Category Archives: Prediction

Lilley and Rogoff Recommending Negative Interest Rates

We are commenting with respect to Andrew Lilley and Kenneth Rogoff’s “conference draft” discussing the advisability of a FRB policy of negative interest rates:

 Lilley, Andrew and Kenneth Rogoff, April 24, 2019: “The Case for Implementing Effective Negative Interest Rate Policy” (Conference draft for presentation at Strategies For Monetary Policy: A Policy Conference, the Hoover Institution, Stanford University, May 4, 2019, 9:15 am PST) [Lilley and Rogoff, 2019]     (Continue reading)

Theoretical Breakthroughs of Euclid, Newton, Hilbert, Einstein, and Lonergan

To help the reader gain an appreciation of Lonergan’s achievement of Modern Macroeconomic Field Theory we will, in each section, print leading excerpts, then highlight the key concepts of those excerpts. We will comment on the historically-significant advances in geometry of Euclid and Hilbert, in physics of Newton and Einstein, and in macroeconomics of Lonergan.

  • Euclid’s great achievement was his rigorous deduction of geometry.
  • Hilbert’s great achievement was his employment of implicit definition to reorder Euclid’s geometry.
  • Newton’s two great achievements were unifying the isolated insights of Galileo and Kepler into a unified system of mechanics and his invention of the calculus.
  • One of the great achievements of Einstein was the invention of the field theories of Special Relativity, General Relativity, and Gravitation.
  • One of Lonergan’s several great achievements was his systematization of macroeconomic phenomena in his Modern Macroeconomic Field Theory. He combined the technique of implicit definition introduced by Hilbert and the concept of a field theory developed by Faraday and Einstein; and he developed an explanatory macroeconomics, which is general, invariant, and relevant in any instance. (Continue reading)

Prediction is Impossible in the General Case

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)

 

 

The System of Abstract Primary Relativities Applied to Secondary Determinations

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

The Process is Always the Current, Purely Dynamic Process, etc. (See full title specification below.)

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:

Always the Current Process: Continue reading

Walter Scheidel re Cataclysm as the Only Cure

Walter Scheidel, a historian at Stanford University, wrote an opinion piece entitled Only Cataclysm Can Cure Inequalityin the June 11, 2017 Boston Sunday Globe.  Professor Scheidel rails against distortions of the economic process but offers no scientific perspective explaining the distortions as violations of a normative theory of the economic process.  His perspective is largely political rather than scientific.  Similar to the condition for proof in mathematics, until a statement is grounded in verified theory, it may be true or false; it is verified theory alone that elevates opinions such as Professor Seidel’s to the rank of theorems.

In the absence of proof we may have strong evidence for our belief in a certain statement but we cannot state that it is true. … until a proof is provided (statements) remain only statements that may be true or false.  It is a proof alone that elevates them to the rank of theorems. [Bush and Obreanu 1965, 6]

In the long-term creative-destructive process, a capital-expansion phase is intrinsically anti-egalitarian; and the subsequent consumer-goods-expansion phase is intrinsically egalitarian.  Furthermore, in a properly managed economy, the phases will be characterized by surges and tail-off’s but with no systematic requirement for a slump, depression, or Scheidel’s cataclysm.  Thus, Professor Scheidel’s conclusion “only cataclysm” is false.  It is not true that the only cure is a cataclysm.

Enlightenment of higher-paid people as to the science of the normative functionings of the economic process would induce both massive philanthropic activity  and increases in the incomes of the lower-paid people in conformity with the normative requirements of the process.  This philanthropy would be an instance of enlightened government by the competent rather than wasteful bungling by an ignorant, self-interested government bureaucracy.  It would not have the negative connotations of plutocracy or oligarchy; rather, in combination with the provision of increased incomes to satisfy the possibilities of supply, this philanthropy would constitute the competent and effective partial management of the economy by knowledgable and talented, free people.

These free, enlightened philanthropists would constitute a fourth branch of government.  Their adaptation to the norms of the economic process to effect the social good would be an exercise of moral precepts based on the scientific understanding of the dynamics of the economic process by enlightened free persons.

The cure is not cataclysm; rather it is the achievement of an understanding of how the economy normatively functions, coupled with goodwill.  To dispel ignorance, a dynamic perspective and explanatory science are more effective than Professor Scheidel’s recitation of historical, but not determinate, facts.
Cf CWL 15, xxviii, xxxii-xxxv, xivi-xivii, 6

Again,

In the absence of proof we may have strong evidence for our belief in a certain statement but we cannot state that it is true. … until a proof is provided (statements) remain only statements that may be true or false.  It is a proof alone that elevates them to the rank of theorems. [Bush and Obreanu 1965, 6]

Also,

When suitable classes and rates of payment have been defined, it will be possible to show that under certain conditions of human inadaptation this pure cycle results in a trade cycle.  However, that implication is not absolute but conditioned, not something inevitable in any case but only something that follows when human adaptation is lacking.CWL 15, 35