The macroeconomic scientist must have a cognitional theory. The real is not the ‘already out there now’; objectivity is not merely animal extroversion; verification is not merely ‘taking a look‘. What science verifies is to be found in general affirmations. Continue reading
A recent interview of Ray Dalio (Bridgewater Associates) is available on YouTube. An introduction to Mr. Dalio’s thinking is available on the Bridgewater website’s home page under the title The Economy, How the Economic Machine Works.
The final paragraph of this Post is as follows: We hope that Mr. Dalio will study Bernard Lonergan’s Macroeconomic Dynamics: An Essay in Circulation Analysis (CWL 15) to advance his present considerable understanding further – from a self-described “mechanic” to a theorist of circulation analysis, whose formulations are precisely explanatory, compelling to the private sector of the economic process, and verifiable by econometricians. We hope that, as a person of influence, Mr. Dalio will convey a more advanced, explanatory understanding of the pretio-quantital economic process to the nation and to the world.
In particular, Mr. Dalio should not speak shallowly and haphazardly of “common prosperity”; rather he should understand and master Lonergan’s theory of the basic-expansionary phase of the pure cycle of expansion. One of the motives driving Lonergan to seek and discover the science of the objective economic process was to establish scientific grounds for social policy. Unlike in totalitarian countries where people are free to be an ant, here human persons are free to think and learn and free to conduct themselves according to the norms and precepts of the objective economic process. … … We now offer some pointers; as we say in the Welcome: Continue reading
In explaining the normative pure cycle of economic expansion for which the process has a systematic exigence, Lonergan redefined “costs” and “profits”,
There is a sense in which one may speak of the fraction of basic outlay that moves to basic income as the “costs” of basic production. It is true that that sense is not at all an accountant’s sense of costs; … But however remote from the accountant’s meaning of the term “costs,” it remains that there is an aggregate and functional sense in which the fraction… is an index of costs. For the greater the fraction that basic income is of total income, the less the remainder which constitutes the aggregate possibility of profit. But what limits profit may be termed costs. Hence we propose ….to speak of (c’O’ = p’a’Q’) and (c”O” = p”a”Q”) as costs of production, having warned the reader that the costs in question are aggregate and functional costs…. [CWL 15, 156-57] Continue reading
A distinction has been drawn between description and explanation. Description deals with things as related to us. Explanation deals with the same things as related among themselves. The two are not totally independent, for they deal with the same things and, as we have seen, description supplies, as it were, the tweezers by which we hold things while explanations are being discovered or verified, applied or revised. … [CWL 3, 291/316]
Lonergan’s basic explanatory terms are rates of so much or so many every so often; i.e. the foundational and superstructural explanatory terms of the economic process are velocities. What at first seem to be everyday commonsense descriptive utterances are “remeaningized”, given another meaning, or redefined, and precisely distinguished and related as functional point-to-point activities or functional point-to-line activities; and they are scientifically employed as abstract technical terms in an explanatory formulation.
In the Wall Street Journal of Thursday, 12/2/2021, Senator Tom Cotton had an article entitled ‘No’ on Jerome Powell at the Fed. Senator Cotton was correct regarding a) the possibility of worst-case and less-catastrophic scenarios of inflation, b) the possibility of inflation wiping out wage gains, and c) that the result of the Fed’s policies is to boost prices in both the basic consumables (point-to-point) circuit and in the Redistribution Function’s secondary stock and bond markets.
Senator Cotton, as always, is to be admired for his courage; but he and all in government and the private sector must learn the principles and laws of how the objective economic process actually works. A lot depends on a knowledgable government acting in the best interests of the entire populace of free people. Some would say it’s a matter of the survival of human liberty.
A surplus expansion calls for saving, and a massive surplus expansion calls for massive saving. In contrast, the basic expansion calls for ever-increasing consumption. So the practical wisdom cherished in the surplus expansion (save and invest) has to give way to a quite different practical wisdom (employ for consumption) in the basic expansion. … Now to change one’s standard of living in any notable fashion is to live in a different fashion. It presupposes a grasp of new ideas. If the ideas are to be above the level of currently successful advertising, serious education must be undertaken. Finally, coming to grasp what serious education really is and, nonetheless, coming to accept that challenge constitutes the greatest challenge to the modern economy. [CWL 15, 119]
The non-Euclideans moved geometry back to premises more remote than Euclid’s axioms, they developed methods of their own quite unlike Euclid’s, and though they did not impugn Euclid’s theorems, neither were they very interested in them; casually and incidentally they turn them up as particular cases in an enlarged and radically different field. Continue reading
- THE STUDY OF ORGANISMS – ANIMAL AND ECONOMIC
- DETERMINISM AND INDETERMINISM – DISAGREEING WITH EINSTEIN
- CORRESPONDENCE IN THE CURRENT BASIC DYNAMIC, ORGANIC PROCESS; A DETERMINATE ALGEBRAIC FUNCTION OF THE FIRST DEGREE
- CORRESPONDENCE IN THE SURPLUS DYNAMIC, ORGANIC PROCESS; AN INDETERMINATE POINT-TO-LINE CORRESPONDENCE
- AVOIDING A VICIOUS CIRCLE OF CRITICISM
- THREE IMPLICITLY-DEFINED CIRCULATORY ORGANS
- THE TRANSITION TO SYSTEMATIZATION
- THE ROLE OF MIND IN THE DEVELOPMENT OF THE HUMAN AND THE ECONOMIC ORGANISMS
.1. THE STUDY OF ORGANISMS – ANIMAL AND ECONOMIC: (Continue reading)
In their article in the 10/21/2021 Wall Street Journal, John Greenwood and Steve H. Hanke evoked an image with which we are all familiar, water flowing in and out of a bathtub. The simple image was to be representative of monetary flows. The image attracted attention, which was a good thing; however, Macroeconomic Field Theory finds it more instructive to put forth a more adequate representative image of flows. Continue reading
We have recited some aspects of the dynamic economic process:
- (Dummy) money “must be constant in exchange value.”
- Prices alone do not explain the economic process. Prices must be interpreted in the light of those significant variables which actually explain the economic process.
- The economic process of production and exchange always is the current, purely-dynamic process
- The economic process is an organic whole
- The process has an exigence for a normative pure cycle of expansion.
- Equilibrium requires the keeping of pace and balance among interdependent flows of products and money
- Scarcity is the normal cause of inflation
- Maladjustment of incomes is the maladaptive cause of inflation
- Just as the surplus phase of the expansion is anti-egalitarian in tendency, postulating an increasing rate of saving, … so the basic phase of the expansion is egalitarian in tendency; it postulates a continuously decreasing rate of saving [CWL 15, 139]
- The central adjustment to the respective phases of the process may be formulated as adjustment of I”/(I’ + I”), the ratio of surplus income to total income
- Interpreters of prices must distinguish between real and relative price increases monetary and absolute changes in prices We have recited some aspects of the dynamic economic process: (Continue reading)