Understanding the Causes of Boom or Slump, Inflation or Deflation

(Lonergan’s) massive part-time investment of his surplus intellectual energy in an effort to understand the “causes” of the Depression was a response specifically to the boom and bust dimension of that problem.  His response came in his exploration of the functional correlation between production, exchange and finance in an economy.  Central was the question, how in aggregate in an economy does money circulate?  His subsequent insights led him to divide it into distinct basic and surplus circuits causally interacting with a redistribution financial zone.  As a result he was able to show how with better financial management of that circulation the emergent standard of living of an economic community could advance cyclically to a higher level without any downward negative swings. [Mathews, 2009, 150] Mathews’ website

The economic process is constituted by production, exchange and finance.

… a business cycle theory is to be found in the interpretation of the whole. (CWL 15, 8)

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