A very expensive macroeconomics textbook, having 700-1000 pages, would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions. A reader would not gain a clear theory and complete explanation of the dynamics of the real economic process. However, is there not a superior 228-page, far less expensive textbook right in our hands? How about this? Reword the subtitle of CWL 15 from An Essay in Circulation Analysis to A Textbook of Circulation Analysis, and let the professor instruct the serious student to read the book three times, then report back to discuss the following:
the canons of empirical method
a scientific, dynamic heuristic
the technique of implicit definition; explanatory terms defined by the functional relations in which they stand with one another
velocitous functional unities of scientific and explanatory significance replacing the BEA’s descriptive, commonsense, accountants’ unities
the structure of the lagged, rectilinear productive process
money as a dummy invented by man
the perspective of a hierarchical series of monetary circuits
how a monetary circulation meets the rectilinear production-and-vending process
the primary relativities and concomitance in the Diagram of Rates of Flow
dynamic equilibrium replacing static Walrasian general equilibrium
the velocity of money in terms of magnitudes and frequencies
prices are not a given and not requiring explanation; rather prices are in need of explanation
interpretation of prices, quantities, interest rates in the light of significant explanatory variables
the pure cycle and its constituent phases in the expansion of the objective economic process
the abstractprimary relativities and concrete secondary determinations in the expansion of the economic process
the statistical residue and why prediction is impossible in the general case; predicting weather vs. predicting planetary motion
the significance of investment’s monetary correlate
the ineptitude of manipulating interest rates
the explanation of government and foreign-trade imbalances by the dynamics of superposed circuits
the distinction between efficient cause and formalcause
distinguishing between self-healing and the effect of interventions
the intelligibility and explanatory power of the basic price-spread ratio
Figures 14-1, 24-7, and 27-1 in CWL 15
The student would learn much that is radically different, explanatory, and very useful; and he/she would gain a perspective or framework by which to evaluate and criticize the flawed premises and tenets of conventional textbooks and traditional theories.
Economists don’t have the methodological and conceptual toolkit needed for appreciation of FMD’s scientific and historical significance.
They don’t know what they don’t know
They’re not methodologists and don’t know what constitutes good theory.
They never read CWL 3 and, thus, they never studied the canons of empirical method, especially the Canon of Parsimony and the Canon of Complete Explanation; they have no idea of the deficiencies of their method.
Thus, they lack a purely scientific and explanatory heuristic.
They do not adequately distinguish description vs. explanation.
They do not know the type of answer they’re seeking, i.e. their known unknown.
They do not put questions in the right order to discover basic terms of scientific significance.
They are mired in muddy premises and faulty assumptions.
They are unable to employ a scientific, dynamic heuristic adequate for analysis of a current, purely dynamic process.
They don’t understand the normative system’s requirement for concomitance of flows.
They lack a background in theoretical physics. They don’t understand the principles and abstract laws of hydrodynamics, electric circuits, or field theory. Nor do they understand adequately the idea of continuity and the conditions of equilibrium in the dynamic process. They are unaware of analogies from physics applicable on the basis of isomorphism to the phenomena of Functional Macroeconomic Dynamics. (Continue reading.)
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 prediction is impossible in the general case, 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 →
Part III: A New Textbook, Lonergan’s Macroeconomic Dynamics: A Textbook in Circulation Analysis
Part IV Comments on The Federal Reserve’s Current Framework For Monetary Policy: A Review and Assessment, by Janice C. Eberly, James H. Stock, and Jonathan H Wright.
Part I: The Disorientations of Macroeconomists
One cannot help but admire and be grateful to the Federal Reserve Bank for its Flow of Funds matrices and the National Bureau of Economic Research for its GDP tables. Great information, well done! However, the Fed, the NBER, and the proponents of the DSGE methodology suffer from fundamental disorientations. The NBER’s descriptive, commonsense, national-income accounting must integrate the Fed’s data on credit and to be recast to provide an explanatory systematization of interdependent flows of products and money. Devotees must reorient themselves. (Continue reading)
The acronym stands for Dynamic (in Newtonian mechanics an external force causes a change to constant velocity, i.e. an acceleration, which may be negative or positive), Stochastic (random, not according to system, probabilistic, unexplained) General (pertaining to the entire economic process), Equilibrium (essentially Walrasian static equilibrium).
Leon Walras developed the conception of the markets as exchange equilibria. Concentrate all markets into a single hall. Place entrepreneurs behind a central counter. Let all agents of supply offer their services, and the same individuals, as purchasers, state their demands. Then the function of the entrepreneur is to find the equilibrium between these demands and potential supply. … The conception is exact, but it is not complete. It follows from the idea of exchange, but it does not take into account the phases of the productive rhythms. … [CWL 21, 51-52] (Continue reading)