Category Archives: NIPAs

Two economic mechanisms. Two components of concrete relations. Two simultaneous roles for human participants

Part I. Two economic mechanisms. Two components of concrete relations. Two simultaneous roles for human participants

It is the viewpoint of the present inquiry that, besides the pricing system, there exists another economic mechanism, that relative to this system man is not an internal factor but an external agent, and that the present economic problems are peculiarly baffling because man as external agent has not the systematic guidance he needs to operate successfully the machine he controls. [CWL 21, 109]

What the analysis reveals is a mechanism distinct though not separable from the price mechanism which spontaneously coordinates a vast and ever shifting manifold of otherwise independent choices from demand and of decisions from supply. It is distinct from the price mechanism, for it determines the channels within which the price mechanism works.  It is not separable from the price mechanism, for a channel is irrelevant when nothing flows through it. [CWL15, 17] [Continue reading).

DSGE vs. FMD; Sbordone, Tambalotti, Rao, and Walsh

DSGE is – to many economists – the standard model and method of macroeconomic analysis.  See our treatment of the textbooks’ IS-LM, AD-AS models and the Phillips Curve correlation.

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)

Letter to The Bureau of Economic Analysis

The Functional Macroeconomic Dynamics Collaborative

Website: Bernard Lonergan’s Functional Macroeconomic Dynamics


Brian C. Moyer, Director

Bureau of Economic Analysis (BEA)

4600 Silver Hill Road

Washington, DC 20233

Dear Mr. Moyer,

Presently the Bureau of Economic Analysis (BEA) publishes three general versions of the National Income and Product Accounts (NIPA).

  1. Gross Domestic Product, Current $
  2. Gross Domestic Income by Type of Income; National Income by Type of Income; and, National Income by Sector …; Current $)
  3. Gross Value Added by Sector; Current $)

Would it be possible for the BEA staff to develop a fourth which would be explanatory of the production-and-exchange process? Continue reading

The IS-LM, AD-AS, and Phillips Curve Models

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 single explanatory unity; it is purely relational, completely general, and universally applicable to every configuration in any instance. (Continue reading)



New Foundations in 10 Minutes

New foundations for a new science of macroeconomics are grounded in

  • a scientific, dynamic heuristic
  • the technique of implicit definition
  • precise, purely relational, analytical distinctions between fundamental terms representing functional flows of products and money
  • the functional interrelations among these interdependent, mutually defining, explanatory functional flows

Continue reading

Larry Summers; The Foundations for Macroeconomics

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

Textbook Flaws and Deficiencies

The popular textbooks of Macroeconomics – by N Gregory Mankiw, Paul Krugman and Robin Wells, Olivier Blanchard, Andrew B. Abel and Ben S. Bernanke, William J. Baumol and Alan S. Blinder – suffer in common from several flaws.  Our subheadings immediately below and the pointers thereafter point out flaws and deficiencies in textbooks commonly used in higher education. Though the treatments in this section are not exhaustive, they are sufficiently provocative; they should stimulate careful scrutiny of, and skepticism regarding, many traditional and conventional tenets.  Finally, though the treatments in this section are relatively brief and often primarily referential, there is a lot of ground to cover; so, we will underline and publish as time allows.

  1. This Introduction
  2. The nature of the current, purely dynamic economic process
  3. Scientific macroeconomics explains rather than merely describes
  4. A theory of macroeconomics must be independent of human psychology and anthropology
  5. The author of a textbook must employ a scientific and dynamic heuristic
  6. Real Analysis (read more)