A Note on Disagreeing with Einstein and the Determinists, on Avoiding a Vicious Circle, and on the Need for Precise Analytical Distinctions

Economic process – like other world processes – has an immanent intelligibility consisting of primary relativities which can be applied to the coincidental secondary determinations which occur throughout time in a non-systematic manifold. Economic process is constituted  by schemes of recurrence under the dominance of abstract principles and laws; nevertheless, the actual concrete workings of the economic schemes of recurrence are shot through and throughout time with indeterminancy.  So, it is a fact that  since the concrete patterns of events occurring throughout time are a non-systematic aggregate. Thus, the point-to-line and higher correspondences are based upon the indeterminacy of the relation between current surplus products and the ultimate later basic products that eventually exit the dynamic process and enter into the standard of living.

An event in an economic scheme of recurrence has a diverging series of conditions. Continue reading

The IS-LM, AD-AS, and Phillips Curve Models

In this section, we are contrasting familiar textbook models of macrostatic equilibrium, with Lonergan’s explanatory theory of macrodynamic equilibrium.  We are contrasting a macrostatic toolkit with a purely relational field theory of macroeconomic dynamics. Lonergan discovered  a theory which is more fundamental than the traditional wisdom based upon human psychology and purported endogenous reactions to external forces.  His Functional Macroeconomic Dynamics is a set of relationships between n objects, a set of intelligible relations linking what is implicitly defined by the relations themselves, a set of relational forms wherein the form of any element is known through its relations to all other elements.  His field theory is a single explanatory unity; it is purely relational, completely general, and universally applicable to every configuration in any instance. (Continue reading)

The Process is Always the Current, Purely Dynamic Process, etc. (See full title specification below.)

The process is always the current, purely dynamic process.  The analysis is purely functional, purely relational and explanatory analysis.  The theory is general and universally applicable  to concrete determinations in any Instance; The theory is a normative theory having a condition of equilibrium.

Our subheadings in this treatment are as follows:

• Always the Current Process:
• A Purely Dynamic Process Requiring a Dynamic Heuristic:
• A Purely Functional Analysis:
• A Purely Relational, Explanatory Analysis:
• A Theory, General and Universally Applicable to Concrete Determinations in Any Instance:
• A Normative Theory Having a Condition of Equilibrium:

Always the Current Process: Continue reading

The Emergence of Science

Lonergan, like Euclid, Newton, and Mendeleyev, moved through his field of inquiry to the level of system.

(Given the failure to implement the basic expansion,) the systematic requirement of a rate of losses will result in a series of contractions and liquidations. … [CWL 15, 155]

… a science emerges when thinking in a given field moves to the level of system. Prior to Euclid there were many geometrical theorems that had been established.  The most notable example is Pythagoras’ theorem on the hypotenuse of the right-angled triangle, which occurs at the end of  book 1 of Euclid’s Elements.  Euclid’s achievement was to bring together all these scattered theorems by setting up a unitary basis that would handle all of them and a great number of others as well. … Similarly, mechanics became a system with Newton.  Prior to Newton, Galileo’s law of the free fall and Kepler’s three laws of planetary motion were known.  But these were isolated laws.  Galileo’s prescription was that the system was to be a geometry’; so there was something functioning as a system.  But the system really emerged with Newton.  This is what gave Newton his tremendous influence upon the enlightenment.  He laid down a set of basic, definitions, and axioms, and proceeded to demonstrate and conclude from general principles and laws that had been established empirically by his predecessors.  Mechanics became a science in the full sense at that point where it became an organized system. … Again, a great deal of chemistry was known prior to Mendeleev. But his discovery of the periodic table selected a set of basic chemical elements and selected them in such a way that further additions could be made to the basic elements.  Since that time chemistry has been one single organized subject with a basic set of elements accounting for incredibly vast numbers of compounds.  In other words, there is a point in the history of any science when it comes of age, when it has a determinate systematic structure to which corresponds a determinate field. [CWL 14, Method, 1971, 241-42]

Lonergan’s functional, analytic distinctions are prior to and more fundamental than changes in prices, interest rates, and employment

Lonergan is alone in using this difference in economic activities to specify the significant variables in his dynamic analysis… no one else considers the functional distinctions between different kinds of (production flows) prior to, and more fundamental than, … price levels and patterns, … interest and profits, and so forth….only Lonergan analyzes booms and slumps in terms of how their (explanatory) velocities, accelerations, and decelerations are or are not equilibrated in relation to the events, movements, and changes in two distinct monetary circuits of production and exchange as considered both in themselves (with circulatory, sequential dependence) and in relation to each other by means of crossover payments. [CWL 15, Editors’ Introduction, lxii]

The Intrinsic Cyclicality of the Productive Process

The economy is composed of the production of two conceptually distinct, mutually-definitive types of goods.  Depending on the context they may be named

• basic goods or surplus goods,
• consumer goods or producer goods,
• accelerated goods or accelerator goods,
• point-to-point goods or point-to-line goods.

An expansion of the surplus production function causes a later acceleration of the basic production function.  First one surge, then later the other surge.  Note the symbols for time (t) and (t-a) in the following formula, “the lagged technical accelerator.” (continue reading)

kn[f’n(t-a)-Bn] = f”n-1(t) – An-1        CWL 15, p. 37

Textbook Flaws and Deficiencies

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.

1. This Introduction
2. The nature of the current, purely dynamic economic process
3. Scientific macroeconomics explains rather than merely describes
4. A theory of macroeconomics must be independent of human psychology and anthropology
5. The author of a textbook must employ a scientific and dynamic heuristic