4/7/2021: Yahoo Finance today featured an article by Julia La Roche entitled ‘The fault line is inequality’: J.P. Morgan’s Dimon calls for fixing America’s ‘self-inflicted’ problems. La Roche was reviewing the Public Policy section of Dimon’s 67-page Chairman and CEO Letter to Shareholders. Mr. Dimon seeks to end the nation’s self-infliction of problems threatening the culture, the economy and the polity. He particularly regrets “false arguments of fanatics, the certitude of ideologues and cycles of intolerance.” 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)
Free open markets work better than central bureaucracies.
The excellence of the exchange solution becomes even more evident when contrasted with the defects of a bureaucratic solution. The bureaucrat … (gives the people) what he thinks is good for them, and he gives it in the measure he finds possible or convenient; nor can he do other wise, for the brains of a bureaucrat are not equal to the task of thinking of everything; only the brains of all men together can even approximate to that. … when a limited liability company has served its day, it goes to bankruptcy court; but when bureaucrats take over power, they intend to stay. … when the pressure of terrorism is needed to oil the wheels of enterprise, then the immediate effect is either an explosion or else servile degeneracy. … the exchange solution is a dynamic equilibrium resting on the equilibria of markets. … every product of the exchange economy must mate through exchange with some other product, and the ratio in which the two mate is the exchange value. The generality of this equilibrium makes it indifferent to endless complexity and endless change; for it stands on a level above all particular products and all particular modes of production. While these multiply and vary indefinitely, the general equilibrium of the exchange process continues to answer with precision the complex question, Who, among millions of persons, does what, among millions of tasks, in return for which, among millions of rewards? Nor is the dynamic solution unaccompanied by a continuous stimulus to better efforts and more delicate ingenuity. For the uniformity of prices means that the least efficient of those actually producing will at least subsist, while every step above the minimum efficiency yields a proportionately greater return. (CWL 21, 34-35)
We ask all serious graduate students and professors of macroeconomics, government economists, conscientious politicians, poorly educated journalists, and financial-talk-show “pundits” to please read Bernard Lonergan’s Macroeconomic Dynamics, (CWL 15), Section 26, “The Cycle of Basic Income”. That section addresses several important economic issues:
- the adjustment of the rate of saving to the phases of the pure cycle of expansion in the economic process
- the complementary mechanism of changing prices
- the significance of a relative and an absolute rise or fall of monetary prices
- the difficulty with the theory of manipulating interest rates in that a) it lumps together a number of quite different things, and b) overlooks the order of magnitude of the fundamental problem
- the ineptitude of the procedure of manipulating interest rates.
Then, after the first reading, please read that section a second time.
[CWL 15] Lonergan, Bernard (1999), Macroeconomic Dynamics: An Essay in Circulation Analysis, ed. Frederick G. Lawrence, Patrick H. Byrne, and Charles Hefling, Jr., vol 15 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press)
On Greg Mankiw’s website one will find a blog-video, dated Tuesday, January 19th, entitled “A Discussion About My Favorite Textbooks”. The participants included Greg Mankiw, Peter Bofinger, Rudiger Bachmann, and Anna Reisch; and questions were called in by Vinit Rishi, Sascha Buetzer, Janina Urban, and Thomas Kopp.
Our only comment is that in doing pure science all macroeconomists must distinguish and keep separate pure science, applied science, psychology, sociology, anthropology, and political philosophy. Usually what they think is their pure science is actually an impure admixture of two or more fields of phenomena. If one intends a pure science, consisting of the explanatory relations of objective macroeconomic phenomena, one should not contaminate the field with illegitimate importations of sociology, class conflict, psychology, psychopolitical inclinations, etc. Otherwise there will inevitably be differences of opinion whose source is differences of sentiment, which will never be settled; the macroeconomists will argue superficially and endlessly about their unintelligible admixtures. (Continue reading)
Presenters John Siegfried and David Colander, and discussants Daron Acemoglu, Melissa S. Kearney, John A List, N. Gregory Mankiw, Deirdre McCloskey, and Betsey Stevenson recently collaborated in a virtual ASSA meeting entitled “What Does Critical Thinking Mean in Economics, the Big and Little of It?” Handouts from the meeting can be found in an Announcement in a blog of Saturday, January 2, 2021 on N. Gregory Mankiw’s website.
Preliminarily, note the subtitle in Lonergan’s seminal work, Insight: A Study of Human Understanding. In the present context we might reword the subtitle A Study of Critical Thinking. A very smart person – learned in advanced mathematics and theoretical physics – called Lonergan’s book “The Most Significant Book of the Twentieth Century.” (Continue reading)
To indicate to the serious reader the editors’ helpfulness in placing Functional Macroeconomic Dynamics in its historical and theoretical context, we list here the headings of the Editors‘ Introduction to Lonergan’s Macroeconomic Dynamics: An Essay in Circulation Analysis (CWL 15):
Editors’ Introduction, Frederick G. Lawrence ; xxv
- Lonergan’s Entry into Economics, 1930-1944 / xxvi
- Democratic Economics: An alternative to Liberalism and Socialism / xxxii
- Liberalism and Socialism as Economistic Ideologies / xxxv
- Free Enterprise as an Educational Project
- Lonergan’s Reentry into Economics, 1978-1983 / xxxix
- Lonergan’s Interlocutors in Economics / xliii
- Lonergan and Marx / xlvi
- Lonergan and Marshall / xlvii
- Lonergan and Keynes / xlviii
- Lonergan, Kalecki, and Others / li
- Lonergan and Schumpeter / li
- Macroeconomic Dynamic Analysis as a New Paradigm of Economic Theory / liv
- The Systematic Significance of the Fundamental distinction between Basic and Surplus Production and Exchange
- Profit / lxiii
- Interest / lxvii
- Lonergan’s Critique of ‘Supply-Side’ and ‘Demand-Side’ Economics / lxvii
- Lonergan’s Critique of Secularist Ideologies: The Need for a Theological Viewpoint / lxix
In the first section .I., we’ll list a) a ranking or scale of preferences of meanings and values within the ecology in which humans live, b) money’s values from different points of view, and c) an ordered hierarchy of economic activity. In the second section .II., we’ll add detail to that scale of preferences and situate money’s values and the ordered hierarchy within the scale. Finally .III., we’ll display excerpts to point readers to original sources. One might find this outline useful when reading A Must-Read: Fred Lawrence, “Money, Institutions, And The Human Good”: An Ordered Perspective Distinguishing Social and Monetary Values. Lawrence points out that Lonergan properly clarifies the concept of exchange value in a free exchange process so as to destroy with a single stroke the mistaken concepts of Adam Smith, John Locke, David Ricardo, and Karl Marx.
Not only do feelings respond to value. They do so in accord with some scale of preference. So we may distinguish vital, social, cultural, personal, and religious values in an ascending order. (CWL 14, 31-2/32-3) (Continue reading)
On Saturday, 12/19/ 2020, John Cochrane‘s blog “Bisin on MMT Rhetoric” cited Alberto Bisin’s review of Stephanie Kelton’s Book “The Deficit Myth. “ Alberto Bisin contends, as do we, that So-Called Modern Monetary Theory, as espoused by Kelton and others, does not qualify as a theory. Cochrane quotes Bisin:
The book should be seen as a rhetorical exercise. Indeed, it is the core of MMT that appears as merely a rhetorical exercise. As such it is interesting, but not a theory in any meaningful sense I can make of the word. The T in MMT is more like a collection of interrelated statements floating in fluid arguments. Never is its logical structure expressed in a direct, clear way, from head to toe.