Category Archives: Implicit Definition

New Foundations in 30 Minutes

New foundations for a new science of macroeconomics are grounded in

  • a scientific, dynamic heuristic
  • the technique of implicit definition
  • precise, purely relational, analytic distinctions between abstract fundamental terms and relations from which a superstructure of complete explanation may be deduced
  • the relativistic, field-theoretic functional interrelations among interdependent, mutually-defining, explanatory functional flows

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The Road Up is The Road Down; The Mechanism of Rising and Falling  Prices

This post was originally entered on May 30, 2022.  We repeat it now because it is remains relevant.

“The road up and the road down is one and the same. (Heraclitus)
ὁδὸς ἄνω κάτω μία καὶ ὡυτή

Archaeologists and scholars have not found the context of this isolated fragment of Heraclitus.  What “road” was he referring to, and was he was speaking literally or figuratively? I simply like the statement as an introduction to the ups and downs of distinct price-quantity flows, whether in a pure cycle of expansion or in a distorted cycle of inflationary boom and corrective slump. Continue reading

Pointers to the Philosophic, Mathematical, and Scientific Bases of Lonergan’s Functional Macroeconomic Dynamics

Being is the objective of the unrestricted desire to know.  Being is intrinsically intelligible and one. Apart from being there is nothing.

Intelligibility is the very essence of unity.  Intelligibility is intrinsic to being and, at the same time, it is the essence of unity.  Formal intelligibility is form; it is the unity of unification or of correlation.  Correlation is abstract; it constitutes the implicit definition of explanatory terms by their functional relations among themselves.

“Functional” is for Lonergan a technical term pertaining to the realm of explanation, analysis, theory;  … Lonergan (identified) the contemporary notion of a “function” as one of the most basic kinds of explanatory, implicit definition – one that specifies “things in their relations to one another” … [CWL 15, 26-27  ftnt 27]

The economic process is an aspect of being.  The immanent intelligibility of the dynamic economic process is the essence of the process’s unity.  (Continue reading)

Explanation By Gross Domestic Functional Flows To Supplement Description By Gross Domestic Product

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)

Elizabeth Warren’s Advice to Jerome Powell; Sentiment Without Intelligence

The Wall Street Journal of 7/25/2022 featured an article by Senator Elizabeth Warren:  “Jerome Powell’s Fed Pursues a Painful and Ineffective Inflation Cure.” Because she lacks an objectivenormative, abstract, explanatory theory and, thus, fails to understand the functional interdependencies constituting the organic economic process, particular arguments in her article are a) sometimes contaminated by psychopolitical wishful opinions, b) often ignorantly one-sided because she is unaware that some policies have double edges, c) sometimes contradictory of her other arguments, and d) in at least one case, supercilious.

E. Warren suffers from the same plight as Thomas Picketty. To satisfy her responsibility to the public, she needs to achieve a scientific understanding of the organic economic process; she needs to get a “grip.”

We are at the heart of Picketty’s plight: he has no clue of the needed grip on the grounds of the inequality in history.  So, what else can he offer but a centralist solution, taxation, to history’s drunken careening. (McShane, Philip, Picketty’s Plight, 53)

In equity (the basic expansion following the surplus expansion) should be directed to raising the standard of living of the whole society.  It does not.  And the reason why it does not is not the reason on which simple-minded moralists insist.  They blame greed.  But the prime cause is ignorance.  The dynamics of surplus and basic expansion, surplus and basic incomes are not understood, not formulated, not taught….. [CWL 15, 82]

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Abstraction in Macroeconomics; Classical and Statistical Laws

Abstraction is enriching.  The relation of things to our senses must be transcended by abstraction; abstraction yields explanatory concepts implicitly defined by their functional relations to one another.

The commonsense accounting relations constituting historical Gross Domestic Product must be supplemented by the abstract explanatory formulation of Current Gross Domestic Functional Flows.  All participants must have the scientific guidance of a normative theory in order to properly adapt their personal conduct to the principles and laws of the objective process. (Continue reading)

The Leibnitz-Newtonian Shift of Context and Scientific Economics

Lonergan’s basic terms are velocities.  There is a shift to dynamics.  P. McShane called the creative shift from Walrasian macrostatics to macroeconomic dynamics the Leibnitz-Newtonian shift.

Please see under Key Notions the subtopic with the lengthy title: The Leibnitz-Newtonian Shift of Context and Scientific Economics; Basic Terms, Explanatory Conjugates, An adequate Level of Abstraction, No Premature Introduction of Boundary Conditions.

Taking into account past and (expected) future values does not constitute the creative key transition to dynamics.  Those familiar with elementary statics and dynamics (in physical mechanics) will appreciate the shift in thinking involved in passing from equilibrium analysis (of a suspended weight or a steel bridge)…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.  Particular boundary conditions, “past and future values” are relatively insignificant for the analysis.  What is significant is the Leibnitz-Newtonian shift of context. [McShane, 1980, 127]

Note that the vertical axis of the Figure 24-7 below represents the accelerations: dQ’/Q’ and dQ”/Q”.  Q’ and Q” represent velocities.  The title underneath the Figure 24-7 fails to apply the proper superscript to surplus activity. Also, k-1 might be, for example 1.05-1 or .05 or 5% or a geometric increase period after period, while (1/r – 1)Qmight be !/.95 – 1)100 or (1.05263-1)100 or (.05263)100 or 5.263 which would be a constant magnitude period after period and, therefore, a declining percent period after period.  Thus the title indicating the Rate of Change of a percentage change.

Lonergan’s basic terms are velocities and their changes.  There is a shift to dynamics.  P. McShane called the creative shift from Walrasian macrostatics to macroeconomic dynamics the Leibnitz-Newtonian shift. Again,

In Lonergan’s circulation analysis, the basic terms are rates – rates of productive activities and rates of payments.  The objective of the analysis is to discover the underlying intelligible and dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates to one another.  [CWL 15  26-27  ftnt 27]

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The Principle of Concomitance: The Foundation of Continuity, Equilibrium, and Explanatory Theory

Contents

  • .1. Concomitance and Correlation in Macroeconomic Field theory
  • .2. Five Notes re Abstraction; Abstraction is Enriching
  • .3. Resume Focus on Concomitance and Correlation in Macroeconomic Field Theory

.1. Concomitance and Correlation in Macroeconomic Field theory

Concomitance is, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane, [Fusion 1, page 4 ftnt 10]

 All science begins from particular correlations, but the key discovery is the interdependence of the whole.…its basic terms are defined by their functional relations[CWL 15, 53, 54, and 177]

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A Closely Knit Frame of Reference; the Channels Account for Booms and Slumps, for Inflation and Deflation,

The interconnected channels of the Diagram of Rates of Flow provide a closely knit frame of reference.  The channels account for booms and slumps, inflation and deflation.

The method of circulation analysis resembles more the method of arithmetic than the method of botany.  It involves a minimum of description and classification, a maximum of interconnections and functional relations.  Perforce, some description and classification are necessary; but they are highly selective, and they contain the apparent arbitrariness inherent in all analysis.  For analytic thinking uses classes based on similarity only as a springboard to reach terms defined by the correlations in which they stand.  To take the arithmetic illustration, only a few of the integral numbers in the indefinite number series are classes derived from descriptive similarity; by definition, the whole series is a progression in which each successive term is a function of its predecessor.  It is this procedure that gives arithmetic its endless possibilities of accurate deduction; and, as has been well argued, it is an essentially analogous procedure that underlies all effective theory. [CWL 21, 111] Continue reading