Time-consuming cares of our day and the nonsense on TV compel us, against our better judgment, to enter this section now in draft form. We request the reader’s forbearance and suspension of his/her own judgment re the contents. Also, note that we have included part of Subsection 3 first on the teaser below. Clicking on the “Click here” at the bottom will bring the reader to the top of the entry.
MMQ does not have a scientific heuristic; it does not seek, much less reach, an explanatory theory; it does not grasp that the province of science as explanation by terms related among themselves. MMQ is fundamentally disoriented.
Already 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. … despite their intimate connection, it remains that description and explanation envisage things in fundamentally different manners. The relations of things among themselves are, in general, a different field from the relations of things to us. (CWL 3, 291/316)
No doubt Keynes was an economist first and a methodologist second but he was none the less very articulate about his theorizing……..Lonergan, for his part, is perhaps a methodologist first and an economist second, but, as we shall see, he was able to push his economic reflections further than Keynes because he had a firmer grasp of the essentials of an effective theory. [Gibbons, 1987]
Thus, MMQ does not adopt a scientific method in order to explain.
MMQ does not display a trace of knowledge and appreciation of a) concomitance of functionings, composed of actual monetary flows often supported by credit, b) what constitutes continuity, c) what constitutes dynamic equilibrium, d) the analytic distinction of two or more circuits of monetary circulations, analytically distinguished but solidary with one another.
We have recited some aspects of the dynamic economic process:
(Dummy) money “must be constant in exchange value.”
Prices alone do not explain the economic process. Pricesmust be interpreted in the light of those significant variables which actually explain the economic process.
The economic process of production and exchange always is the current, purely-dynamic process
The economic process is an organic whole
The process has an exigence for a normative pure cycle of expansion.
Equilibrium requires the keeping of pace and balance among interdependent flows of products and money
Scarcity is the normal cause of inflation
Maladjustment of incomes is the maladaptive cause of inflation
Just as the surplus phase of the expansion is anti-egalitarianin tendency, postulating an increasing rate of saving, … so the basic phase of the expansion is egalitarian in tendency; it postulates a continuously decreasingrate of saving [CWL 15, 139]
The central adjustment to the respective phases of the process may be formulated as adjustment of I”/(I’ + I”), the ratio of surplus income to total income
Interpreters of prices must distinguish between real and relative price increasesmonetary and absolute changes in prices We have recited some aspects of the dynamic economic process: (Continue reading)
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.
Unwittingly, first out of ignorance and recently as necessitated by a pandemic, some nations, including the U.S., are wandering into the ultimatemenace 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, concomitant production of goods and services, is rampant inflation in prices for a) goods and services and/or b) financial assets. (Continue reading)
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 →
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)
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).
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)
.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)
There are five figures below from CWL 15: The single figure on the left represents the interrelations of interdependentMonetary 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 consistentlythroughout the long-run expansion represented on the right. This condition of dynamic equilibrium is that the crossover flows between the two interacting circuits must continuouslybalanceeven 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)
We hope to inspire serious graduate students of economics a) to seek and achieve an understanding of “Macroeconomic Field Theory,” b) to verifyempirically 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)