Category Archives: A New Paradigm

Zephyrs and Pandemics

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

Field Theory in Physics and Macroeconomics

We hope to inspire serious graduate students of economics a) to seek and achieve an understanding of “Macroeconomic Field Theory,” b) to verify empirically Lonergan’s field relations,  and c) to use the explanatory field relations as the basis of influential scholarly papers.

We trace developments

  • in physics from Newtonian mechanics to modern field theory, and
  • in economics from Walrasian supply-demand economics to purely relational, Modern Macroeconomic Field Theory.

Key ideas include a) abstraction and implicit definition as the basis and ground of invariance in both physics and macroeconomics, b) the concept of a purely relational field, c) immanent intelligibility and formal causality, and d) the canons of parsimony and of complete explanation. We highlight some key ideas: (continue reading)

Elements of The Analysis

Our aim is to prescind from human psychology 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]

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 equilibrium analysis…to an analysis where attention is focused on second-order differential equations, on d2θ/dt2, d2x/dt2, d2y/dt2, on a range of related forces, central, friction, whatever….. What is significant is the Leibnitz-Newtonian shift of context. [McShane 1980, 127]

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.  …  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, as to the notion of cause, Newton conceived of his forces as efficient causes, and the modern mechanics drops the notion of force; it gets along perfectly well without it.  It thinks in terms of a field theory, the set of relationships between n objects.  The field theory is a set of intelligible relations linking what is implicitly defined by the relations themselves; it is a set of relational formsThe form of any element is known through its relations to all other elements.  What is a mass?  A mass is anything that satisfies the fundamental equations that regard masses.  Consequently, when you add a new fundamental equation about mass, as Einstein did when he equated mass with energy, you get a new idea of mass.  Field theory is a matter of the immanent intelligibility of the object. [CWL 10, 154]

 

Modern Monetary Theory Fails to Qualify as Scientific Macroeconomics

Scientific macroeconomics, if it is to be genuinely scientific, must not be contaminated by human psychology.  Gustav Kirchhoff’s laws of the electric circuit do not incorporate the psychology of the human who operates the levers or switches.  So, Lonergan, the scientist, strove to discover the purely relational, purely functional laws of the circuits of the objective economic process.  Unfortunately, many proponents of Modern Monetary Theory exhibit sentiments and inclinations favoring a totalitarian bureaucracy for the management of fiscal and monetary affairs. Their purported science contains some valid assertions, but is not a coherent set of objective laws to which participants must adapt, regardless of sentiment; rather MMT is an admixture of several ideological and psychopolitical sentiments transformed into a contaminated set of mandates for the management of fiscal and monetary affairs.  The tenets of MMT fail to constitute a fully explanatory theory of macroeconomic dynamics. (to continue reading, click here)

The Relativistic Invariant: The Ideal Pure Cycle at the Root of the Aberrant Trade Cycle

The heart of the normative theoretical framework that can actually explain business and trade cycles is what (Lonergan) calls the ‘Pure Cycle’ (§10, §24, 114).  This cycle generalizes into clearly articulated relationships the ideal phases characteristic of major economic transformations as they depart from a stationary phase and move through phases first of surplus expansion and then of basic expansion, only to return to a new stationary phase. … (CWL 15, Editors’ Introduction, lxiii)  (Continue reading)

Two Summaries in Functional Macroeconomic Dynamics

.I.   Summary of the Analysis:  Heuristic, Observations, and Discoveries

.II.  Summary of the Argument (verbatim from CWL 15, 5-6)

.III. Supplement to the Summaries

(Continue Reading)

Harvard Magazine’s Podcast, “Ask a Harvard Professor”

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)

(Continue reading)

Explanation By Gross Domestic Functional Flows To Supplement Description By Gross Domestic Product

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)

Notes Re Reading Graphs In CWL 15, pp. 121-25

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 ratesrates 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.”

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Are We Outside Or Inside The Economic Process? And What Constitutes The Equilibrium To Be Achieved?

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