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)
Functional Macroeconomic Dynamics seeks not merely to “view” and describe the economic process; rather it seeks to understand in order to explain and properly manage the economic process. (Continue reading)
The economic process always is “the current process” constituted by current interdependent velocitous flows of so-much or so-many every so often.
The productive process is, then, the (current)aggregate of activities proceeding from the potentialities of nature and terminating in a standard of living. Always it is the current process, and so it is distinguished both from the natural resources, which it presupposes, and from the durable effects of past production. [CWL 15, 20]
The goal of scientific analysis is explanation of the objective economic process, i.e. to discover the abstractimmanent intelligibility which explains any particular configuration of flows of products and money in any instance. Such immanent intelligibility would be always relevant and universally valid. (Continue reading)
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. The two are not totally independent, for they deal with the same things and, as we have seen, 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]
The analysis of the overall dynamic functioning, which we call in nominal terms the economic process, must seek the explanation of the process. It must seek the objective immanent intelligibility among the interdependent, dynamic “functionings” which altogether constitute the process. The functionings are rates of so much or so many every so often, and, thus, they are velocities. And the scientific analysis must be in terms of abstract, implicitly-defined, explanatory conjugates rather than in terms of the descriptive accountants’ unities of merely legal or proprietary entities called “firms.” (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)
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).