Features of Functional Macroeconomic Dynamics

The list below is excerpted from The IS-LM, AD-AS Models and the Phillips Curve Correlation.

Features of the explanatory science of Functional Macroeconomic Dynamics include:

  • It adopts a scientific and explanatory heuristic.
  • Rather than merely describe or report, it explains the objective economic process in the form of abstract terms related to one another
  • The process is always the current process.
  • The process, as a process, evolves.  It is dynamic; and the analysis and explanation must be adequate to a dynamic process.  It must be in terms of first and second order differentials: d2θ/dt2, d2x/dt2, d2y/dt2.  FMD finds no significant explanatory value in the momentary intersections of macrostatics.
  • It prescinds from human psychology; it is conceptually and explanatorily prior to and more fundamental than human psychology; it explains the objective process to which psychological humans must adapt.  Human agents are, as it were, outside the field-theoretic laws of the process.
  • It is a theory comprising the immanent intelligibility or formal cause of the process, not a narrative describing the actions of human agents, who are, as it were, acting as efficient cause from outside the process.
  • It employs implicit definition to reach precise analytical terms of explanatory significance; these terms mutually define and mutually condition one another
  • Again, the process to be explained by an explanatory theory is always the current process
  • The explanatory theory must be comprised of invariant principles and laws; it must be completely general; it must be at an adequate level of abstraction, and universally explanatory a) of all configurations, and b) in every instance
  • The explanatory terms must be defined by the functional relations in which they stand with one another
  • The analysis is purely functional and purely relational
  • Its basic terms are the velocities of interdependent functionings
  • It discovers and analytically distinguishes circuits of accelerator and accelerated functionings, requiring explication of their vital, crossover interactions with respect to timing and magnitude
  • The basic terms are terms of scientific and explanatory significance upon which  a superstructure of relations comprising a completely explanatory theory may be constructed
  • It explains in the perspective of a circuit; it bears resemblance in some respects – but only in some respects – to the explanatory science of hydrodynamic flows in channels and the explanatory science of electrical-current flows through wires and junctions
  • It rejects accounting unities; accounting is in the realm of common sense rather than in the realm of explanatory science; and accounting does not provide indexes of scientific and explanatory significance
  • It understands that the primary goal of science is verification of understanding, not necessarily of prediction 
  • It is a normative theory yielding precepts for adaptation, yet comprehending violations of the norms and precepts; so, as completely explanatory, it is a theory of both normative equilibria and violative disequilibria
  • It is a purely relational field theory, a theory of the relation of n objects among themselves
  • Money is a dummy invented by man to make possible a vast and intricate economic process, not a commodity to be hoarded
  • Inflation is explained as disproportionate flows of products and of money
  • The data whose pattern it explains are the data of the current functional flows of production and payments
  • It is composed of invariant primary relativities which can be applied to secondary determinations or boundary conditions –, such as the quantities and prices of the non-systematic manifold – in order to derive particular laws.
  • The interest rate of scientist significance is an internal relation, not an external lever – as in the IS-LM model
  • By the nature of a transaction, supply and demand are concomitant in any and all transactions
  • Prices and quantities are not a given – as in the static AD-AS model; rather they are secondary determinations to be explained in light of the significant variables. P’/p’ = a’ + a”p”Q”/p’Q’
  • The root of the recession or depression is an inability of the efficient-cause-participants to understand a) the difference between real and relative prices vs. monetary and absolute prices (P’/p’ = a’ + a”p”Q”/p’Q’), b) the significance of pure surplus income as merely the monetary correlate of the expansion of the process (f = vw), c) that the process is a finite process and, as finite, has limits, and d) that the criterion of ever-increasing earnings and stock prices is in conflict with the systematic rise and fall of pure surplus income.
  • It understands that, in the general case, prediction of the longer term is impossible



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