Principles of Macroeconomics

N. Gregory Mankiw’s two textbooks – Principles of Microeconomics (Fourth Edition, 2007) and Brief Principles of Macroeconomics (Fifth Edition, 2009) – have their first chapter entitled “Ten Principles of Economics.” The first four of the ten principles deal with the concept of efficient cause consisting in the subjective psychology of human participants as they make microeconomic decisions about their personal economic well-being. In contrast, Lonergan’s Macroeconomic Dynamics: An Essay in Circulation Analysis (1999) first treats the objective macroeconomic situation to whose laws the psychological participants must adapt in the conduct of their lives.  Lonergan seeks the immanent macroeconomic intelligibility of the objective system of production and exchange.  Both Mankiw and Lonergan deal intelligently in the micro and macro realms. Lonergan seeks to treat “first thing first.”

Our aim is to prescind from human psychology that, in the first place, we may define the objective situationwith 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]

We set out to indicate the existence of an objective mechanical structure of economic activity, of something independent of human psychology, of something to which human psychology must adapt itself if economic activity is not to become a matter of standing in a tub and trying to lift it. [CWL 21, 56]

Lonergan’s comprehensive explanation yields a normative theory and a set of laws, which men themselves must honor and administrate in the personal conduct of their lives.  The normative theory explains both dynamic equilibrium and dynamic disequilibria. It defines the objective situation with which man has to deal, and it defines the psychological attitude that has to be adopted if society is to deal successfully with economic problems.

Immediately below we list several fundamental concepts of scientific macroeconomics under the rubric of “principles.”  Some might quibble about our arrangement, and we might readily agree that a) some of our principles should be under headings such as heuristic or method, and b) some principles might better be categorized in the manner of geometry as definitions, axioms, postulates, or theorems.  But in the interest of brevity and in a trust of readers’ perspicacity, we avoid getting into the weeds of a perfect arrangement.  We use the designation “principle” as a catch-all category in a perhaps-loose sense of “basic” or “fundamental” elements in the analysis.

Principle: that which is first in some order.  Thus a point is the principle of a line, ‘one’ is the principle of numeration, a cause is the principle of its effect …(CWL 11, 503)

A principle is that which is first in some order, and principles can be found in many different orders.   Thus in various disciplines there is the usual distinction between common principles, founded on the formality of being and common to every science, and proper principles, founded on the grasp of the essence of the object of that discipline and therefore proper only to that particular discipline.  Hence in all disciplines there is a further distinction between the way of discovery and the way of teaching: the way of discovery begins from what are prior with respect to us so as through common principles to arrive at what are prior in themselves and the principles proper to that discipline; the way of teaching, however, begins from what are prior in themselves so as to order and explain by means of proper principles what are prior with respect to us. (CWL 11, 637)

  • Principle: that which is first in some order
  • Principle of a dynamic heuristic to analyze an intrinsically-dynamic process
  • Principle of abstraction at a highest level of generalization and universal applicability
  • Principles of empirical, scientific method
    • The Canon of Selection
    • The Canon of Operations
    • The Canon of Relevance
    • The Canon of Parsimony
    • The Canon of Complete Explanation
    • The Canon of Statistical Residues
  • Principle of a method to reach one’s goal
  • Principle of real analysis of the structure of the productive process
  • Principle of laws of the process independent of human psychology
  • Principle of adapting to and obeying laws
  • Principle of a scheme of recurrence having classical laws, yet boundary values from a non-systematic manifold
  • Principle of a normative theory
  • Principle of explanation by the functional relations of implicitly-defined, interdependent functional aggregates among themselves rather than description by the relations of things to us
  • Principle of implicit definition by functional relation
  • Principle of an always current and purely dynamic process being expressed by the differentials of velocity and acceleration
  • Principle of analytic basic terms upon which to build a superstructure
  • Principle of the compensated factor of production as the fundamental quantum
  • Principle of composition of a product
  • Principle of the structure of the dynamic process being the basis of analysis
  • Principle of money as a dummy instrument invented by humans
  • Principle of classes of money payments being derived by projections (mappings) from the dynamic structure of the dynamic productive process
  • Principle of money as a promise of constant value here and now and from now and into the future
  • Principle of dynamics vs. statics
  • Principle of ideal (mathematical) expression
  • Principle of the interdependence of the whole process
  • Principle of concomitance
  • Principle of solidarity in a single organic whole
  • Principle of continuity in interval after interval
  • Principle of equilibrium or balance of flows
  • Principle of a circuit
  • Principle of a crossover between circuits
  • Principle of correspondence of productive factors with elements in the standard of living
  • Principle of diminishing returns from saturation and competing maintenance requirements
  • Principle of an invariant, purely-relational “field theory”
  • Principle of adjustment of incomes to the shifting requirements of a phase
  • Principle of pure surplus income as a social dividend for investment rather than consumption
  • Principle of the true function of credit
  • Principle of the concrete common good
  • Principle of the concrete good of order
  • Principle of the adjustment of the foreign exchange rate to the normative rate which balances exports and imports
  • Principle of propensity to consume rather than save
  • Principle of normative proportion
  • Principle of crossover ratio
  • Principle of We-The People – whether acting as individuals, or in the person of elected and appointed officials, or by the agency of the Federal Reserve Bank

Questions cannot be put in any order whatsoever.  Some questions simply cannot be answered until others have been resolved.  And sometimes the answers to one question immediately provide the answers to others. [CWL 12, 23]

putting things in their right order is the special talent of the wise person, and so the wise person will start with the problem that is first in the sense (1) that its solution does not presuppose the solution to other problems, (2) that solving it will expedite solving a second problem, (3) that solving the first and second problems will lead right away to solving a third, and so on through all consequent connected problems. [CWL 12, 23]

… the questions are put in such an order that, once the first is solved, the solutions to the others follow with almost no difficulty.  Therefore, because the later solutions are connected to the first as conclusions are connected to some principle, all solutions after the first seem to be the proper province of knowledge. [CWL 12, 25]

All science begins from particular correlations, but the key discovery is the interdependence of the whole. [CWL 15, 53-4 and 177]

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