Category Archives: A New Paradigm

Conflicting Ways Of “Viewing” The Economic Process (In Draft Status)

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Time-consuming cares of our day and the nonsense on TV compel us, against our better judgment, to enter this section now in draft form.  We request the reader’s forbearance and suspension of his/her own judgment re the contents.  Also, note that we have included part of Subsection 3 first on the teaser below. Clicking on the “Click here” at the bottom will bring the reader to the top of the entry.

  1. Lonergan’s “Macroeconomic Field Theory” (MFT), AKA “Functional Macroeconomic Dynamics” (FMD) – Draft
  2. Marxism – Draft
  3. Modern Monetary Theory Quackery (MMQ) – Draft
  4. Establishment Economics – Draft

.3. Modern Monetary Theory Quackery (MMQ)

Draft

  • MMQ does not have a scientific heuristic; it does not seek, much less reach, an explanatory theory; it does not grasp that the province of science as explanation by terms related among themselves. MMQ is fundamentally disoriented.

Already 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.  … despite their intimate connection, it remains that description and explanation envisage things in fundamentally different manners.  The relations of things among themselves are, in general, a different field from the relations of things to us. (CWL 3, 291/316)

No doubt Keynes was an economist first and a methodologist second but he was none the less very articulate about his theorizing……..Lonergan, for his part, is perhaps a methodologist first and an economist second, but, as we shall see, he was able to push his economic reflections further than Keynes because he had a firmer grasp of the essentials of an effective theory.   [Gibbons, 1987]

  • Thus, MMQ does not adopt a scientific method in order to explain.
  • MMQ does not display a trace of knowledge and appreciation of a) concomitance of functionings, composed of actual monetary flows often supported by credit, b) what constitutes continuity, c) what constitutes dynamic equilibrium, d) the analytic distinction of two or more circuits of monetary circulations, analytically distinguished but solidary with one another.

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Explanatory Conjugates; Formal Implicit Relations; Ideal Frequencies

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… 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.  .. Lindsay and Margenau in their Foundations of Physics, … may be said to exhibit a preference for terms implicitly defined by equations.  [CWL 3, 81-82/105]

Macroeconomics is an explanatory science; as science it employs scientific method. (Continue reading)

The Method of Circulation Analysis; Brief Item #94

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A first step is to offer some definition of the positive integers, 1, 2, 3, 4…. … Further, let us suppose as too familiar to be defined, the notions of ‘one’, ‘plus’, ‘equals’…. As the acute reader will see, the one important element in the above series of definitions, is the etc., etc., etc…It means that an insight should have occurred.  If one has had the relevant insight, if one has caught on, if one can see how the defining can go on indefinitely, no more need be said … in defining the positive integers there is no alternative to insight. … a single insight is expressed in many concepts.  In the present instance, a single insight grounds an infinity of concepts.  (CWL 3, 13-14/38-39) Continue reading →

Imaginary Letter From An Imaginary Billionaire

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To whom it may concern:

I am a billionaire. To earn my wealth I assumed personal and financial risks continuously over several years. If I had failed and gone broke, no one would have felt sorry for me or bailed me out; nor would I have asked to be bailed out. I and my associates provided to the world superior material goods of higher value-for-money than comparably priced substitutes. We offered our high-quality products honestly and we charged what the market would bear.  Consumers purchased our goods wisely and gladly. Our incomes have been proportionate to our contribution to the economy and, thus, to society. (Continue reading)

Jamie Dimon’s Challenges to Himself and to the Nation

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4/7/2021:  Yahoo Finance today featured an article by Julia La Roche entitled ‘The fault line is inequality’: J.P. Morgan’s Dimon calls for fixing America’s ‘self-inflicted’ problems.  La Roche was reviewing the Public Policy section of Dimon’s 67-page Chairman and CEO Letter to Shareholders.  Mr. Dimon seeks to end the nation’s self-infliction of problems threatening the culture, the economy and the polity.  He particularly regrets “false arguments of fanatics, the certitude of ideologues and cycles of intolerance.” Continue reading →

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

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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)

Free Markets vs. a Central Bureaucracy; and Further Equilibria Must be Maintained

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Free open markets work better than central bureaucracies.

The excellence of the exchange solution becomes even more evident when contrasted with the defects of a bureaucratic solution.  The bureaucrat … (gives the people) what he thinks is good for them, and he gives it in the measure he finds possible or convenient; nor can he do other wise, for the brains of a bureaucrat are not equal to the task of thinking of everything; only the brains of all men together can even approximate to that. … when a limited liability company has served its day, it goes to bankruptcy court; but when bureaucrats take over power, they intend to stay. … when the pressure of terrorism is needed to oil the wheels of enterprise, then the immediate effect is either an explosion or else servile degeneracy. … the exchange solution is a dynamic equilibrium resting on the equilibria of markets. … every product of the exchange economy must mate through exchange with some other product, and the ratio in which the two mate is the exchange value.  The generality of this equilibrium makes it indifferent to endless complexity and endless change; for it stands on a level above all particular products and all particular modes of production.  While these multiply and vary indefinitely, the general equilibrium of the exchange process continues to answer with precision the complex question, Who, among millions of persons, does what, among millions of tasks, in return for which, among millions of rewards?  Nor is the dynamic solution unaccompanied by a continuous stimulus to better efforts and more delicate ingenuity.  For the uniformity of prices means that the least efficient of those actually producing will at least subsist, while every step above the minimum efficiency yields a proportionately greater return. (CWL 21, 34-35)

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The Cycle of Basic Income

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We ask all serious graduate students and professors of macroeconomics, government economists, conscientious politicians, poorly educated journalists, and financial-talk-show “pundits” to please read Bernard Lonergan’s Macroeconomic Dynamics, (CWL 15), Section 26, “The Cycle of Basic Income”.  That section addresses several important economic issues:

  • the adjustment of the  rate of saving to the phases of the pure cycle of expansion in the economic process
  • the complementary mechanism of changing prices
  • the significance of a relative and an absolute rise or fall of monetary prices
  • the difficulty with the theory of manipulating interest rates in that a)  it lumps together a number of quite different things, and b) overlooks the order of magnitude of the fundamental problem
  • the ineptitude of the procedure of manipulating interest rates.

Then, after the first reading, please read that section a second time.

Thank you.

[CWL 15] Lonergan, Bernard (1999), Macroeconomic Dynamics: An Essay in Circulation Analysis, ed. Frederick G. Lawrence, Patrick H. Byrne, and Charles Hefling, Jr., vol 15 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press)

Editors’ Introduction to CWL 15: Table of Contents

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To indicate to the serious reader the editors’ helpfulness in placing Functional Macroeconomic Dynamics in its historical and theoretical context, we list here the headings of the Editors‘ Introduction to Lonergan’s Macroeconomic Dynamics: An Essay in Circulation Analysis (CWL 15):

Editors’ Introduction, Frederick G. Lawrence ; xxv

  1. Lonergan’s Entry into Economics, 1930-1944 / xxvi
  2. Democratic Economics: An alternative to Liberalism and Socialism / xxxii
    1. Liberalism and Socialism as Economistic Ideologies / xxxv
    2. Free Enterprise as an Educational Project
  3. Lonergan’s Reentry into Economics, 1978-1983 / xxxix
  4. Lonergan’s Interlocutors in Economics / xliii
    1. Lonergan and Marx / xlvi
    2. Lonergan and Marshall / xlvii
    3. Lonergan and Keynes / xlviii
    4. Lonergan, Kalecki, and Others / li
    5. Lonergan and Schumpeter / li
  5. Macroeconomic Dynamic Analysis as a New Paradigm of Economic Theory / liv
  6. The Systematic Significance of the Fundamental distinction between Basic and Surplus Production and Exchange
    1. Profit / lxiii
    2. Interest / lxvii
    3. Lonergan’s Critique of ‘Supply-Side’ and ‘Demand-Side’ Economics / lxvii
  7. Lonergan’s Critique of Secularist Ideologies: The Need for a Theological Viewpoint / lxix