We wish to suggest a structure for the salt of deoxyribose nucleic acid (D.N.A.). This structure has novel features which are of considerable biological interest. [J. D. Watson and F.H.C. Crick] (Attribution below)
We wish to suggest a structure for the objective, dynamic, economic process. This structure, which is independent of human psychology, is composed of both productive and correlated monetary flows. The structure of the interdependent, pretio-quantital, monetary flows is double-circuited and has novel features which are of considerable macroeconomic interest.
A very expensive macroeconomics textbook, having 700-1000 pages, would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions. A reader would not gain a clear theory and complete explanation of the dynamics of the real economic process. However, is there not a superior 228-page, far less expensive textbook right in our hands? How about this? Reword the subtitle of CWL 15 from An Essay in Circulation Analysis to A Textbook of Circulation Analysis, and let the professor instruct the serious student to read the book three times, then report back to discuss the following:
the canons of empirical method
a scientific, dynamic heuristic
the technique of implicit definition; explanatory terms defined by the functional relations in which they stand with one another
velocitous functional unities of scientific and explanatory significance replacing the BEA’s descriptive, commonsense, accountants’ unities
the structure of the lagged, rectilinear productive process
money as a dummy invented by man
the perspective of a hierarchical series of monetary circuits
how a monetary circulation meets the rectilinear production-and-vending process
the primary relativities and concomitance in the Diagram of Rates of Flow
dynamic equilibrium replacing static Walrasian general equilibrium
the velocity of money in terms of magnitudes and frequencies
prices are not a given and not requiring explanation; rather prices are in need of explanation
interpretation of prices, quantities, interest rates in the light of significant explanatory variables
the pure cycle and its constituent phases in the expansion of the objective economic process
the abstractprimary relativities and concrete secondary determinations in the expansion of the economic process
the statistical residue and why prediction is impossible in the general case; predicting weather vs. predicting planetary motion
the significance of investment’s monetary correlate
the ineptitude of manipulating interest rates
the explanation of government and foreign-trade imbalances by the dynamics of superposed circuits
the distinction between efficient cause and formalcause
distinguishing between self-healing and the effect of interventions
the intelligibility and explanatory power of the basic price-spread ratio
Figures 14-1, 24-7, and 27-1 in CWL 15
The student would learn much that is radically different, explanatory, and very useful; and he/she would gain a perspective or framework by which to evaluate and criticize the flawed premises and tenets of conventional textbooks and traditional theories.
Economists don’t have the methodological and conceptual toolkit needed for appreciation of FMD’s scientific and historical significance.
They don’t know what they don’t know.
They’re not methodologists and don’t know what constitutes good theory.
They never read CWL 3, pages 3-172 and 490-97 and, thus, they never studied the canons of empirical method, especially the Canon of Parsimony and the Canon of Complete Explanation; they have no idea of the deficiencies of their method.
Thus, they lack a purely scientific and explanatory heuristic.
They do not adequately distinguish description vs. explanation.
They do not know the type of answer they’re seeking, i.e. their known unknown.
They do not put questions in the right order to discover basic terms of scientific significance.
They are mired in muddy premises and disorienting assumptions.
They are unable to employ a scientific, dynamic heuristic adequate for analysis of a current, purely dynamic process.
They don’t understand what constitutes the normative system’s requirement for concomitance, continuity, and equilibrium of flows.
They lack a background in theoretical physics. They don’t understand the principles and abstract laws of hydrodynamics, electric circuits, or field theory. Nor do they understand adequately the idea of continuity and the conditions of equilibrium in macroeconomic dynamics. They are unaware of analogies from physics applicable on the basis of isomorphism to the phenomena of Functional Macroeconomic Dynamics. (Continue reading.)
Part I. Two economic mechanisms. Two components of concrete relations. Two simultaneous roles for human participants
It is the viewpoint of the present inquiry that, besides the pricing system, there exists another economic mechanism, that relative to this system man is not an internal factor but an external agent, and that the present economic problems are peculiarly baffling because man as external agent has not the systematic guidance he needs to operate successfully the machine he controls. [CWL 21, 109]
What the analysis reveals is a mechanism distinct though not separable from the price mechanism which spontaneously coordinates a vast and ever shifting manifold of otherwise independent choices from demand and of decisions from supply. It is distinct from the price mechanism, for it determines the channels within which the price mechanism works. It is not separable from the price mechanism, for a channel is irrelevant when nothing flows through it. [CWL15, 17] [Continue reading).
Part III: A New Textbook, Lonergan’s Macroeconomic Dynamics: A Textbook in Circulation Analysis
Part IV Comments on The Federal Reserve’s Current Framework For Monetary Policy: A Review and Assessment, by Janice C. Eberly, James H. Stock, and Jonathan H Wright.
Part I: The Disorientations of Macroeconomists
One cannot help but admire and be grateful to the Federal Reserve Bank for its Flow of Funds matrices and the National Bureau of Economic Research for its GDP tables. Great information, well done! However, the Fed, the NBER, and the proponents of the DSGE methodology suffer from fundamental disorientations. The NBER’s descriptive, commonsense, national-income accounting must integrate the Fed’s data on credit and to be recast to provide an explanatory systematization of interdependent flows of products and money. Devotees must reorient themselves. (Continue reading)
Philanthropy: Anyone familiar with the medical and cultural institutions of Metropolitan Boston – upon which institutions the regional economy rides piggyback – cannot help but admire the beneficence, wisdom, and benefit of philanthropy: the Connors Center for Women’s Health and Gender Biology at Brigham and Women’s Hospital; the Connors Family Learning Center and the Clough Center for the Study of Constitutional Democracy at Boston College; the Yawkey Center for Outpatient Care and the Wang Building at Mass General; The Rosenberg Building at Beth Israel Hospital; the Salvation Army Kroc Center on Dudley St.; the Harry V. Keefe Library and the Clough Center for Global Understanding at Boston Latin School; the John A. Paulson School of Engineering and Applied Sciences at Harvard; the Carl J. and Ruth Shapiro Cardiovascular Center at Brigham and Women’s Hospital; museums, endowed scholarship funds, hundreds of endowed chairs, stained glass windows, etc. (Continue reading)
N. Gregory Mankiw wrote an article for the Sunday New York Times, 8/11/19, entitled Ties That Bind Inflation and Unemployment. His final paragraph states:
The Fed’s job is to balance the competing risks of rising unemployment and rising inflation. Striking just the right balance is never easy. The first step, however is to recognize that the Phillips curve is always out there lurking.
We have emphasized that the Fed’s responsibilities are a.) to be admonitory and supervisory to the banking system, and b.) to supply the economy with the quantity of money needed for orderly execution of the magnitudes and frequencies of operative payments. And it is the responsibility of the enlightened private and government sectors – not the Fed, because it does not possess sufficiently effective tools – to manage production, employment, and philanthropy properly. By so doing, enterprise and government can effect production, pricing, interest rates, and dividend rates consistent with the opportunities and risks in the system; and they can achieve the full productivity made possible by the invention, gumption, and hard work of free people, yet properly constrained by the state of technology, culture, and resources. Contrary to what Mankiw seems to be approving in his conclusion, it is wrong to assign responsibility to the Fed for adjusting inflation and unemployment in the economic process by artificially manipulating the interest rate. And, despite all the hype about the effectiveness or ineffectiveness of manipulating the rental price of money (i.e. the interest rate), no one has yet developed the ability to separate the effect of self-healing from the positive or the negative, counterproductive effect of interest-rate manipulation. For further perspective, click here for critical treatment of the IS-LM, AD-AS, and Phillips Curve Models, including notes explainingstagflation and the need to transition from a single-circuit analysis to a double-circuit analysis; here, for Notes Regarding FRB Monetary Policy and a Theoretic of Credit; and here for Practical Precepts for Free People – Consumers, Entrepreneurs, Bankers, Investors. Also see Two Summaries of the Argument in Functional Macroeconomic Dynamics (CWL 15, 5-6) and The Cycle of Basic Income (CWL 15, 133-44).