Category Archives: A New Paradigm

Scientific Generalization by Functional Analysis of the Network of Interdependent Rates

The non-Euclideans moved geometry back to premises more remote than Euclid’s axioms, they developed methods of their own quite unlike Euclid’s, and though they did not impugn Euclid’s theorems, neither were they very interested in them; casually and incidentally they turn them up as particular cases in an enlarged and radically different field. Continue reading

John Greenwood and Steve H. Hanke’s “The Monetary Bathtub is Overflowing”

In an article in the 10/21/2021 Wall Street Journal,  John Greenwood and Steve H. Hanke evoked an image with which we are all familiar, water flowing in and out of a bathtub.  The simple image was to be representative of monetary flows.  The image attracted attention, which was good thing; however, Macroeconomic Field Theory finds it more instructive to put forth a more adequate representative image of flows. Continue reading

Facing Facts: The Ideal Of Constant Value Of The Currency vs. The Fact Of Inflation

 

We have recited some aspects of the dynamic economic process:

    • (Dummy) money “must be constant in exchange value.”
    • Prices alone do not explain the economic process. Prices must be interpreted in the light of those significant variables which actually explain the economic process.
    • The economic process of production and exchange always is the current, purely-dynamic process
    • The economic process is an organic whole
    • The process has an exigence for a normative pure cycle of expansion.
    • Equilibrium requires the keeping of pace and balance among interdependent flows of products and money
    • Scarcity is the normal cause of inflation
    • Maladjustment of incomes is the maladaptive cause of inflation
    • Just as the surplus phase of the expansion is anti-egalitarian in tendency, postulating an increasing rate of saving, … so the basic phase of the expansion is egalitarian in tendency; it postulates a continuously decreasing rate of saving [CWL 15, 139]
    • The central adjustment to the respective phases of the process may be formulated as adjustment of I”/(I’ + I”), the ratio of surplus income to total income
    • Interpreters of prices must distinguish between real and relative price increases monetary and absolute changes in prices We have recited some aspects of the dynamic economic process: (Continue reading)

Lonergan’s “Macroeconomic Field Theory” (MFT), AKA “Functional Macroeconomic Dynamics” (FMD)

  • Functional Macroeconomic Dynamics seeks not merely to “view” and describe the economic process; rather it seeks to understand in order to explain and properly manage the economic process. (Continue reading)

A Vicious Circle; The Welfare State

Now this type of surplus is not confined to warlike concerns.  Once the possibility of an unbalanced budget is established, the precedent can be invoked to persuade politicians to carry on other wars: wars on illiteracy, on poverty, on ill health, on unemployment, on insecurity.  Where the profit motive does not prove efficacious, the state must intervene. … the increasing volume of transactions requires a larger money supply, and the central bank can be persuaded to meet the demand. … it appears to be less evident that a vicious circle of ever more demands for a larger money supply with no increase in real income is inflationary … In any case there has emerged in fact if not in name the welfare state. … Its mechanism is rather strikingly similar to that of the favorable balance of foreign trade. The debt once owed by colonies to richer countries now is replaced by the national debt. … now the long overdue basic expansion is doled out to one’s fellow countrymen under the haughty name of welfare. [CWL 15, 85-86]

Understanding The Whole Organic System; Purely Intelligible Relations Among Explanatory Terms

The human mind seeks understanding of the whole.

For the human mind is such that it does not wonder about things just individually but, understanding individual elements, goes on to ask how they are connected with one another. [CWL 12, 17]

Lonergan was seeking the explanatory intelligibility underlying the ever-fluctuating rhythms of economic functioning.  To that end he worked out a set of terms and relations that ‘implicitly defined’ that intelligible pattern. [CWL 15, 179-80]

Continue reading

Stagflation Demystified

The general form of so-called stagflation is more money chasing fewer goods in the basic circuit and a dearth of investment in the surplus circuit to keep pace with the strong basic demand. (Click here)

Lonergan gave one theoretical example of stagflation – without calling it that – wherein the condition of equilibrium between the circuits of the process is violated: Continue reading

“The Most Significant Book of the Twentieth Century”

A quote from [McShane, 2017, Preface xii]:   “I have brought you face to face with the first page of the most significant book of the twentieth century.* … You are on the edge of the invention of the permanent science of econo-dynamics. What is your next move? Obviously, if you are an economist, you get moving towards a Nobel Prize.” Continue reading

The Economic Process Is The Current Process, Grasped In A Unified Whole, Requiring The Contribution of Academics, Control Theorists, And System Dynamicists

The economic process always is “the current process” constituted by current  interdependent velocitous flows of so-much or so-many every so often.

The productive process is, then, the (current) aggregate of activities proceeding from the potentialities of nature and terminating in a standard of living.  Always it 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 goal of scientific analysis is explanation of the objective economic process, i.e. to discover the abstract immanent intelligibility which explains any particular configuration of flows of products and money in any instance.  Such immanent intelligibility would be always relevant and universally valid. (Continue reading)

 

Paul H. Rubin’s “The Woke Left’s Primitive Economics”

The Wall Street Journal of 10/6/2021 featured Paul H. Rubin’s article, “The Woke Left’s Primitive Economics”.  Rubin makes several valid points in a) criticizing The Woke’s and the Marxist’s simple-minded, psycho-political, self-damaging, hate-and-envy macroeconomics, and b) recognizing that new and better human and material capital benefit the entire society.  We wish Rubin had explicitly and clearly a) legitimized by nuanced theory the practical balance of taxation and spending for responsible waste-free activities, which only we, in our governmental form as We-The-People, can perform, and b) stated specifically that the level of taxation and the incidence of stratified taxation depend upon the requirements of the current phase of an economic expansion – Is it an initial non-expanding static economy, a proportionate expansion, a surplus expansion, a basic expansion, or a higher non-expanding static economy? Continue reading