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FMD’s Take on Greg Mankiw’s Take on Modern Monetary Theory


  • .I. Introductory
  • .II. The “legal” basis of our criticism; the “laws” of the process
  • .III. Key objections to Modern Monetary Theory
  • .IV. Observations re “A Skeptic’s Guide to Modern Monetary Theory”
  • .V. Why and how the Basic Expansion fails to be implemented
  • .VI.  Addendum #1: Primary relativities of the economic process
  • .VII. Addendum #2: Excerpts re the drift to totalitarianism

Continue reading.

[#72] Special Relativity is primarily a field theory

[1/23/20]  Field Theory: … Special Relativity is primarily a field theory, that is, it is concerned not with efficient, instrumental, material, or final causes of events, but with the intelligibility immanent in data; but Newtonian dynamics seems primarily a theory of efficient causes, of forces, their action, and the reaction evoked by action. … Special Relativity is stated as a methodological doctrine that regards the mathematical expression of physical principles and laws, but Newtonian dynamics is stated as a doctrine about the objects subject to laws.  [#72]  [3, 43/67] (Click here for previous “Single Paragraphs” or “Brief Items”)

Three Points of Criticism (McShane) [#71]

[1/20/20]  Leon Walras, Alvin Hansen, Joseph Schumpeter: I will begin by noting three points of criticism of the present tradition. In the first place, the tradition includes no serious effort at analysis of the productive process.  Secondly, even when it takes on the trappings of a theory of growth, it remains economic macrostatics.  Thirdly, inbuilt into it and into its political application, there is a fundamental ideology of alienation.

First:  As opposed to the impoverished abstraction “leets” there is an enriching abstraction which holds together, within a general heuristics of process, the aggregate of rates at which goods and services move, directly or indirectly, into a standard of living, without excluding wheat or cotton, bread and dresses, ships and machine tools, management and innovation.

Second: Wedded to the difficulty of conceiving capital … is the difficulty of conceiving change. Nor can this be surprising if the accusation of macrostatic thinking is valid. … An early villain was Leon Walras. … As Schumpeter notes, “the exact skeleton of Keynes’ system belongs, to use terms proposed by Ragnar Frisch, to macrostatics, not macrodynamics.”

ThirdHansen’s characterization of the shift of interest in the twentieth century takes on a different hue from the perspective of Praxisweltanschauung and of the third stage of meaning.  Then one sees it as an abandonment of the search both for a dynamic theory and for democracy.

There is no doubt that the solar system, even macrodynamically speaking, involves an aggregate of bodies.  Was, then, the solution of the two-body problem irrelevant?  Again, there is no doubt that tidal waves are not sinusoidal.  Should we then drop the dynamic question and settle for some equivalent of photography and comparative statics?  Or should we not make sense of elementary rhythms, momenta, etc., acknowledging that we are only paving the way for such developments as Fourier analysis? [#71] [McShane, 1980,  104-106, and118-119] (Click here for previous “Single Paragraphs” or “Brief Items”)

Generalization and Transformation; A Brief Item for Consideration Today [#70]

[1/15/20] A generalization will postulate a transformation not only of the old guard and its abuses but also of the reformers and their reforms; it will move to a higher synthesis that eliminates at a stroke both the problem of wages and the complementary problem of trade unions; it will attack at once both the neglect of economic education and the blare of advertisements leading the economically uneducated by the nose; it will give new hope and vigor to local life, and it will undermine the opportunity for peculation corrupting central governments and party politics; it will require the brain trust but it will make the practical economist as familiar a professional figure as the doctor, the lawyer, or the engineer; it will find a new basis both for finance and for foreign trade.  The task will be vast, so vast that only the creative imagination of all individuals in all democracies will be able to construct at once the full conception and the full realization of the new order. [CWL 21, 36-37] [#70]  (Click here for previous “Single Paragraphs” or “Brief Items”)

A Superior and Far Less Expensive Macroeconomics Textbook

A very expensive macroeconomics textbook, having 700-1000 pages, would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions.  A reader would not gain a clear theory and complete explanation of the dynamics of the real economic process.  However, is there not a superior 228-page, far less expensive  textbook right in our hands?  How about this?  Reword the subtitle of CWL 15 from An Essay in Circulation Analysis to A Textbook of Circulation Analysis, and let the professor instruct the serious student to read the book three times, then report back to discuss the following:

  • the canons of empirical method
  • a scientific, dynamic  heuristic
  • the technique of implicit definition; explanatory terms defined by the functional relations in which they stand with one another
  • velocitous functional unities of scientific and explanatory significance replacing the BEA’s descriptive, commonsense, accountants’ unities
  • the structure of the lagged, rectilinear productive process
  • money as a dummy invented by man
  • the perspective of a hierarchical series of monetary circuits
  • how a monetary circulation meets the rectilinear production-and-vending process
  • the primary relativities and concomitance in the Diagram of Rates of Flow
  • dynamic equilibrium replacing static Walrasian general equilibrium
  • the velocity of money in terms of magnitudes and frequencies
  • prices are not a given and not requiring explanation; rather prices are in need of explanation
  • interpretation of prices, quantities, interest rates in the light of significant explanatory variables
  • the pure cycle and its constituent phases in the expansion of the objective economic process
  • the abstract primary relativities and concrete secondary determinations in the expansion of the economic process
  • the statistical residue and why prediction is impossible in the general case; predicting weather vs. predicting planetary motion
  • the significance of investment’s monetary correlate
  • the ineptitude of manipulating interest rates
  • the explanation of government and foreign-trade imbalances by the dynamics of superposed circuits
  • the distinction between efficient cause and formal cause
  • distinguishing between self-healing and the effect of interventions
  • the intelligibility and explanatory power of the basic price-spread ratio
  • Figures 14-1, 24-7, and 27-1 in CWL 15

The student would learn much that is radically different, explanatory, and very useful; and he/she would gain a perspective or framework by which to evaluate and criticize the flawed premises and tenets of conventional textbooks and traditional theories.


Why Economists Don’t Flock to Functional Macroeconomic Dynamics

Economists don’t have the methodological and conceptual toolkit needed for appreciation of FMD’s scientific and historical significance.

  • They don’t know what they don’t know
    • They’re not methodologists and don’t know what constitutes good theory.
    • They never read CWL 3 and, thus, they never studied the canons of empirical method, especially the Canon of Parsimony and the Canon of Complete Explanation; they have no idea of the deficiencies of their method.
  • Thus, they lack a purely scientific and explanatory heuristic.
    • They do not adequately distinguish description vs. explanation.
    • They do not know the type of answer they’re seeking, i.e. their known unknown.
    • They do not put questions in the right order to discover basic terms of scientific significance.
    • They are mired in muddy premises and faulty assumptions.
    • They are unable to employ a scientific, dynamic heuristic adequate for analysis of a current, purely dynamic process.
    • They don’t understand the normative system’s requirement for concomitance of flows.
  • They lack a background in theoretical physics. They don’t understand the principles and abstract laws of hydrodynamics, electric circuits, or field theory.  Nor do they understand adequately the idea of continuity and the conditions of equilibrium in the dynamic process.  They are unaware of analogies from physics applicable on the basis of isomorphism to the phenomena of Functional Macroeconomic Dynamics. (Continue reading.)



Two economic mechanisms. Two components of concrete relations. Two simultaneous roles for human participants

Part I. Two economic mechanisms. Two components of concrete relations. Two simultaneous roles for human participants

It is the viewpoint of the present inquiry that, besides the pricing system, there exists another economic mechanism, that relative to this system man is not an internal factor but an external agent, and that the present economic problems are peculiarly baffling because man as external agent has not the systematic guidance he needs to operate successfully the machine he controls. [CWL 21, 109]

What the analysis reveals is a mechanism distinct though not separable from the price mechanism which spontaneously coordinates a vast and ever shifting manifold of otherwise independent choices from demand and of decisions from supply. It is distinct from the price mechanism, for it determines the channels within which the price mechanism works.  It is not separable from the price mechanism, for a channel is irrelevant when nothing flows through it. [CWL15, 17] [Continue reading).