One of Lonergan’s great contributions to humanity was his division of scholarship into eight functional specialties: research, interpretation, history, dialectic, foundations, doctrines, systematics, and communications. Persons familiar with Lonergan’s works might read the title of this website and immediately, but mistakenly, think that this website is an application of the eight functional specialties to macroeconomics. It is not. Herein, in order to explain the economic process, we are seeking to understand and systematize interconnected functional economic activities which are implicitly defined by the functional relations in which they stand with one another.
Relevant sections on this website are found at
production occurs by means of and in view of payments: expenditures that become receipts, and outlays that become income. Money intended for expenditure performs a demand function; and money intended for outlay performs a supply function. Thus, outlay and expenditure, income and receipts, all function as operative in monetary circulation, because they are each functionally congruent with distinct productive processes. [CWL 15, Editors’ Introduction lix]
Now as the statistical approach differs from the descriptive, the analytic differs from both. Out of endless classificatory possibilities it selects not the one sanctioned by ordinary speech nor again the one sanctioned by facility of measurement but the one that most rapidly yields terms which can be defined by the functional interrelations in which they stand. [CWL 21, 112]
While a few economists have noticed and struggled with particular functionings in the economic process, none has been able to discover a unified, explanatory theory and formulate a systematics of the process. Lonergan is alone in formulating and explaining the concrete economic process in terms of functionings.
Lonergan is alone in using this difference in economic activities to specify the significant variables in his dynamic analysis… no one else considers the functional distinctions between different kinds of productive rhythms prior to, and more fundamental than, wealth, value, supply and demand, price levels and patterns, capital and labor, interest and profits, wages, and so forth….only Lonergan analyzes booms and slumps in terms of how their (explanatory) velocities, accelerations, and decelerations are or are not equilibrated in relation to the events, movements, and changes in two distinct monetary circuits of production and exchange as considered both in themselves (with circulatory, sequential dependence) and in relation to each other by means of crossover payments.[CWL 15, Editors’ Introduction, lxii]
Our whole structure is purely relational. A macroeconomic functioning is not a compilation or aggregation of particular income statement categories, such as wages or interest expense. A macroeconomic functioning is implicitly defined by its functional relation to other functionings. The whole structure is purely relational. “Lonergan’s analysis is concrete but heuristic. It focuses on functional relations intrinsic to the productive process to reach eventually a general theory of dynamic equilibria and disequilibria.” [McShane 1980, 117]
An ‘accountant’s unity’: that is a category used in (conventional) accounting. For Lonergan, (conventional) accounting generally denotes an enterprise within common sense which uses descriptive, as contrasted with explanatory terms (on these terms see Insight 37-38/61-62, 178-79/201-3, 247-48/272-73). Insofar as that is true, the accountant’s unity is not an adequate index for the normative, explanatory analysis of the productive process. [CWL 15, 26, ftnt 26]
“Functional” is for Lonergan a technical term pertaining to the realm of explanation, analysis, theory; … Lonergan (identified) the contemporary notion of a “function” as one of the most basic kinds of explanatory, implicit definition – one that specifies “things in their relations to one another” … [CWL 15, 26-27 ftnt 27]
Lonergan … was seeking the explanatory intelligibility underlying the ever-fluctuating rhythms of economic functioning. To that end he worked out a set of terms and relations that ‘implicitly defined’ that intelligible pattern. When all was said and done the relations, and the terms they implicitly defined, were markedly different from either the terms of ordinary business parlance or the terms of neoclassical and Keynesian economic theory. Moreover, not only did Lonergan’s terms differ, but he also indicated that these aforementioned terms (of neoclassical and Keynesian economic theory) were permeated, as were the terms of Newton’s theory of gravitation, with descriptive, nonexplanatory residues. Hence, just as a mathematical equation may be said to be the most adequate expression of purely intelligible relations among explanatory terms in certain instances – for example, Einstein’s gravitational field tensor equations – something closely akin to Lonergan’s diagram seems necessary for the realm of dynamic economic functioning. So, for example, the existence and manner of dynamic mutual interdependence of the two circuits of payment, basic and surplus, is not adequately expressed either by descriptive terms (since this pattern does not directly relate to the senses of anyone operating in a common-sense way in a concretely functioning economy) nor by the series of (simultaneous) equations that do not explicitly manifest the interchanging of ‘flows.’ [CWL 15, 179]
Lonergan’s critique (shows that) by using the technique of implicit definition, the emphasis shifts from trying to definethe relevant variables to searching heuristically for the maximum extent of interconnections and interdependence; and that the variables discovered in this way might not resemble very much the objects (or the aggregates) which, in the first instance, one was thinking about. [Gibbons, 1987]
Over and over again McShane endeavors to keep the analyst in a proper orientation by insisting that the analysis a) must be functional, b) regards a concrete process, and c) is heuristically oriented towards the discovery of a dynamic theory.
I have insisted on focusing on the central issue: the need of a functionalanalysis of the productive process and its correlated monetary flow. [McShane 1980,200]
Lonergan’s analysis is concrete but heuristic. It focuses on functional relations intrinsic to the productive process to reach eventually a general theory of dynamic equilibria and disequilibria. [McShane 1980, 117]
The division is not a matter of social relations or of property or of the properties of things: it is a functional analysis. … The aim of the analysis is to reveal the possibilities of the productive process as a dynamic system. One moves forward to that revelation in so far as one appreciates the different ways in which basic and surplus stages may relate. [McShane 1980, 119-20]
The analysis is functional and leads us to define five monetary functions which reveal a set of circulations of money. [McShane 1980, 121]
Now whatever the difficulties of measurement, the functional distinction is undeniably valid. [McShane 1980, 121]
the diagram is an aid to separating and understanding functions. The circles are not places, nor are they, say, groups of capitalists, workers, bankers, exporters. … The diagram represents the functional journeys. [McShane 2017, 79]
you begin to glimpse the necessity and the plausibility of the functional analysis for the understanding and guiding of the globe’s economy. [McShane, 2017, 81]
We stick with our simple illustrations … to get you used to thinking in terms of these functional distinctions. [McShane, 2017, 85]
The difficulty here is the absence of the functional classifications, basic and surplus, and the rhythmic ramifications. It is like trying to have a clear view on fire-hazardous chemicals prior to the emergence of the perspectives of Lavoisier and Mendeleev. [McShane, 2017, 87]
Many will still find it difficult to think functionally. (I hope you do not imagine) in terms of suppliers passing money on to buyers who pass money on to some redistributive area. [McShane, 2017, 88]
We deal with functions, not firms or households.
… a massive long-term acceleration is a massive development of surplus activity. Further, one is not to think of this increment in Q” as concentrated in firms of certain types. The distinction between basic and surplus is not a material nor a proprietary but a functional distinction. There are types of enterprise that in themselves are indifferently basic or surplus … [CWL 15, 118]