Category Archives: Concomitance

Modern Monetary Theory is Backward; It Creates “Illegal” Superposed Circuits

Preliminary note: In this section we are addressing the proper understanding and management of the economic process in normal, non-pandemic times.  We affirm that the current pandemic calls for extraordinary measures.

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Unwittingly, first out of ignorance and recently as necessitated by a pandemic, some nations, including the U.S., are wandering into the ultimate menace to the financial system, the spending without constraint blessed and recommended by unscientific Modern Monetary Theory. (Click here and here) The systematic result of MMT’s unconstrained printing of money, unjustified by corresponding production of goods and services, is rampant inflation in prices for a) goods and services and/or b) financial assets.  (Continue reading)

Three Displays of the Diagram of Rates of Flow

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

The Principle of Concomitance: The Foundation of Equilibrium and Continuity

Concomitance is, 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)

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 are symbolically represented all 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).

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)

A Contrast: Understanding Pricing in Macrostatic DSGE and in Macrodynamic FMD

.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) assumption and 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)

Explanatory Macroeconomic Dynamics; Relevant In Any Instance

There are five figures below from CWL 15:  The single figure on the left represents the interrelations of interdependent Monetary Flows; and the figure contains the important condition of dynamic equilibrium: G = c”O” -i’O’ = 0.  The four figures stacked on the right demonstrate aspects of the productive phases constituting a Pure Cycle of Expansion. The bidirectional arrows uniting the two sides signify that the dynamic equilibrium among interdependent flows specified on the left is to be achieved consistently throughout the long-run expansion represented on the right.  This condition of dynamic equilibrium is that the crossover flows between the two interacting circuits must continuously balance even as they continuously vary in magnitude in the succession of phases constituting the expansionary process.  Just as the general laws of simple parabolic or pendular motion are explanatory and applicable to any particular instance of initial angle and velocity, so a) the primary relativities of productive and monetary flows, and b) the primary differentials of long-term expansion explain the economic process, and are normatively relevant in every particular instance.  All five diagrams are unitary.  Each and every velocitous and accelerative flow of products and money has proximate or remote explanatory aspects embedded in all five diagrams. (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]

 

Why and How the Basic Expansion Fails to be Implemented

In the ideal pure cycle, the long-term expansion proceeds from a static phase through a proportionate-expansion phase , then through a surplus-expansion phase, then through a basic-expansion phase, and finally into a higher static phase.

At (the beginning of a basic expansion) an economic system is confronted with an intrinsic test. It success will be established if it can complete the major basic expansion and – without mishap, without inflation, without unemployment, without a break in confidence –  make its way serenely into the haven of the stationary state.  I mean of course, not the stationary state of mere backwardness, not the stationary state of stagnation when a disastrous crash follows on an earlier apparent triumph, but the stationary state that preserves all the gains of the preceding major expansions.  It is (then) content to produce their gains at a constant rate.  Its duration may be short or long, for in each case it must wait until such time as further new developments are grasped by human intelligence and eventually become practically conceived possibilities. [CWL 15, 80] (Continue reading)