Lonergan is alone … Only Lonergan …

Lonergan pointed out that this differentiation of economic activities … is discussed by traditional economists such as S. M. Longfield (1802-1884), John Rae (1796-1872), Nassau Senior (1790-1864), Eugen von Bohm-Bawerk (1851-1914), and in the heavily disputed “Ricardo effect.” But Lonergan credits Piero Sraffa (1898-1983) as having clarified it most thoroughly in his famous essay, Production of Commodities by Means of Commodities(1960).  Yet even Sraffa does not use his sophisticated explanation of the “Ricardo effect” and the “roundabout” or “concertina”-like phenomena associated with it in the way Lonergan does. 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]

 Alone Lonergan …

The Peruvian guru, Hernando de Soto Polar, estimates that there is something of the order of Euro10 trillion in cash circulating in our world as well as Euro125 trillion in classic debt, loans that stayed with the lender.  Derivatives and other loans, loans that no longer stayed with the lender but were sold on, add between Euro 450 trillion and Euro750 trillion.⁴² Yet it seems that alone Lonergan has taken the question seriously, what are the scientifically significant properly functional and dysfunctional manners in which money in aggregate circulates in an economy?  [Mathews, 2009, 169-70]

 Lonergan’s inquiry differs radically.  He effects something of a Copernican revolution.

our inquiry differs radically from traditional economics, in which the ultimate premises are not production and exchange but rather exchange and self-interest, or later, exchange and a vaguely defined psychological situation.  Our aim is to prescind from human psychology (so) that, in the first place, we may define the objective situation with which man has to deal, and, in the second place, define the psychological attitude that has to be adopted if man is to deal successfully with economic problems.  Thus something of a Copernican revolution is attempted: instead of taking man as he is or as he may be thought to be and from that deducing what economic phenomena are going to be, we take the exchange process in its greatest generality and attempt to deduce the human adaptations necessary for survival. [CWL 21,42- 43]

 While we agree with Schumpeter that Walras’s system implicitly includes the aggregates commonly considered in macroanalysis, (Walras’s system) can hardly be credited with distinctions between basic and surplus Expenditure, Receipts, Outlay, Income, and much less with an account of their various dynamic relations.  But until such distinctions are drawn and their dynamic significance understood, the aggregates and relations cannot be contained implicitly in any (explanatory) system. [CWL 15,  91-92]

All science begins from particular correlations, but the key discovery is the interdependence of the whole. … (CWL 15, 179)

 “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]

In Lonergan’s circulation analysis, the basic terms are rates – rates of productive activities and rates of payments.  The objective of the analysis is to discover the underlying intelligible and dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates to one another.  [CWL 15  26-27  ftnt 27]

An ‘accountant’s unity’ 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 CWL 3, 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]

Lonergan employed implicit definition to develop a new paradigm.

Sufficient has been done here (to) provide a basis for a new paradigm of disequilibrium macrodynamics which, inter alia, responds to Schumpeter’s challenge that, … “has not taken any special cognizance of the process of creative destruction which we have taken to be the essence of capitalism.” (Schumpeter, Capitalism, Socialism, and Democracy. P.104) [Burley, 1989, 120-21 ]

Lonergan’s critique (shows that) by using the technique of implicit definition, the emphasis shifts from trying to define the 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]

the terms are defined by the relations in which they stand, that is, by a process of implicit definition. [Gibbons 1987, 313]

Analogously, focusing on one of Lonergan’s implicit equations, the terms are implicitly defined by the relations in which they stand with one another.

P’Q’ = p’a’Q’ + p”a”Q”

We may read from left to right, right to left, or back and forth between right and left.  From left to right, expenditures-receipts P’Q’ define  and determine concomitant macroeconomic costs, p’a’Q’ and p”a”Q” as they are defined (CWL 15, 156-58)  From right to left,  basic and surplus costs-outlays constitute the incomes which define and determine what is concomitantly spent for basic products.  Travelling back and forth between left and right, the equals sign mandates the reciprocal constraining influence on one another of pretio-quantial expenditures-receipts and pretio-quantital costs-outlays constituting basic incomes.

Lonergan’s macroeconomic dynamics is a macroeconomic field theory.

Field theory is a matter of the immanent intelligibility of the object. [CWL 10, 154]

The form of any inner functioning is known through its relations to all other inner functionings, rather than being known through its relation to an external efficient cause.

the terms are defined by the relations in which they stand, that is, by a process of implicit definition. [Gibbons 1987, 313]

We have characterized modern field theory (MFT) as follows:

• MFT does not require (the notion of) an external influence as an efficient cause
• It explains the field by the immanent relations among the n objects the fall within the field
• It is a set of intelligible relations linking that which is implicitly defined by the relations themselves
• Thus it is the theory of what may be called the formal cause, or immanent intelligibility among nobjects in a unitary system
• The formal cause is distinct from the efficient, material, instrumental, or final causes which would be of interest to applied science as distinct from abstract theoretic science
• The field is a “region” at every point of which there is a value – whether scalar, and/or vector, and/or tensor
• Three examples of modern field theoryare Einstein’s Special Relativity, General Relativity, and Generalized Theory of Gravitation.

… as to the notion of cause, Newton conceived of his forces as efficient causes, and the modern mechanics drops the notion of force; it gets along perfectly well without it.  It thinks in terms of a field theory, the set of relationships between n objects.  The field theory is a set of intelligible relations linking what is implicitly defined by the relations themselves; it is a set of relational forms.  The form of any element is known through its relations to all other elements.  What is a mass?  A mass is anything that satisfies the fundamental equations that regard masses.  Consequently, when you add a new fundamental equation about mass, as Einstein did when he equated mass with energy, you get a new idea of mass.  Field theory is a matter of the immanent intelligibility of the object. [CWL 10, 154]

Macroeconomists in academia, at the Bureau of Economic analysis, and at the Federal Reserve Board mistakenly base explanation of the objective economic process upon psychic elements – such as utility, time preference, expectations, hunches about interest rates, which are, as it were, external to the immanent intelligibility of the objective process as a point-to-point and point-to-line unitary system of production and exchange.  The psyche of the human driver is not the immanent intelligibility of the car; the psyche of the switcher is not the immanent intelligibility of the the electric circuit.  The psyche of the operator is not the immanent intelligibility of the objective process.  However, Functional Macroeconomic Dynamics drops the notion of psychic motive and cause; it gets along perfectly well without it.  It thinks in terms of a field theory, the set of internal relationships among the n interdependent, implicitly-defined, objective functionings which constitute the process.  The field theory of Functional Macroeconomic Dynamics explains the objective process.  Functional Macroeconomic Dynamics is a set of intelligible functional relations linking functionings which are implicitly defined by the functional relations of immanent functioning among themselves; it is a set of relational forms.  The form of any inner functioning is known through its relations to all other inner functionings, rather than being known through its relation to an external efficient cause.  ….  The field theory of macroeconomics is a matter of the immanent intelligibility of the objective, dynamic functional process.

Back Cover of Macroeconomic Dynamics: An Essay in Circulation Analysis, University of Toronto Press [CWL 15]

Bernard Lonergan’s economic writings span forty years and represent one of the most important intellectual achievements of the twentieth century.  Unfortunately they have been inaccessible outside of the Lonergan research community, as the majority of them have not been formally published and exist only as a group of unfinished essays and material for courses on economics taught by Lonergan.  The publication of Macroeconomic Dynamics: An Essay in Circulation Analysis, along with its companion volume, For a new Political Economy (Collected Works of Bernard Lonergan, Volume 21) seeks to remedy this by bringing together various elements of Lonergan’s economic thought.

Lonergan’s concept of economics differs radically from that of contemporary economists and represents a major paradigm shift.  Macroeconomic Dynamics expresses the economic thought of Lonergan at the end of his career.  This volume offers a fresh look at fundamental variables and breaks from centralist theory and practice, providing a uniquely democratic perspective on surplus income and non-political control.