(Lonergan’s) channels of circulation replace the overall dominance claimed for general equilibrium theory, but they reveal the conditions under which partial equilibria can exist. … More positively, the channels account for booms and slumps, for inflation and deflation, for changed rates of profit, for the attraction found in a favorable balance of trade, the relief given by deficit spending, and the variant provided by multinational corporations and their opposition to the welfare state. (CWL15, 17)
In a Bloomberg News piece, authored by Rich Miller and dated October 11, 2022, Miller quotes Alan Blinder’s remarks about A.W. “Bill” Phiilps, the originator of the Phillips Curve:
This guy was as inter-disciplinary as you can be. He was a practical engineer as a young man, with a wrench in his hand, and then later in his life an academic who took those ideas to economics and in particular to Keynesian economics. He had a very mechanical view of the macro economy. He built this machine where water flowed through clear plastic tubes, like income and expenditure in the economy. People spend money that becomes income to other people, and they spend money that becomes income to other people, and so on. The machine is now at the Reserve Bank of New Zealand. (Blinder re Phillips)
He also had a colorful history. He won a Member of the Order of the British Empire award for bravery handling a machine gun during World War II. He was captured by the Japanese and became a prisoner of war, during which time, among other things, he learned Chinese from his fellow prisoners. (Blinder re Phillips)
… the prime cause (whether it be of inequity or inflation) is ignorance. The dynamics … are not understood, not formulated, not taught….. [CWL 15, 82]
man as external agent has not the systematic guidance he needs to operate successfully the machine he controls. [CWL 21, 109]
Academia’s failure threatens economic liberty.
Lonergan realized that failure to understand correctly what is needed if the economic process is to perform well is gravely threatening to democratic liberty. That is why he undertook his serious study of economics. [CWL 15 Editors’ Introduction, xxx]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)
The popular textbooks of Macroeconomics – by N Gregory Mankiw, Paul Krugman and Robin Wells, Olivier Blanchard, Andrew B. Abel and Ben S. Bernanke, William J. Baumol and Alan S. Blinder – suffer in common from several flaws. Our subheadings immediately below and the pointers thereafter point out flaws and deficiencies in textbooks commonly used in higher education. Though the treatments in this section are not exhaustive, they are sufficiently provocative; they should stimulate careful scrutiny of, and skepticism regarding, many traditional and conventional tenets. Finally, though the treatments in this section are relatively brief and often primarily referential, there is a lot of ground to cover; so, we will underline and publish as time allows.