Larry Summers is the esteemed former Vice President of Development Economics and Chief Economist of the World Bank, (1991–93), senior U.S. Treasury Department official, ultimately Treasury Secretary (1999–2001), former director of the National Economic Council for President Obama (2009–2010) and former president of Harvard University (2001–2006).
Larry’s Blog of 9/13/2018 asked questions and gave suggestions regarding establishing new foundations for macroeconomics.
As we did in our blog of 9/11/2018 regarding Ray Dalio, let us say in the beginning what we say near the end:
Finally, Larry states that “the arguments that Gennaioli and Shliefer make need to be debated in the profession.” Let us suggest that, before Larry calls for debates among macroeconomists about the obvious inadequacy of present foundations, the entire macroeconomics profession must study carefully Bernard Lonergan’s Macroeconomic Dynamics. That book has already brought insights from mathematics, physics, and scientific method to the discovery of a radically new foundation. Also, let us advise them how not to react in their reading. Initially they will find Lonergan’s Functional Macroeconomic Dynamics radically different from the static Walrasian structures they have long espoused and depended upon; they might be inclined gradually to rationalize against its method and tenets; then, instead of embracing it, they might seek arguments to defend themselves against it; finally, having mistakenly persuaded themselves that it is a waste of their precious time, they might put it aside. However, if they courageously and carefully power through Lonergan’s dynamics 3-5 times, they will find themselves saying, “Whoa! Bernard Lonergan operated from a more profound point of view and discovered a deeper unity in macroeconomics. With his understanding of what constitutes science and explanation and with his employment of the technique of implicit definition, this polymath has successfully applied his expertise in math, physics, and scientific method to discover a new field theory of macroeconomics, a new paradigm, a whole new theoretical combination of foundation and superstructure which explains both the normative equilibria and maladaptive disequilibria of the intrinsically cyclical, dynamic economic process. This is something of a Copernican Revolution.” Then, rather than calling for debates, let Larry call for elucidation, elaboration and implementation of Functional Macroeconomic Dynamics at the Bureau of Economic Analysis, the Federal Reserve Board, textbook publishers, colleges, and universities. Continue reading