In the ideal pure cycle, the long-term expansion proceeds from a static phase through a proportionate-expansion phase , then through a surplus-expansion phase, then through a basic-expansion phase, and finally into a higher static phase.
At (the beginning of a basic expansion) an economic system is confronted with an intrinsic test. It success will be established if it can complete the major basic expansion and – without mishap, without inflation, without unemployment, without a break in confidence – make its way serenely into the haven of the stationary state. I mean of course, not the stationary state of mere backwardness, not the stationary state of stagnation when a disastrous crash follows on an earlier apparent triumph, but the stationary state that preserves all the gains of the preceding major expansions. It is (then) content to produce their gains at a constant rate. Its duration may be short or long, for in each case it must wait until such time as further new developments are grasped by human intelligence and eventually become practically conceived possibilities. [CWL 15, 80] (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 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 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)
As both Aristotle and Lonergan acknowledged, forms are grasped by mind in images.
τα μεν ουν ειδη τον οητικον εν τοις φαντασμασι νοει
[Aristotle, De Anima, III, 7, 431b 2] and [CWL 3, title page]
Thus, if we want to have a comprehensive grasp of everything in a unified whole, we shall have to construct a diagram in which are symbolically represented all the various elements along with all the connections between them. [McShane 2014, 11 (quoting CWL 7, 151)]
We wish here to suggest the insights the reader should have to fully appreciate all that is contained in the Diagram of Rates of Flow. (continue reading)
Why did Lonergan analyze the structure and rhythm of the productive process before he analyzed the monetary aspects of exchange and the inner contradictions of the manipulation of interest rates?
Quick answer: Money is to buy goods and services. Payments of money are congruent with the network of the production and provision of goods and services. The production of goods and services is prior in the order of understanding to the correlated payments for goods and services. Therefore, the structure of the current, purely dynamic, productive process – as to factoral makeup, functional interdependencies, flow quantities, and timing – sets the pattern for the pattern of payments. It is conceptually prior to, and really determinate of, the normative flowings of money.
real analysis (is) identifying money with what money buys. … And that is the source of the problem in real analysis. If you want to treat money that doesn’t make a difference, you can have a beautiful liberal monetary theory. But it doesn’t say the way the thing works. [CWL 21, xxviii] (continue reading)
The Editors’ Introduction in Macroeconomic Dynamics: An Essay in Circulation Analysis [CWL 15] contains a 4 ½-page Section 5 (pp. liv-lix) entitled Macroeconomic Dynamic Analysis as a New Paradigm of Economic Theory. It is difficult to imagine that any macroeconomist, who has read that section, would fail to be motivated to study seriously Lonergan’s Functional Macroeconomic Dynamics. That section should be read in its entirety. Here are some of the particular items in that section: (If discontinued here, click on the title above) Continue reading →