In his book, FREEFALL (2009, Penguin Books), Joseph Eugene Stiglitz, a professor at Columbia University and a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979), states that economics is a predictive science. Now, one must distinguish between predicting a) planetary motion in its scheme of recurrence, and b) this afternoon’s weather vs. next month’s weather, or this afternoon’s prices and quantities vs. next year’s prices and quantities, all subject to to conditions diverging in space and time. Continue reading)
There is required a shift of focus by academics from the concrete secondary determinations of prices and quantities in a non-systematic manifold to the immanent, abstract, primary relativities which may be applied to these secondary determinations to reach particular laws.
Paraphrasing [McShane, 1980, 127]: Taking into account past and (expected) future values does not constitute the creative key transition to Functional Macroeconomic Dynamics.Continue reading →
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 singleexplanatory 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. 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:
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]
Scientific macroeconomics, if it is to be genuinely scientific, must not be contaminated by human psychology. Gustav Kirchhoff’s laws of the electric circuit do not incorporate the psychology of the human who operates the levers or switches. So, Lonergan, the scientist, strove to discover the purely relational, purely functionallaws of the circuits of the objective economic process. Unfortunately, many proponents of Modern Monetary Theory exhibit sentiments and inclinations favoring a totalitarian bureaucracy for the management of fiscal and monetary affairs. Their purported science contains some valid assertions, but is not a coherent set of objective laws to which participants must adapt, regardless of sentiment; rather MMT is an admixture of several ideological and psychopolitical sentiments transformed into a contaminated set of mandates for the management of fiscal and monetary affairs. The tenets of MMT fail to constitute a fully explanatory theory of macroeconomic dynamics. (to continue reading, click here)