We print three displays of the same Diagram of Rates of Flow, AKA the Diagram of **Interdependent Velocities**. The second and third displays simply suggest that the serious reader must keep in mind certain precepts as he/she seeks to achieve **a new paradigm and a new framework** for macroeconomic dynamics. Continue reading

# Category Archives: A New Paradigm

# The Principle of Concomitance: The Foundation of Equilibrium and Continuity

Concomitanceis, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane, [Fusion 1, page 4 ftnt 10]

Recall that the subtitle of CWL 15 is **“An Essay in Circulation Analysis”**. It is by virtue of **concomitance** that **continuity** and **equilibrium** are achieved so as to constitute an orderly process of circulations. (Continue reading)

# Explaining “Present Fact”: An Ever-Varying Process; A Never-Varying Systematics

The economic process is **always the current**, **purely-dynamic**, concrete functioning. The analysis of the dynamic process is always relevant to the **present fact**. The **immanent intelligibility** of such a dynamic, **ever-varying process** may** itself be an invariant; **i.e. though the differentials may change in magnitude, the relation of the **differential velocities and accelerations** among themselves is **invariant**. So it is in the case of dynamic pendular motion, elliptic motion, the variables of electromagnetic phenomena, and in the dynamic economic process. The **general laws** of the process are **applicable in any instance**. These **primary, abstract, general, field-theoretic laws** may be applied to whatever may be the **secondary determinations** from **the concrete non-systematic manifold. **Thus we can get the **particular law** explaining the **particular** **concrete process** under investigation.

The overall **economic** **functioning** has an **objective immanent intelligibility**. This intelligibility is an **invariant** – a set of **differential equations** which **implicitly define** the explanatory, conjugate, differentials of the dynamic process. The **explanatory terms are abstract functions** defined by their **functional relations to one another**. In the implicit equations, the **terms define the relations and the relations define the terms**, and **insight** fixes both. And the equations **cohere** with one another to constitute a **fully-explanatory field theory.**

The

point-to-lineand highercorrespondencesare based upon theindeterminacyof the relation between certain (surplus) products and the (later ultimate basic) products that (exit the process and eventually) enter into the standard of living. …the indeterminacy is very much a present fact. One has to await the future to have exact information. And while estimates in the present may be esteemed accurate, the future has no intention of being ruled by them: owners do not junk equipment simply because it has outlasted the most reliable estimates; nor are bankrupts kept in business because their expectations, though mistaken, are proved to have been perfectly reasonable. The analysis that insists on the indeterminacy is the analysis that insists on thepresent fact:estimates and expectations are proofsof thepresent indeterminacyand attempts to get round it; and, to come to the main point, an analysis based on such estimates and expectations can never arrive at acriticismof them; it wouldmove in a vicious circle. It is to avoid that circle that we havedivided the processin terms of indeterminate point-to-line and point-to-surface and higher correspondences. [CWL 15, 27-28]in the long run, and especially in the very long run, such a correlation exists. It is that surplus production is

the acceleratorof basic production. In other words thecorrespondencebetween the two is not a point-to-point but a point-to-line correspondence; … Now such acorrespondence, if it is to be expressednot in terms of expectations of the future but in terms of present fact, is a correspondence ofaccelerator to accelerated. … If the system is to move into a long-term expansion, this movement has to begin with a surplus quantity acceleration: surplus production has not merely to maintain or renew existing capital equipment but has to reach a level at which it turns out new units of production and maintains or renews a greater number of existing units; this givesthe quantity surplus expansion. [CWL 21, 132](there is to be discerned a

threefold processin which a basic stage is maintained andacceleratedby a series of surplus stages, while the needed additions to or subtractions from the stock of money in these processes is derived from the redistributive area) … The maintaining of astandard of livingis attributed to abasic process(distinct process 1), an ongoing sequence of instances of. Theso much every so oftenmaintenanceandacceleration(distinct process 2) of this basic process is brought about by a sequence of surplus stages, in whicheach lower stageis maintained andacceleratedby thenext higher. Finally, transactions that do no more than transfer titles to ownership are concentrated in aredistributivefunction, whence may be derivedchangesin the stock of money (distinct process 3) dictated by theacceleration (positive or negative)in the basic and surplus stages of the process. … So there is to be discerned athreefold processin which a basic stage is maintained and accelerated by a series of surplus stages, while the needed additions to or subtractions from the stock of money in these processes is derived from the redistributive area. … it will be possible to distinguish stable and unstable combinations and sequences ofratesin the three main areas and so gain some insight into the long-standing recurrence of crises in the modern expanding economy. [CWL 15, 53-54]

# Only Lonergan

Lonergan is alone … Only Lonergan … Continue reading

# Five Why’s

# The Diagram of Central Importance

We note that several instructors in Lonergan’s **Functional Macroeconomic Dynamics** give conceptual priority to his Diagram of Rates of Flow in their essays. Continue reading

# Insight Into The “Baseball Diamond”: Discovery For Implementation

Thus, if we want to have

a comprehensive grasp of everything in a unified whole, we shall have to construct a diagram in which aresymbolically representedall the various elements along with all the connections between them. [McShane 2014, 11 (quoting CWL 7, 151)]

We wish here to suggest the insights the reader should have to fully appreciate all that is contained in the Diagram of Rates of Flow. (Continue reading).

# A Burley Sampler

In our Thanks section we have emphasized our debt to Professor Peter Burley. With a PhD in physics (Adelaide, 1965) and a PhD in Economics (Princeton, 1968) he was well qualified to understand the revolutionary nature of Lonergan’s Macroeconomic Field Theory. (Continue reading)

# A Normative Dynamic Structure, Despite Maladaptive Errors by “Infielders”

Functional Macroeconomic Dynamicshas adefinite, normative, dynamic structure. Evidently, there is a high degree of indeterminacy to events within such a dynamic structure. All one can say is the game can go all awry. But despite this almost baffling indeterminacy,it remains that there is a definite dynamic structure. [CWL 21, 211-12]

The **velocities** of correlated, interdependent payments must keep pace and be in balance. Payments of dummy money **move **at** velocities in circuits; e.g.** *O = I = E = R* (CWL 15, 54) and *O’ + O” = I’ + I” = E’ + E” = R’ + R” *(CWL 15, 54) The arrows in the **Diagram of Rates of Flow** represent channels containing analytically-distinguished, **interdependent**, functional **velocities**. These dynamic functionings are **defined by the functional relations** in which they stand with one another.

The intelligibility of the **concrete process** consists of two components: an **abstract** **primary relativity** expressing the **normative systematic structure**, and a **secondary component of concrete determinations** from the non-systematic manifold. There is a **normativity** to the dynamic structure. An analogy from baseball may help to make the point regarding **interdependence and keeping pace.**

A large and

positive crossover differenceuncompensated by action from the pitcher’s box will result sooner or later in depriving the groups at second and third bases of all their balls, or if thecrossover difference is large and negative, it will result in depriving the groups at home and first of all their balls. Continue reading

# Lilley and Rogoff Recommending Negative Interest Rates

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)