Concomitance is, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane, [Fusion 1, page 4 ftnt 10]
Recall that the subtitle of CWL 15 is “An Essay in Circulation Analysis”. It is by virtue of concomitance that continuity and equilibrium are achieved so as to constitute an orderly process of circulations. (Continue reading)
In our Thanks section we have emphasized our debt to Professor Peter Burley. With a PhD in physics (Adelaide, 1965) and a PhD in Economics (Princeton, 1968) he was well qualified to understand the revolutionary nature of Lonergan’s Macroeconomic Field Theory. (Continue reading)
There are five figures below from CWL 15: The single figure on the left represents the interrelations of interdependentMonetary Flows; and the figure contains the important condition of dynamic equilibrium: G = c”O” -i’O’ = 0. The four figures stacked on the right demonstrate aspects of the productive phases constituting a Pure Cycle of Expansion. The bidirectional arrows uniting the two sides signify that the dynamic equilibrium among interdependent flows specified on the left is to be achieved consistentlythroughout the long-run expansion represented on the right. This condition of dynamic equilibrium is that the crossover flows between the two interacting circuits must continuouslybalanceeven as they continuously vary in magnitude in the succession of phases constituting the expansionary process. Just as the general laws of simple parabolic or pendular motion are explanatory and applicable to any particular instance of initial angle and velocity, so a) the primary relativities of productive and monetary flows, and b) the primary differentials of long-term expansion explain the economic process, and are normatively relevant in every particular instance. All five diagrams are unitary. Each and every velocitous and accelerative flow of products and money has proximate or remote explanatory aspects embedded in all five diagrams. (Continue reading)
The heart of the normative theoretical framework that can actually explain business and trade cycles is what (Lonergan) calls the ‘Pure Cycle’ (§10, §24, 114). This cycle generalizes into clearly articulated relationships the ideal phases characteristic of major economic transformations as they depart from a stationary phase and move through phases first of surplus expansion and then of basic expansion, only to return to a new stationary phase. … (CWL 15, Editors’ Introduction, lxiii) (Continue reading)
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)
Harvard Magazine’s podcast, “Ask a Harvard Professor,” recently featured an interview of professors Doug Elmendorf and Karen Dynan – two good people – under the title Doug Elmendorf and Karen Dynan: How Much Can the Federal Budget and the Deficit Continue to Grow? (Click here for video and print versions of the interview)
Our inquiry differs from classical analysis and from traditional economics. Functional Macroeconomic Dynamics prescinds from human psychology to replace Walras’ general equilibrium with a prior and more fundamental equilibrium to which human participants must adapt.
Participants are not to dominate as willy-nilly, ignorant, external, efficient causes, but rather to adapt to the immanent intelligibility of the objective mechanism. This immanent intelligibility is the set of laws explaining the process – laws not to be enforced by a civilian police force but rather abstract laws to be understood and honored by enlightened free people. Continue reading →