**Part I. Introductory: Lonergan’s Wise Seriation of Ideas**

In his serial arrangement of ideas in ** “Macroeconomic Dynamics: An Essay in Circulation Analysis’**, Bernard Lonergan followed his own advice. Unlike the authors of establishment macroeconomics textbooks, he

**a)**insisted on scientific

**explanation**rather than mere

**description**,

**b)**distinguished between the analytic scientist’s

**order of analysis and discovery**vs. the

**teacher’s**

**order of synthesis and composition,**and

**c)**insisted on

**putting questions and answers in the right order.**

… **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]

Next, understanding is about **principles**. A principle is defined as what is **first in some order**. Therefore, it belongs to understanding to grasp the solution of that problem that is **first in the order proposed by wisdom**. Since this order is such that solving the first means that the others are expeditiously solved, the understanding should be such as **virtually to contain in itself** the answers to the rest of the questions. [CWL 12, 23]

Lonergan distinguished between **“the first movement”** called **“analysis” **and the **“second movement”** called **“synthesis.”**

So the **first movement toward** acquiring science begins from an ordinary **prescientific description** of things and ends in the **knowledge** **of their** **causes**. This **first movement** has been called: **(1) analysis**, because it

**starts from**what is apprehended in a confused sort of way and moves to

**well-defined causes or reasons**,

**(2)**

*the way of resolution*, because it resolves things into their causes,

**(3)**

*the way of discovery*, because previously unknown causes are discovered,

**(4)**

*the way of certitude*, because the ordinary prescientific knowledge of things is most obvious to us, and so the arguments we find most certain begin from such knowledge and on to demonstrate matters that are more remote and more obscure to us, and

**(5)**

*the temporal way*, because causes are not usually discovered instantaneously, any more than they are discovered by just anyone or without a certain amount of good luck. ¶ The

**other movement**

**starts from the causes that have been discovered**and ends by understanding things in their causes. This movement is called:

**(1)**, because

*synthesis***fundamental reasons**are employed both to define things and to deduce their properties,

**(2)**

*the way of composition*, because causes are employed to

**produce**things or

**constitute**them,

**(3)**

*the way of teaching*or

*of learning*, because it begins with

**concepts that are fundamental**and especially simple, so that by adding a step at a time it may proceed in an orderly way to the understanding of

**an entire science**,

**(4)**

*the way of probability*, partly because it often attains no more than probability, but also because people frequently have no clear discernment of just where or when they have reached certitude, and

**(5)**

*the way of logical simultaneity*, because, once the principles have been clearly laid down, all the rest takes comparatively little time; it can be accomplished in a few short deductions and applications. ¶ For examples of the two ways, compare the history of a science like physics or chemistry with the textbooks from which these sciences are taught. History reveals that these sciences worked out their various demonstrations starting from the most obvious sensible data. But when one goes to a textbook, one finds at the beginning of the book in chemistry, only the periodic table of elements from which three hundred thousand compounds are derived, or, in physics, Newton’s laws, Riemannian geometry, or those remarkable quantum operators. The reason for this difference is, of course, that

**inquiring, investigating, and demonstrating begin with what is obvious**, while

**teaching begins from those concepts that can be understood without understanding other elements**. [CWL 12, 61-63]

The difference is **completely universal**: **every argument proceeds from something prior and moves to something subsequent**; but what are prior in the **systematic** way are subsequent in the **dogmatic**; and what are subsequent in the systematic way are prior in the dogmatic. [CWL 12, 71]

In the systematic way the understanding of some points is more necessary than the understanding of others: **some points are such that, unless they are understood, nothing else in the entire treatise can be understood**; neglecting to understand other points may deprive us only of part of the understanding of the entire treatise; and finally, some points are included just so that others may be more easily understood or that the connections with other questions may be clearer or that we may proceed more promptly to the applications. [CWL 12, 73]

We said enough above about the close connection between what is **prior in itself** and what is **prior for us**: what **the way of analysis discovers** and demonstrates is entirely the same as **what the way of synthesis wisely orders**. But if this intimate link and interdependence are overlooked or not clearly grasped, … speculation will … neglect the positive sources, … and positive investigations, **deprived of direction and integration**, will wander aimlessly hither and thither or like some huge mass lie there in complete inertia. [CWL 12, 95]

Heretofore macroeconomics has wandered hither and thither, deprived of direction by a scientific dynamic heuristic and precise analytic fundamental distinctions between what is prior for us, ** priora quoad nos**, and what is prior in itself,

**.**

*priora quoad se*An introductory outline of the order of discovery:

**A scientific dynamic heuristic**– The theory will consist of abstract explanatory formulation of a velocitous process characterized as dynamic because constituted by velocitous rates of flow; the abstract formulation canbe applied to concrete prices and quantities in the non-systematic manifold of events and occurrences**Empirical method**– observe, measure data, correlate, formulate a hypothesis, verify- Discovery – the analyst seeks
**principles first in an order**as the**basis**and**ground**of the subsequent questions and**deductions**which form a**superstructure completely explaining the process** - The principles first in an order
**are discovered and then postulated**to be determinate-point-to-determinate-point, determinate-point-to-indeterminate-series-or-line, determinate-point-to-indeterminate-surface, or higher correspondences in the process of production and sale. - The principles and the deductions are posited as a hypothesis to be cumulatively verified or debunked by measured and correlated data or debunked.

In this subsection we state the** explanatory conclusions** of the order of analysis, discovery, and certitude in order to demonstrate Lonergan’s serial arrangement of the order of synthesis, composition, and teaching or learning. It is this latter order which he followed in CWL 15, “** Macroeconomic Dynamics: An Essay in Circulation Analysis”**.

**First,** by his order of analysis, he had discovered and by his order of synthesis he **first taught** that the objective, **concrete, dynamic**, economic process **a)** is **always** the **current process,** and **b)** as a **purely dynamic process – is a process consisting of a “shifting network** of **exchanges** in which firms supply households with goods and services while members of households seek work and receive income from firms.” (CWL 15, 12)

Always (the economic process) is **the current process**, and so it is distinguished both from the natural resources, which it presupposes, and from the durable effects of past production. (CWL 15, 20)

… the productive process is a **purely dynamic** entity. (CWL 15, 21-22)

… , goods and services are in a **point-to-point correspondence** with elements in the standard of living when they are some **determinate, though not immutable or unvarying, algebraic function of the first degree** with respect to elements in the standard of living. Finally, just as the aggregate of rates constituting the emergent standard of living is an aggregate of instances of **‘so much every so often,’** so **also** is the **aggregate of rates** of production in the basic stage of the process; and again, as the emergent standard of living, so also the basic stage of the process is an **aggregate of rates** that are qualitatively and quantitatively variable with respect to successive intervals of time. (CWL 15, 29)

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]

**Then,** he adopted a **scientific, dynamic heuristic** based on **Hilbert’s technique of** **implicit definition of terms according to their functional correlations and interrelations with one another**. A descriptive, static and non-explanatory heuristic is replaced by a scientific and dynamic heuristic composed of observation, insight, and judgment methodically seeking understanding **adequate to the dynamics of the field** under investigation. Macroeconomic science seeks not merely to describe but rather to achieve **explanation** in the form of **terms defined in equations by their functional relations** to one another. And, of course, the patterns of terms and relations of the equations would be isomorphic with the patterns of the terms and relations in the correlations immanent in the measurements of the data of the dynamic process.

Scientific thought involves a more exact anticipation. What is to be known inasmuch as data are understood is some **correlation** or **function** that states **universally** the relations of **things** … **to one another**. Hence the scientific anticipation is of some unspecified **correlation** to be specified, some indeterminate **function** to be determined; and now the task of specifying or determining is carried out by measuring, by tabulating measurements, by reaching an **insight into the tabulated measurements**, and by expressing the insight through some **general** correlation or function that, **if verified**, will define **a limit on which converge** the relations between all subsequent appropriate measurements. [CWL 3, 44/68]

… **verified** correlations **necessarily** involve the verification of **terms implicitly defined by the correlations**; …what is verified accurately is not this or that particular proposition but the **general and abstract proposition** on which ranges of ranges of particular propositions **converge**. … **there is a fundamental heuristic structure** that leads to the determination of **conjugates**, that is, of terms **defined implicitly** by their empirically-verified, explanatory relations. Such **terms as related** are **known by understanding**, and so they are **forms**. Let us name them **conjugate forms**.[quoted more fully below from CWL 3, 435/460]

Note the distinction between words **reclassified as abstract terms** through **abstract correlation** and, yet, the same words retaining their usage as **concrete** as **measurable quantities of the concrete economic process**. **Concrete descriptive terms** get redefined as abstract **scientific explanatory conjugates** in equations whose patterns are isomorphic with the patterns of the terms’ in their **functional correlations**.

… V. Lenzen in his *Nature of Physical Theory* emphasizes the **genetic process** that begins from **experiential contents** of force, heat, extension, duration, etc., to move through a **process of redefinition** towards terms **implicitly defined** **by empirically established principles and laws**. [CWL 3, 81-82/105]

**Then**, drawing upon and implementing his findings and conclusions of his CWL 3, ** Insight: A Study of Human Understanding**, he prescribed that the

**two components of explanation**would be 1) a set of equations of

**abstract functional terms**which

**implicitly define**their

**interdependencies**

**with one another in equations**whose patterns are

**isomorphic**with the patterns in the measurements, and 2)

**concrete measured determinations**of actual concrete prices and quantities from the

**non-systematic manifold**of concrete events and occurrences.

Lonergan employed **empirical method**, Since all investigation begins from data, the **method** **of discovery**, interpretation and formulation would be the **empirical method** of a) measurement of data, b) **insight **revealing the **immanent abstract intelligibility** in the measured and **abstractly correlated** data, c) formulation of a **hypothesis** of the understanding’s form, d) the continuing testing and **accumulating verification** of the hypothesis by measuring data – thus so as to **verify and judge as reliable the abstract correlations** formulated in the hypothesis.

A distinction has been drawn **between description and explanation**. Description deals with things as **related to us**. Explanation deals with the same things as **related among themselves**. The two are not totally independent, for they deal with the same things and, as we have seen, description supplies, as it were, the tweezers by which we hold things while explanations are being **discovered or verified, applied or revised**. … [CWL 3, 291/316]

**Again for emphasis, concrete descriptive terms** get **redefined** as **scientific explanatory conjugates** in equations whose patterns are isomorphic with the patterns of the terms in their **functional correlations**.

… V. Lenzen in his *Nature of Physical Theory* emphasizes the **genetic process** that begins from **experiential contents** of force, heat, extension, duration, etc., to move through a **process of redefinition** towards terms **implicitly defined** **by empirically established principles and laws**. [CWL 3, 81-82/105]

Click **here**

Pure (or explanatory) conjugates, … , are **correlatives** defined implicitly by **empirically established correlations**, **functions, laws, theories, systems**. (CWL 3, 80)

Again,

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]

Taking into account past and (expected) future values does not constitute *the creative key transition to dynamics**.* Those familiar with elementary statics and dynamics will appreciate the **shift in thinking** involved in passing from (Walrasian textbook macrostatic) equilibrium analysis … to an analysis where attention is focused on **second-order differential equations**, on d^{2}θ/dt^{2}, d^{2}x/dt^{2}, d^{2}y/dt^{2}, on the **primary relativities** of a range of related forces, central, friction, whatever. Particular **secondary boundary conditions**, past and future **pricings and quantities**, are **relatively insignificant** for the analysis of the **primary relativity immanent in, and applicable to, every instance** of the process. What is significant is the **Leibnitz-Newtonian shift of context**. [McShane, 1980, 127]

Lonergan noted that money is a human invention.

**Money is a dummy** invented by humans to enable divided exchange. Money is **a promise of trust** between people. But, simple as money’s **functional purposes** may seem, the determination of **how much money to create** through the credit function is not well understood. There are natural limits to the supply of money, though the menace of so-called Modern Monetary Quackery is (mistakenly called “theory”) unconstrained printing of money would not have it so..

Now if the gold-standard (or ideas analogous to it) has no validity, “What is needed,” Lonergan tells us, “is a frank avowal that **money is simply a system of public bookkeeping**, and then a **coherent and thorough transformation** of all **monetary practice** with the fundamental fact.” Otherwise, “the whole economy comes to be regulated **not by the social good**, **not by the objective exigencies of the economy itself**, but **by the money invented to serve the objective process and the social good**.”^{38 (CWL 15, 105) }**[**Fred Lawrence; “Money, Institutions, and The Human Good,” in **Liddy, 2010, 185**]

**real analysis** (is) identifying money with **what money buys**. … And that is **the source of the problem in real analysis**. If you want to treat money that doesn’t make a difference, you can have a beautiful liberal monetary theory. But it doesn’t say **the way the thing works**. [CWL 21, *Editors’ Introduction*, xxviii quoting Lonergan]

Money is an instrument **invented** to fulfill a **definite task**; it is not the ultimate master of the situation. One has to **place first human society** which is served by the economic process, and second the economic process which is to be served by money. Accordingly **money has to conform to the objective exigencies** of the economic process, and not vice versa. (CWL 21, 101)

Click here for **Why Analyze the Production Process First**.

Lonergan specified that an adequate understanding of the **concrete** economic process should be based upon the **constituent** **functional productive activities** **implicitly defining one another. **The understanding would be formulated as **equations** expressing **isomorphically** the patterns of **functional** productive activities in their **functional** **interdependencies among themselve**s. The equations would be in the form of scientifically explanatory **abstract terms and relations**, not the GDP’s **non**-explanatory form of the corporate accountant’s tallies or the Walrasian economists’ unexplained, out-of-the-blue external shocks and their consequences; rather the **abstract explanatory terms** **and relations immanent in the concrete process** would be formulated and, thus, expressed in the form of equations whose patterns would be **isomorphic** with the patterns **immanent**** among the correlations** of the measured data of the process.

**Then, in the order of analysis,** Lonergan discovered precise, analytic, functional distinctions and relations acting as principles, – **first in an order.** He could state these as definitions or axioms or postulates which constitute the primary analytic basis and ground of the analysis. **Then**, in the tradition of explanatory science, which forms by principles, definitions, axioms, and postulates a **sound basis** **and ground** for **deductions forming **a fulsome theoretical** superstructure,** Lonergan discovered a groundwork of **precise analytic distinctions** within a network of point-to-point, point-to-line, point-to-surface and higher **correspondences **among **classes of productive activity**.

These distinctions between point-to-point, point-to-line, and higher correspondences conatitute the answers and principles which are** first principles** which virtually contain the answer to the rest of the questions in macroeconomic science. Again, we repeat because it is of such fundamental importance:

… **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]

Next, understanding is about **principles**. A principle is defined as what is **first in some order**. Therefore, it belongs to understanding to grasp the solution of that problem that is **first in the order proposed by wisdom**. Since this order is such that solving the first means that the others are expeditiously solved, the understanding should be such as **virtually to contain in itself** the answers to the rest of the questions. [CWL 12, 23]

Lonergan’s precise analytic elements are **functional correspondences**.

… (Lonergan) approaches the focus armed with **precise analytic distinctions** upon which a **superstructure of laws**, coherent with one another and comprising a complete theory, may be constructed. **Paraphrasing** [CWL 3, 80/103]:

**Point-to-point correspondence** – the elements in the standard of living are **algebraic functions** of the **first degree**. … There exists, then, a point-to-point correspondence between bushels of wheat and loaves of bread. (point –to-point functions involve no exponential powers of the variables other than 1; … that is, in the expression *y = bx + c*, where *b* represents the number of loaves of bread which can be obtained from one bushel of wheat, and *c* represents any fixed loss or gain which is independent of the number of bushels.) (CWL 15, 23 and footnote 25)

There exists, then, a **point-to-point correspondence** between bushels of wheat and loaves of bread, between head of cattle and pounds of meat, between bales of cotton and cotton dresses, between tons of steel and motorcars. In each case the elements in the standard of living are **algebraic functions of the first degree** with respect to elements in the productive process….(there is) **an inexorable law of limitation**. [CWL 15, 23]

(On the other hand,)** there is a distinct point-to-line correspondence – **elements in the productive process correspond not to single elements in the standard of living but to **indeterminate series** of the latter. (CWL 15, 24)

The **point-to-line and higher correspondences** are based on the **indeterminacy** of the relation between certain products and the ultimate products that enter into the standard of living. Now (some would object that) such indeterminacy does not seem to be a fact. **(Lonergan proceeds to refute.)** [CWL 15, 27]

Taking into account past and (expected) future values does not constitute *the creative key transition to dynamics**.* Those familiar with elementary statics and dynamics will appreciate the **shift in thinking** involved in passing from (Walrasian textbook macrostatic) equilibrium analysis … to an analysis where attention is focused on **second-order differential equations**, on d^{2}θ/dt^{2}, d^{2}x/dt^{2}, d^{2}y/dt^{2}, on the **primary relativities** of a range of related forces, central, friction, whatever. Particular **secondary boundary conditions**, past and future **pricings and quantities**, are **relatively insignificant** for the analysis of the **primary relativity immanent in, and applicable to, every instance** of the process. What is significant is the **Leibnitz-Newtonian shift of context**. [McShane, 1980, 127]

Let us repeat for emphasis:

Particular **secondary boundary conditions**, past and future **pricings and quantities**, are **relatively insignificant** for the analysis of the **primary relativity immanent in, and applicable to, every instance** of the process. What is significant is the **Leibnitz-Newtonian shift of context**. [McShane, 1980, 127]

From the basic **principal distinctions in principle** of point-to-point, etc. it follows that each productive level of correspondence has** its own monetary circuit **ofpayments of Outlays-Incomes and Expenditures-Receipts.

The entire tradition slipped past **Lonergan’s simple move**. I describe the move as **paralleling Newton’s move**. Newton started within an old culture of two flows: an earthly flow and, to recall ancient searchings, a quintessential flow. Newton went from two to one. Lonergan started with a dominant one-flow economic analysis – think in terms of the household-firm diagram – and separated it into two flows “to form a more basic concept and develop a** more general theory**.” ^{21 }[McShane 2017, viii]; also see [CWL 21, 11] (Click **here**)

Because the field of investigation always is **the current process**, analysts must discover in their observations and abstract explanatory correlations the **present facts** of the** current process.**

… The analysis that **insists on the indeterminacy** (of the point-to-indeterminate-line) is the analysis that **insists on the present fact**: estimates and expectations are proofs of the **present indeterminacy** and attempts to get round it; and, to come to **the main point**, an **analysis based on** such estimates and expectations can never arrive at a **criticism** of them; it would move in a **vicious circle**. It is to avoid that circle that we have divided the (primary productive) process in terms of **determinate** point-to-determinate-point, determinate-point-to-**indeterminate**-line, determinate-point-to-**indeterminate**-surface, and higher **correspondences**. [CWL 15, 28]

The point-to-line **and higher** correspondences are based on the **indeterminacy** of the relation between certain products and the **ultimate products that enter into the standard of living.** Now (some would mistakenly object that) such indeterminacy does not seem to be a fact. (Lonergan proceeds to refute.) [CWL 15, 27]

The several concepts and answers **virtually contained** in these principal distinctions in principle include:

- a
**normative theory**of the current, dynamic, productive process - a
**hierarchical**set of stages of the productive process - a productive process characterized by
**magnitudes and frequencies of turnovers**which are to be correlated with**properly proportionate,**non-inflationary and non-deflationary**magnitudes and frequencies of payments.** **analytically distinct circuits**with their own circulations of Outlays, Incomes, Expenditures, and Receipts**crossover flows**between interdependent circuits**phases**in the transition or**expansion**from one static phase to a higher static phase in pure cycles of expansion- the central
**condition of equilibrium**of the entire process - the conditioning of a fulsome normative expansion by adequate money and full realization of potential
**accelerations**, i.e. changes of velocity (though from a different field of investigation not applicable here, recall Newton’s first and second laws of motion)**lags**within implementation of the series ophases of the pure cycle of expansion- the
**cycle of basic income**with a) its tiers of lower and higher incomes and different poropensities, and b) different susceptibilities as to the manipulation of interest rates - the
**cycle of pure surplus income**with its rise and decline of the pure surplus-income ratio - the
**cycle of the****aggregate****basic price spread**demonstrating**last in the analysis** - inflation by
**scarcity**vs inflation by**mistaken anticipations**of the monetary requirements of the**phase**of the pure cycle of expansion - the
**explanation of inflation and deflation**caused by**divergence**of monetary flows from theoretically proper correlation with the magnitudes and frequencies of production and sale

**Then, in the order of synthesis of teaching** Lonergan taught the formulation of the **immanent intelligibility of the structure** of the levels of the **dynamic** **hierarchical** **production process, Lonergan** treated the form of the composition of a final product at rates by **compensated** humans of a product:

** q_{i} = ΣΣq_{ijk}** (for context see CWL 15, 30)

*p*_{i}* = **ΣΣp*_{ijk }* *_{(for context see CWL 15, 30)}

**Then**, in the order of synthesis and teaching, he taught the formulation of the general technical form of **lagged acceleration** from the higher levels to the final retail level of the process of production and sale.

*k[f*^{’}_{n}*(t-a) – B*_{n}*] = f”*_{n-1}*(t) –A***_{n-1 }**. (for context see CWL 15, 37)

**Then**, in the order of synthesis and teaching, he **projected this structure** into the universe of payments to draw out and **define** **classes of payments** which are **the monetary correlates** of the fluid production and sale of products.

These differences and correlations (of the productive process of a hierarchical, advanced economy) have now to be **projected into** **their monetary correlates** to set up **classes of payments**. Thus a restrictive supposition is introduced into the argument. The productive process is now envisaged as occurring in an **exchange** **economy**. It will be supposed to be an economy of notable size, complexity, and **development**, with property, exchange, prices, supply and demand, money. [CWL 15, 39]

An analysis of the **circulation of payments meeting the flow of goods and services** … aims at imparting an understanding of economic change that can master both the distortion of developments by **one-sided conceptions** and the disaster of collapse that can change a recession into a breakdown. (CWL 15, 16)

**Then**, in the order of synthesis and teaching, having classified rates of payment **correlated** with rates of productive flows, he constructed a diagram representing and modeling a double-circuited circulation of payments meeting the flows of goods and services.

**Then**, in the order of synthesis and teaching, he pointed out what all the academic and practicing government economists and financial analysts, and much less politicians, seem to miss:

Now every unit of enterprise involves a **turnover magnitude and a turnover frequency**. … the statement is not a truism, for it involves a **correlation **between the quantities and velocities of rates of payment and the quantities and velocities of goods and services. (CWL 15, 57)

The existence of this **correlation** may be seen readily enough. … the **quantity alternative** in the rates of payment is **conjoined with **the **quantity alternative** in the rate of production, and the frequency alternative in the rate of payment is conjoined with the frequency alternative in the rate of production. The two cases of quantity-velocity are **not only parallel but also correlated**. [CWL 15, 57]

Lonergan agreed with Schumpeter on the importance of a **systematic** or **analytic** **framework** in order to **explain**, rather than **merely record or describe**, the aggregate phenomena of macroeconomics; he agreed with Schumpeter that to be able to explain the **booms, slumps, and crashes** of the trade or business cycles the economist’s analysis had to be **as dynamic as** the subject matter under investigation; and he agreed that the economist had to know what are the **significant variables** **in the light of which price changes are to be interpreted**. According to Lonergan, standard economic theory had successfully achieved none of these desiderata. [CWL 15, Editors’ Introduction liii]

… it will be well at once to draw attention to J.A. Schumpeter’s insistence on the merits of **the diagram as a tool**. (Schumpeter, *History* 240-43, on the Cantillon-Quesnay tableau.) … First, there is the tremendous simplification it effects. From **millions of exchanges** one advances to **precise aggregates**, relatively **few in number**, and hence **easy to follow up and handle**. … Next come the possibilities of advancing to numerical theory. In this respect, despite profound differences in their respective achievements, the contemporary work of Leontieff may be viewed as a revival of Francois Quesnay’s *tableau economique*. Most important is the fact that this procedure was the first to make explicit the concept of **economic equilibrium**. All science begins from particular correlations, but **the key discovery is the interdependence of the whole.** … While it is true that a tableau or diagram cannot establish the uniqueness of a system or rigorously ground its universal relevance, it remains that the diagram (of the interconnections of a few precise aggregates) has compensating features that Quesnay’s system of simultaneous equations may imply but does not manifest. … There is the tremendous simplification (a diagram) effects the aims and limitations of macroeconomics make the use of a diagram particularly helpful, … For its basic terms are **defined by their functional relations**. The maintaining of a *standard of living* (**distinct process** **1**) is attributed to a *basic process*, an ongoing sequence of instances of *so much every so often*. The *maintenance* and *acceleration* (**distinct process** **2**) of this basic process is brought about by a sequence of surplus stages, in which *each lower stage* is maintained and accelerated by the *next higher*. Finally, transactions that do no more than transfer titles to ownership (**distinct process** **3**) are concentrated in a *redistributive* *function*, whence may be derived changes in the stock of money dictated by the acceleration (positive or negative) in the basic and surplus stages of the process. … So there is to be discerned a ** threefold process** in which a basic stage is maintained and accelerated by a series of surplus stages, while the needed additions to or subtractions from the stock of money in these processes is derived from the redistributive area. … it will be possible to distinguish stable and unstable combinations and sequences of rates in the three main areas and so gain some insight into the long-standing recurrence of crises in the modern expanding economy. [mCWL 15, 53 and 177]

More positively, the **channels** account for **booms** and **slumps**, for **inflation** and deflation, for changed rates of profit, for the attraction found in a favorable balance of trade, the relief given by deficit spending, and the variant provided by multinational corporations and their opposition to the welfare state. [CWL 15, 17]

… and from the foregoing **dynamic configuration of conditions** during a limited interval of time, there is deduced a catalogue of possible types of change in the configuration over a series of intervals. There results a **closely knit frame of reference** that can envisage **any total movement** of an economy as a **function** of variations in rates of payment, and that can define the conditions of desirable movements as well as **deduce the causes of breakdowns**. Through such a frame of reference one can see and express the mechanism to which classical precepts are only partially adapted; and through it again one can infer the **fuller adaptation** that has to be attained. [CWL 21, 111]

Then, in the order of synthesis and teaching, he treated

- circuit accelerations,
- phases in the pure cycle of expansion,
- measuring changes in the productive process
- the cycle of basic income
- the cycle of pure surplus income,
- the cycle of the aggregate basic price spread
- superposed circuits,
- the balance of foreign trade, and
- deficit spending and taxes

Unlike the tenets of price theory, the analysis of pricing is not first in Lonergan’s analysis; rather it is **last in the analysis**. (See CWL 15, 156-62) The basic price-spread-ratio formulation,

*P’/p’ = a’ + a”(p”Q”/p’Q’), or*

* J = a’ + a”R, and*

** dJ = da’ + Rda” + a”dR **(CWL 15, 156-62)

**supplies the intelligibility of basic price levels;** and the differential equation provides the rule of changes in the **ratio of basic price levels**. Note that the definition or specification of price levels was **last in the analysis**. Unlike Adam Smith and others, (Click **here**) Lonergan did not begin his intellectual effort by comparing and analyzing the prices of our everyday concrete getting and spending to find an intelligibility on which to base the explanatory science of macroeconomics; rather he first analyzed the hierarchical, lagged accelerative productive process, then correlated classes of payments with classes of products, then discovered new intelligibilities among aggregates and their abstract meanings and relations which explain the conventional concrete terms “cost” and “profit”; then, **at last**, he discovered the formulas relating the new terms among themselves in **equations of scientific or explanatory significance**. Then, in the order of synthesis and teaching, he presened the formulas above.

Other economists of high renown missed the principles which are first in the order proposed by wisdom.

the **Robinson-Eatwell** analysis is hampered by their building the economic ** priora quoad nos** (first in relations to us vs.

**, first in relations to one another; i.e. among themselves) of profits, wages, prices, etc. into explanation, when in fact the**

*priora quoad se**priora quoad nos*are

**last in analysis**. McShane, Philip,

*Lonergan’s Challenge to the University and the Economy*, P 124

**Adolf Lowe’s** analysis in “** The Path of Economic Growth”**…is

**further limited by an early introduction of prices**, the

**of economics. (McShane, Philip,**

*priora quoad nos**Lonergan’s Challenge to the University and the Economy*, p. 112 )

**Frisch’s failure** to develop a significant theory typifies the failure of economists who search for a **dynamic heuristic**. As well as a **fundamental disorientation** of approach …[McShane, 1980, 114]

Lonergan praised Nicholas Kaldor.

Lonergan’s intention was ‘to formulate the laws of an economic mechanism more remote and, in a sense, more fundamental than the pricing system…laws which **men themselves administrate** in the personal conduct of their lives. In 1978 he began to refer to **Nicholas Kaldor** in support of his judgment that the significance traditionally accorded to **price theory** by conventional economics since **Adam Smith’s “ Wealth of Nations”** (1776) amounted to a

**virtual derailment of economic theory**……….Lonergan’s interest in Kaldor’s sweeping statement

**was to emphasize that prices and their changes are not explanatory but accountants’ entities**………

**Lonergan insists that the mechanism of the pricing system does not furnish economists with distinctions among significant variables**of aggregate surplus (or producer-goods) and basic (or consumer-goods) supply and demand with their

**determinate yet flexible**velocities and accelerations, any more than

**Galileo Galilei’s**discrete measurements of distances and times at the Tower of Pisa

**of themselves**provided the law of the acceleration of falling bodies…….the

**lack of ultimacy**that Lonergan ascribes to

**prices**and

**price theory**can scarcely be overemphasized. CWL 15 xlvi-xlvi

It is the viewpoint of the present inquiry that, besides the pricing system, there exists **another economic mechanism**, that relative to this (other) system man is not an internal factor but an external agent, and that the present economic problems are peculiarly baffling because man as external agent **has not the systematic guidance he needs** to operate successfully the machine he controls. [CWL 21, 109]

… the productive process was defined as a **purely dynamic entity**, a movement taking place between the potentialities of nature and products. In the present section, there has been attempted a **dynamic division** of that entity.. Elements in the process are in a **point-to-point, or point-to-line, or point-to-surface, or even some higher correspondence** with elements in the standard of living. … The division is not based upon proprietary (firm-ownership) differences, … for the same firm may be engaged at once in different **correspondences** with the standard of living. Again, it is not a division based upon the properties of things; the same raw materials may be made into consumer goods or capital goods; and the capital goods may be point-to-line or point-to-surface or a higher correspondence; they may have one **correspondence** at one time and another at another. … the division is, then **neither proprietary nor technical**. It is a **functional division** of the **structure** of the productive process: it reveals the possibilities of the process as a **dynamic system**, though to bring out the full implications of such a system will require not only the **next two sections**, on the stages of the process, but also **later sections on cycles**. [CWL 15, 26-7] (see CWL 15, sections 26, 27, 28 named respectively The Cycle of Basic Income, The Cycle of Pure Surplus Income, and The Cycle of the Aggregate Basic Price Spread.

**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]

**In the order of analysis, **Lonergan, understood the inner logic of the double-circuited expansionary process. He identified the **phases** of a dynamic expansion in CWL 15’s Section 18 and 24, titled **“The Phases in the Productive Process,” and “The Cycle of the Productive Process.”**

Having long previously established the **basis** and **ground** virtually **containing** the answers to the rest of the questions in the order of analysis, in the order of synthesis and teaching he treated in CWL 15 the phenomenology of **three phases immanent in** an expanding, dynamic economic process. The chapters preceding Lonegan’s analysis of superposed circuits are

- Section 26, The Cycle of Basic Income, pp. 133-44, which treats
**a)****tiers of income and their propensities to consume**, and**b)**the**delusions of textbook economists (including the Fed)**re raising and lowering interest rates - Section 27, the Cycle of Pure Surplus Income, pp. 144-156, which treats
**a)**the theory of rises and declines of pure surplus income, and**b)****speculative optimism and pessimism**in the secondary markets for**previously issued stocks and bonds** - Section 28 The Cycle of The Aggregate Basic Price Spread, 156-162, which treats the theory of pricing.

**Finally, **in the order of synthesis and teaching, he identified and diagramed the phenomena of **Superposed Circuits**, such as trade imbalances, **government deficits and surpluses**, the Fed’s **flooding or starving** the process with excessive or deficient **circulating monetary capital, **and the** commercial banking system’s **flooding or starving the process by **ignorant and reckless lending, **and** ****one circuit’s violation of the central condition of equilibrium** in its robbing the other circuit of its required funds.

**Part II. Excerpts Re Putting Questions and Answers in their Proper Sequence**

In this Part II. we paraphrase and print several excerpts – many already quoted in Part I – relevant in content to the selections of Part I. **Lonergan was a systematizer**; whether his focus was **a)** the intelligibility of the human knowing of mathematicians and physicists, **b)** the systematics of macroeconomic field theory, or **c)** the systematics of Trinitarian theology, Lonergan aim was **to systematize, **so that others may understand and manage.

… A **science emerges **when thinking in a given field moves to **the level of system**. Prior to **Euclid** there were many geometrical theorems that had been established. The most notable example is **Pythagoras’** theorem on the hypotenuse of the right-angled triangle, which occurs at the end of book 1 of Euclid’s elements. **Euclid’s** achievement was to bring together all these scattered theorems by setting up a **unitary basis** that would handle all of them and a great number of others as well. … similarly, mechanics became a **system** with Newton. Prior to Newton, **Galileo’s** law of the free fall and **Kepler’s** three laws of planetary motion were known. But these were isolated laws. **Galileo’s prescription** was that the system was to be a **geometry**; so there was something **functioning as a system**. **But the system really emerged with Newton**. This is what gave Newton his tremendous influence upon the enlightenment. He laid down a set of basic, definitions, and axioms, and proceeded to demonstrate and conclude from **general principles and laws** that had been established empirically by his predecessors. **Mechanics became a science** in the full sense at that point where it became an **organized system**. … again, a great deal of chemistry was known prior to **Mendeleev**. But his discovery of the periodic table selected a set of basic chemical elements and selected them in such a way that further additions could be made to the basic elements. Since that time chemistry has been **one single organized subject** with a basic set of elements accounting for incredibly vast numbers of compounds. In other words, there is a point in the history of any science when it comes of age, when it has a **determinate systematic structure** to which corresponds a **determinate field**. (CWL 10, 241 & ftnt 20 and 21, and 242)

Lonergan sought a **determinate systematic structure to which corresponds a determinate field of interrelated functionings.**

… 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]

Thus, the problem of understanding is solved not because individual answers are provided to individual questions one at a time and separately, but because the **whole series of questions is ordered by wisdom**, because the first question is solved by a highly fruitful act of understanding, because the later questions are solved **in an ordered way by the efficacy of the first solution**, because **a system of definitions** is introduced through which **the solutions can be formulated**, and because **a technical terminology is developed** for expressing the defined concepts. [CWL 12, 25]

Next, understanding is about **principles**. A principle is defined as what is **first in some order**. Therefore, it belongs to understanding to grasp the solution of that problem that is first in the order proposed by wisdom. Since this order is such that solving the first means that the others are expeditiously solved, the understanding should be such as **virtually to contain in itself **the answers to the rest of the questions. [CWL 12, 23]

Besides, where both the problems and the solutions are interconnected, the concepts and even the terms that express the concepts must also be interconnected. Thus, if solving the first problem **virtually solves all the others**, **the concepts and terms in which the first problem and the first solution are defined and expressed** cannot be significantly changed if they are to **serve to define and express the later problems and solutions**. Clearly, then, it is not the arbitrary malice of professors but the interconnected questions and solutions themselves that **demand both systematically formed concepts and a technical terminology** that corresponds not to any concepts whatsoever but to systematic concepts. [CWL 12, 25]

… we understand many things through many words because we proceed through several acts in which we understand particular things to an understanding of these several things **in a unity**. And yet when we have understood several things in a unity we also are wont to utter a single word, words like geometry, history, … .(CWL 12, 669)

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]

Third, knowledge has to do with conclusions. But 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]

One must start with **precise definitions** of fundamental, **scientifically-significant** terms.

Moreover, once a system has been discovered, it is susceptible to **two proper** and **three accidental eventualities**. It is **proper to a system to grow** and that it keep improving itself. But it can also happen that **the system is poorly understood**, that it is completely rejected, and that the very facts that were understood in the system are now denied. (CWL 12, 25)

A(n **economic**) system grows to the extent that it is extended not only **vitally** and **organically** but also (and more important) in an intellectual and rational way to all parts of **economics** and draws upon philosophy and other human disciplines to serve its own ends. (CWL 12, 25)

A system keeps improving itself insofar as the understanding of its principle increases so that the conclusions penetrate **more deeply** the matter under consideration and extend **more widely**. (CWL 12, 25)

The poor understanding of a system is in accord with the dictum, Whatever is received is received according to the capacity of the receiver. Thus the understanding of the principle, far from increasing, decreases. **The first problem and all the connected subsequent problems are solved imperfectly.** But imperfect solutions are only partly solutions, and so they are partly new problems. These … proceed from the poor understanding of the system. But there is more. The wisdom that puts the problems into order is the wisdom not of the truly wise but of those who have poorly understood. The solutions to these new problems come from the very persons whose poor understanding was the source and cause of the new problems in the first place. Thus a new system arises, but it is **just a semblance of a true system**. **Its problems do not really exist**, its order will please those who have little wisdom, its principle will satisfy only those whose understanding is **superficial**, and its knowledge will be **a morass of obscurity and confusion**. Still, foolishness is manifold: different people are **unwise in different ways.** And so a new system is followed by an even newer one. Extremely clever schemes and ideas suddenly proliferate. The rule of reason … gives way to partisan zeal. The story can no longer be told by a historian of science but only by a sociologist of knowledge. (CWL 12, 25, 27)

A system can be completely rejected for two reasons. Some people never were introduced to anything more than a semblance of system; since they can easily see that these are no good, they judge that every system must be an aberration. But others suffer from a more serious ignorance. **They do not grasp what it means to understand.** When they hear of the problem of understanding, they can think only of the problem of truth or of fact. … … once system is utterly excluded, the problem for understanding is also utterly excluded. Then either one simply goes back to the problem of coherence and disputes with logical subtlety about absolute necessities and absolute possibilities, … , or one finally rejects such seemingly logical exercises as well and concentrates only on the problem of the fact. (CWL 12, 27, 29)

There remains the task of gathering together and summing up what we have said. We distinguished two goals, one that emphasizes certitude based on authorities, and another that emphasizes understanding what is already known as certain. … The same system that can be understood, grow, and keep improving can also be poorly understood or not understood at all, with the result that **those who understand poorly will concoct pseudo-systems **to solve** pseudo-problems**, while those who do not understand at all will give up the effort and return to the problems of coherence. (CWL 12, 29)

… a part of knowledge cannot be omitted without inflicting a **threefold harm** on learners. First, omitting the part means that they will not learn the part. Second, and more seriously, **knowledge itself will be mutilated**. What constitutes knowledge as knowledge is found not in the part but in whew hold, and so to hand on some parts as if they were the whole is to work against knowledge rather than to serve it. Third, and most seriously of all, mutilated knowledge will sooner or later be distorted. The demands that constitute our intelligence and reasonableness will make the omission felt; they will require that a compensation or a supplement be sought and that the remaining parts of knowledge be wrenched from their proper role and task, until they appear by themselves alone to present some kind of unity and whole. For this reason, the more resolutely people abstain from **economic** speculation, the more abundantly they indulge in historical speculations. Empirical method will undoubtedly lead little by little to certain ideas being generally accepted, but **method alone without a mind** **attains nothing**; and experience teaches us how a mind innocent of philosophy and **economics** can be tossed back and forth by every new wind of theory. (CWL 12, 29 and 31)

Imperfect solutions are dangerous. Again,

(in imperfect solutions,) the first problem and all the connected subsequent problems are solved imperfectly. But imperfect solutions are only partly solutions, and so they are also partly new problems. … The wisdom that puts the new problems into order is the wisdom **not of the truly wise** but of those who have poorly understood. The solutions to these new problems come from the very persons **whose poor understanding was the source and cause of the new problems in the first place**. Thus, a new system arises, but it is **just a semblance of a true system**. Its **problems do not really exist**, its order will please those who have little wisdom, its principle will satisfy only those whose understanding is superficial, and its knowledge will be **a morass of obscurity and confusion**. [CWL 12, 25-27]

Lonergan is alluding to Newman’s third discourse, “Bearing of Theology on Other Branches of Knowledge”, in *The Idea of a University*. [CWL 12, 25, ftnt 17]

… one who reaches … understanding … that is most fruitful does not solve just one single problem in a sterile fashion …, but solves one problem directly in such a way that **one simultaneously reaches a virtual solution of many others**. [CWL 12, 43]

So the first movement toward acquiring science begins from an ordinary prescientific description of things and ends in the knowledge of their causes. This **first movement** has been called: **(1) analysis**, because it starts from what is apprehended in a confused sort of way and moves to well-defined causes or reasons,

**(2)**

**, because it resolves things into their causes,**

*the way of resolution***(3)**

**, because previously unknown causes are discovered,**

*the way of discovery***(4)**

**, because the ordinary prescientific knowledge of things is most obvious to us, and so the arguments we find most certain begin from such knowledge and to on to demonstrate matters that are more remote and more obscure to us, and**

*the way of certitude***(5)**

**, because causes are not usually discovered instantaneously, any more than they are discovered by just anyone or without a certain amount of good luck. ¶ The**

*the temporal way***other movement**starts from the causes that have been discovered and ends by understanding things in their causes. This movement is called:

**(1)**, because fundamental reasons are employed both to define things and to deduce their properties,

*synthesis***(2)**

**, because causes are employed to produce things or constitute them,**

*the way of composition***(3)**

**, because it begins with concepts that are fundamental and especially simple, so that by adding a step at a time it may proceed in an orderly way to the understanding of an entire science,**

*the way of teaching*or*of learning***(4)**

**, partly because it often attains no more than probability, but also because people frequently have no clear discernment of just where or when they have reached certitude, and**

*the way of probability***(5)**

**, because, once the principles have been clearly laid down, all the rest takes comparatively little time; it can be accomplished in a few short deductions and applications. ¶ For examples of the two ways, compare the history of a science like physics or chemistry with the textbooks from which these sciences are taught. History reveals that these sciences worked out their various demonstrations starting from the most obvious sensible data. But when one goes to a textbook, one finds at the beginning of the book in chemistry, only the periodic table of elements from which three hundred thousand compounds are derived, or, in physics, Newton’s laws, Riemannian geometry, or those remarkable quantum operators. The reason for this difference is, of course, that inquiring, investigating, and demonstrating begin with what is obvious, while teaching begins from those concepts that can be understood without understanding other elements. [CWL 12, 61-63]**

*the way of logical simultaneity*… we have acknowledged in **the dogmatic way** something of a process of analysis, of resolution, of discovery, of certitude, and of a temporal way, and in **the systematic way** something of the process of synthesis, of composition, of teaching and learning, of probability, and of logical simultaneity, we cannot ignore the fact that these terms are used analogously. Analysis and synthesis are understood in **one way in physics** and in **another way in chemistry**, … [CWL 12, 65]

… there never seem to be lacking those whose **diminished wisdom** is ready and eager to take a **part for the whole** and to pass it on as such to others. [CWL 12, 65]

The difference is **completely universal**: **every argument proceeds from something prior and moves to something subsequent**; but what are prior in the **systematic** way are subsequent in the **dogmatic**; and what are subsequent in the systematic way are prior in the dogmatic. [CWL 12, 71]

In the systematic way the understanding of some points is more necessary than the understanding of others: **some points are such that, unless they are understood, nothing else in the entire treatise can be understood**; neglecting to understand other points may deprive us only of part of the understanding of the entire treatise; and finally, some points are included just so that others may be more easily understood or that the connections with other questions may be clearer or that we may proceed more promptly to the applications. [CWL 12, 73]

We said enough above about the close connection between what is **prior in itself** and what is **prior for us**: what **the way of analysis discovers** and demonstrates is entirely the same as **what the way of synthesis wisely orders**. But if this intimate link and interdependence are overlooked or not clearly grasped, … speculation will … neglect the positive sources, … and positive investigations, **deprived of direction and integration**, will wander aimlessly hither and thither or like some huge mass lie there in complete inertia. [CWL 12, 95]

A final indulgence on our part:

This **reversal of roles** in which the **sensible container** becomes the **intellectually contained** has already been noted. **‘To be’** cannot mean **‘to be in space’** or **‘to be in time’**. If that were so, and space is or time is, then space would be in space and time would be in time. The further space and time, if real, would also be, and so would demand a **still further** space and time. The argument would be repeated **indefinitely** to yield **an infinity of spaces and times**. **‘To be’** then is just **‘to be’**. Space and time, if real, **are determinations within being**; and if they are **determinations within being**, then they are **not containers but the contained**. To put the issue more concretely, there are extensions, durations, juxtapositions and successions. Still such affirmations are **descriptive**. They have to be **transposed** into **explanatory statements** before one may ask legitimately for their **metaphysical equivalents**; and when that transposition takes place, then from the general nature of explanation it follows that **the metaphysical equivalents will be the conjugate potencies, forms, and acts** that **ground the truth of spatio-temporal laws and frequencies**. So it comes about that the **extroverted subject** (sensibly) **visualizing** **extension** and (sensibly) **experiencing** **duration** gives place to the subject **oriented** to the **objective of the unrestricted desire to know and affirm beings differentiated by certain conjugate potencies, forms, and acts grounding certain laws and frequencies**. It is **this shift** that gives rise to **the antithesis of positions and counter-positions**. It is through its acknowledgment of the fact of this shift that **a** **philosophy or metaphysics is critical**. It is only by a **rigorous confinement** of the metaphysician to the intellectual pattern of experience and of metaphysical objects to the **universe of being as explained**, that this basic enterprise of human intelligence can free itself from the morass of pseudo-problems that otherwise beset it. (CWL 3, 513-4/537)

This conclusion is explicitly set forth in Summa Theologiae, I, q. 79, a. 2, and is sufficiently indicated in Summa contra Gentiles, 2, c, 98, ¶9, §1835; but it **implicitly contains within itself** the **whole theory of intellect**, … (CWL 12, 627)

Again,

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]