We are commenting with respect to Andrew Lilley and Kenneth Rogoff’s “conference draft” discussing the advisability of a FRB policy of negative interest rates:
Lilley, Andrew and Kenneth Rogoff, April 24, 2019: “The Case for Implementing Effective Negative Interest Rate Policy” (Conference draft for presentation at Strategies For Monetary Policy: A Policy Conference, the Hoover Institution, Stanford University, May 4, 2019, 9:15 am PST) [Lilley and Rogoff, 2019] (Continue reading)
Philip McShane had a strong background in mathematics and theoretical physics; thus he was able to understand the scientific significance of Bernard Lonergan’s macroeconomicfield theory in an Einsteinian context.
First we display, in brief, key excerpts, many of which contain analogies from physics and chemistry, relevant to the science of Functional Macroeconomic Dynamics; then we show the same excerpts more fully within lengthier quotes. Continue reading →
To help the reader gain an appreciation of Lonergan’s achievement of Modern Macroeconomic Field Theory we will, in each section, print leading excerpts, then highlight the key concepts of those excerpts. We will comment on the historically-significant advances in geometry of Euclid and Hilbert, in physics of Newton andEinstein, and in macroeconomics of Lonergan.
Euclid’s great achievement was his rigorous deduction of geometry.
Hilbert’s great achievement was his employment of implicit definition to reorder Euclid’s geometry.
Newton’s two great achievements were unifying the isolated insights of Galileo and Kepler into a unified system of mechanics and his invention of the calculus.
One of the great achievements of Einstein was the invention of the field theories of Special Relativity, General Relativity, and Gravitation.
One of Lonergan’s several great achievements was his systematization of macroeconomic phenomena in his Modern Macroeconomic Field Theory. He combined the technique of implicit definition introduced by Hilbert and the concept of a field theory developed by Faraday and Einstein; and he developed an explanatory macroeconomics, which is general, invariant, and relevant in any instance. (Continue reading)
“if we want a comprehensive grasp of everything in a unified whole, we shall have to construct a diagram in which are symbolically represented all the various elements of the question along with all the connections between them.” [McShane, 2016, 44]
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.* There the man suggests: 1) that a key move is to pause over little things, 2) that Archimedes invented the permanent science of hydrostatics by focusing on a crown-weighing problem. 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.”
*The book is Bernard Lonergan’s Insight, A Study of Human Understanding, 1957, 1992 CWL 3, University of Toronto Press.
In any analysis there is a right order of questions; and to violate this order is to invite misunderstanding, myth, and disaster. To indicate the wisdom in Lonergan’s analysis, we present excerpts, mainly from his CWL 12, which mandate clearly, for himself and for us, that one’s method and one’s heuristic necessitate putting questions in their right order. The precepts apply whether one is doing physics, economics, philosophy or theology. Continue reading →
.I. Introduction: Contrasting Diagrams and What They Represent
We contrast an assumption and description with an explanation and interpretation. We contrast the Dynamic Stochastic General Equilibrium (DSGE) assumptionand description of pricing as exogenously given and acceptable as a lead item in analysis of economic problems with Functional Macroeconomic Dynamics’ (FMD’s) explanation and interpretation of pricing in the light of the significant functional pretio-quantital flows, which explain the dynamic economic process. (Continue reading)
There are five figures below from CWL 15: The single figure on the left represents the interrelations of interdependentMonetary Flows; and the figure contains the important condition of dynamic equilibrium: G = c”O” -i’O’ = 0. The four figures stacked on the right demonstrate aspects of the productive phases constituting a Pure Cycle of Expansion. The bidirectional arrows uniting the two sides signify that the dynamic equilibrium among interdependent flows specified on the left is to be achieved consistentlythroughout the long-run expansion represented on the right. This condition of dynamic equilibrium is that the crossover flows between the two interacting circuits must continuouslybalanceeven as they continuously vary in magnitude in the succession of phases constituting the expansionary process. Just as the general laws of simple parabolic or pendular motion are explanatory and applicable to any particular instance of initial angle and velocity, so a) the primary relativities of productive and monetary flows, and b) the primary differentials of long-term expansion explain the economic process, and are normatively relevant in every particular instance. All five diagrams are unitary. Each and every velocitous and accelerative flow of products and money has proximate or remote explanatory aspects embedded in all five diagrams. (Continue reading)
Functional Macroeconomic Dynamics acknowledges and affirms a non-systematic manifold of secondary determinations (such as prices and quantities), a Canon of Statistical Residues, and the impossibility of prediction in the general case. However, FMD affirms the existence of both human intelligence and the abstract, primary,immanent intelligibility of the objective, dynamic economic process. It is this abstract, primary, immanent intelligibility by which the process must always be understood so as to be properly managed.
Knocking a pendulum slightly out of its existing oscillation does not necessitate a search for a new theory of the pendulum in order to correct the mishap. The abstract theory of the pendulum in Newtonian mechanics still applies; the abstract intelligibility of the pendular motion is always relevant, in any instance, in any configuration of initial angle and initial velocity. The theory still applies, though the motion may be on a new basis determined by new initial conditions or boundary values. Continue reading →