Harvard Magazine’s podcast, “Ask a Harvard Professor,” recently featured an interview of professors Doug Elmendorf and Karen Dynan – two good people – under the title Doug Elmendorf and Karen Dynan: How Much Can the Federal Budget and the Deficit Continue to Grow? (Click here for video and print versions of the interview)
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]
The analysis of the overall dynamic functioning, which we call in nominal terms the economic process, must seek the explanation of the process. It must seek the objective immanent intelligibility among the interdependent, dynamic “functionings” which altogether constitute the process. The functionings are rates of so much or so many every so often, and, thus, they are velocities. And the scientific analysis must be in terms of abstract, implicitly-defined, explanatory conjugates rather than in terms of the descriptive accountants’ unities of merely legal or proprietary entities called “firms.” (Continue reading)
In the graphs of CWL 15, pages 121-25, it is easy to become disoriented by the symbols on the vertical axes and by the titles and annotations. In particular, one might tend mistakenly to view Q as a symbol for an absolute quantity or an accumulation rather than for a rate of flow of a quantity. Recall:
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]
Lonergan never used terms for magnitudes, only for rates and their accelerations (‘rates of rates’) in the Essay in Circulation Analysis. [CWL 15, 182]
But if the ultimate product qi is related by a double summation to the contributions of factors of production qijk, then the total flow of ultimate products Qi is also related by a double summation to the rates of the contributions of the factors of production Qijk, where both Qiand Qijk are instances of the form ‘so much or so many every so often.’ (CWL 15, 30)
In the graphs superscripts identify basic (‘) or surplus (“) elements. Absence of superscripts here indicates “in any case.”
Our inquiry differs from classical analysis and from traditional economics. Functional Macroeconomic Dynamics prescinds from human psychology to replace Walras’ general equilibrium with a prior and more fundamental equilibrium to which human participants must adapt.
Participants are not to dominate as willy-nilly, ignorant, external, efficient causes, but rather to adapt to the immanent intelligibility of the objective mechanism. This immanent intelligibility is the set of laws explaining the process – laws not to be enforced by a civilian police force but rather abstract laws to be understood and honored by enlightened free people. Continue reading
We wish to suggest a structure for the salt of deoxyribose nucleic acid (D.N.A.). This structure has novel features which are of considerable biological interest. [J. D. Watson and F.H.C. Crick] (Attribution below)
We wish to suggest a structure for the objective, dynamic, economic process. This structure, which is independent of human psychology, is composed of both productive and correlated monetary flows. The structure of the interdependent, pretio-quantital, monetary flows is double-circuited and has novel features which are of considerable macroeconomic interest.
reprinted with permission from Nature magazine
A Structure for Deoxyribose Nucleic Acid
J. D. Watson and F. H. C. Crick (1)
April 25, 1953 (2), Nature (3), 171, 737-738
[3/18/20] Michael Gibbons’ essay, “Economic Theorizing in Lonergan and Keynes” is a gem.
Gibbons, M. (1987) “Economic Theorizing in Lonergan and Keynes”, Religion and Culture: Essays in Honour of Bernard Lonergan S.J., Eds. J.P. Fallon and P.B. Riley, University of New York Press, Albany [Gibbons, 1987, pp. 313-23]
Gibbons’ essay is followed in the collection by essays of Patrick Byrne and Eileen De Neeve; all three are available together on line at Continue reading
- .I. Introductory
- .II. The “legal” basis of our criticism; the “laws” of the process
- .III. Key objections to Modern Monetary Theory
- .IV. Observations re “A Skeptic’s Guide to Modern Monetary Theory”
- .V. Why and how the Basic Expansion fails to be implemented
- .VI. Addendum #1: Primary relativities of the economic process
- .VII. Addendum #2: Excerpts re the drift to totalitarianism
A very expensive macroeconomics textbook, having 700-1000 pages, would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions. A reader would not gain a clear theory and complete explanation of the dynamics of the real economic process. However, is there not a superior 228-page, far less expensive textbook right in our hands? How about this? Reword the subtitle of CWL 15 from An Essay in Circulation Analysis to A Textbook of Circulation Analysis, and let the professor instruct the serious student to read the book three times, then report back to discuss the following:
- the canons of empirical method
- a scientific, dynamic heuristic
- the technique of implicit definition; explanatory terms defined by the functional relations in which they stand with one another
- velocitous functional unities of scientific and explanatory significance replacing the BEA’s descriptive, commonsense, accountants’ unities
- the structure of the lagged, rectilinear productive process
- money as a dummy invented by man
- the perspective of a hierarchical series of monetary circuits
- how a monetary circulation meets the rectilinear production-and-vending process
- the primary relativities and concomitance in the Diagram of Rates of Flow
- dynamic equilibrium replacing static Walrasian general equilibrium
- the velocity of money in terms of magnitudes and frequencies
- prices are not a given and not requiring explanation; rather prices are in need of explanation
- interpretation of prices, quantities, interest rates in the light of significant explanatory variables
- the pure cycle and its constituent phases in the expansion of the objective economic process
- the abstract primary relativities and concrete secondary determinations in the expansion of the economic process
- the statistical residue and why prediction is impossible in the general case; predicting weather vs. predicting planetary motion
- the significance of investment’s monetary correlate
- the ineptitude of manipulating interest rates
- the explanation of government and foreign-trade imbalances by the dynamics of superposed circuits
- the distinction between efficient cause and formal cause
- distinguishing between self-healing and the effect of interventions
- the intelligibility and explanatory power of the basic price-spread ratio
- Figures 14-1, 24-7, and 27-1 in CWL 15
The student would learn much that is radically different, explanatory, and very useful; and he/she would gain a perspective or framework by which to evaluate and criticize the flawed premises and tenets of conventional textbooks and traditional theories.
Economists don’t have the methodological and conceptual toolkit needed for appreciation of FMD’s scientific and historical significance.
- They don’t know what they don’t know.
- They’re not methodologists and don’t know what constitutes good theory.
- They never read CWL 3, pages 3-172 and 490-97 and, thus, they never studied the canons of empirical method, especially the Canon of Parsimony and the Canon of Complete Explanation; they have no idea of the deficiencies of their method.
- Thus, they lack a purely scientific and explanatory heuristic.
- They do not adequately distinguish description vs. explanation.
- They do not know the type of answer they’re seeking, i.e. their known unknown.
- They do not put questions in the right order to discover basic terms of scientific significance.
- They are mired in muddy premises and disorienting assumptions.
- They are unable to employ a scientific, dynamic heuristic adequate for analysis of a current, purely dynamic process.
- They don’t understand what constitutes the normative system’s requirement for concomitance, continuity, and equilibrium of flows.
- They lack a background in theoretical physics. They don’t understand the principles and abstract laws of hydrodynamics, electric circuits, or field theory. Nor do they understand adequately the idea of continuity and the conditions of equilibrium in macroeconomic dynamics. They are unaware of analogies from physics applicable on the basis of isomorphism to the phenomena of Functional Macroeconomic Dynamics. (Continue reading.)
Part I. Two economic mechanisms. Two components of concrete relations. Two simultaneous roles for human participants
It is the viewpoint of the present inquiry that, besides the pricing system, there exists another economic mechanism, that relative to this 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]
What the analysis reveals is a mechanism distinct though not separable from the price mechanism which spontaneously coordinates a vast and ever shifting manifold of otherwise independent choices from demand and of decisions from supply. It is distinct from the price mechanism, for it determines the channels within which the price mechanism works. It is not separable from the price mechanism, for a channel is irrelevant when nothing flows through it. [CWL15, 17] [Continue reading).