injection of additional money, which is not correlated with, and is in excess of, the magnitudes and frequencies of the productive requirements of this economy, If, finally, after the lagging, severely-damaging inflation, there is a merely-gradual decline of the rate of inflation, do you think that anyone should brag about the achievement of a metaphorical “soft landing?” Continue reading
The foregoing Section 13 (entitled Rates of payment and transfer) defined two circuits of outlay, income, expenditure, receipts, a pair of crossovers, and four pairs of transfers between the redistributive function and the demand and supply functions. The present section is concerned to watch the circuits in motion, and more particularly to inquire into the conditions of their acceleration. The inquiry involves three steps: first, one asks what is the possibility of circuit acceleration when the crossovers balance and each of the four pairs of transfers cancel, so that the quantity of money in each of the circuits remains constant. [that is, when (S’-s’O’), (S”-s”O”), (D’-s’I’), (D”-s”I”), and G are each zero]. Secondly, we ask what is the possibility of circuit acceleration when the crossovers balance, transfers to the demand functions balance, but transfers to the supply functions do not [that is, when (S’-s’O’) (S”-s”O”), are positive or negative but (D’-s’I’), (D”-s”I”) and G remain zero]; thirdly, one asks what happens if the crossovers or the transfers to demand do not cancel [that is when none of these is zero]. (Continue reading at CWL 15, 56)