There are five figures below from CWL 15: The single figure on the left represents the interrelations of interdependent Monetary 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 consistently throughout the long-run expansion represented on the right. This condition of dynamic equilibrium is that the crossover flows between the two interacting circuits must continuously balance even 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)
.I. Summary of the Analysis: Heuristic, Observations, and Discoveries
.II. Summary of the Argument (verbatim from CWL 15, 5-6)
.III. Supplement to the Summaries
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
- .I. Introductory
- .II. The “legal” basis of our criticism; the “laws” of the process
- .III. Key objections to Modern Monetary Theory
- .IV. Observations re “A Skeptic’s Guide to Modern Monetary Theory”
- .V. Why and how the Basic Expansion fails to be implemented
- .VI. Addendum #1: Primary relativities of the economic process
- .VII. Addendum #2: Excerpts re the drift to totalitarianism
A very expensive macroeconomics textbook, having 700-1000 pages, would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions. A reader would not gain a clear theory and complete explanation of the dynamics of the real economic process. However, is there not a superior 228-page, far less expensive textbook right in our hands? How about this? Reword the subtitle of CWL 15 from An Essay in Circulation Analysis to A Textbook of Circulation Analysis, and let the professor instruct the serious student to read the book three times, then report back to discuss the following:
- the canons of empirical method
- a scientific, dynamic heuristic
- the technique of implicit definition; explanatory terms defined by the functional relations in which they stand with one another
- velocitous functional unities of scientific and explanatory significance replacing the BEA’s descriptive, commonsense, accountants’ unities
- the structure of the lagged, rectilinear productive process
- money as a dummy invented by man
- the perspective of a hierarchical series of monetary circuits
- how a monetary circulation meets the rectilinear production-and-vending process
- the primary relativities and concomitance in the Diagram of Rates of Flow
- dynamic equilibrium replacing static Walrasian general equilibrium
- the velocity of money in terms of magnitudes and frequencies
- prices are not a given and not requiring explanation; rather prices are in need of explanation
- interpretation of prices, quantities, interest rates in the light of significant explanatory variables
- the pure cycle and its constituent phases in the expansion of the objective economic process
- the abstract primary relativities and concrete secondary determinations in the expansion of the economic process
- the statistical residue and why prediction is impossible in the general case; predicting weather vs. predicting planetary motion
- the significance of investment’s monetary correlate
- the ineptitude of manipulating interest rates
- the explanation of government and foreign-trade imbalances by the dynamics of superposed circuits
- the distinction between efficient cause and formal cause
- distinguishing between self-healing and the effect of interventions
- the intelligibility and explanatory power of the basic price-spread ratio
- Figures 14-1, 24-7, and 27-1 in CWL 15
The student would learn much that is radically different, explanatory, and very useful; and he/she would gain a perspective or framework by which to evaluate and criticize the flawed premises and tenets of conventional textbooks and traditional theories.
Economists don’t have the methodological and conceptual toolkit needed for appreciation of FMD’s scientific and historical significance.
- They don’t know what they don’t know.
- They’re not methodologists and don’t know what constitutes good theory.
- They never read CWL 3, pages 3-172 and 490-97 and, thus, they never studied the canons of empirical method, especially the Canon of Parsimony and the Canon of Complete Explanation; they have no idea of the deficiencies of their method.
- Thus, they lack a purely scientific and explanatory heuristic.
- They do not adequately distinguish description vs. explanation.
- They do not know the type of answer they’re seeking, i.e. their known unknown.
- They do not put questions in the right order to discover basic terms of scientific significance.
- They are mired in muddy premises and disorienting assumptions.
- They are unable to employ a scientific, dynamic heuristic adequate for analysis of a current, purely dynamic process.
- They don’t understand what constitutes the normative system’s requirement for concomitance, continuity, and equilibrium of flows.
- They lack a background in theoretical physics. They don’t understand the principles and abstract laws of hydrodynamics, electric circuits, or field theory. Nor do they understand adequately the idea of continuity and the conditions of equilibrium in macroeconomic dynamics. They are unaware of analogies from physics applicable on the basis of isomorphism to the phenomena of Functional Macroeconomic Dynamics. (Continue reading.)
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).
Philanthropy: Anyone familiar with the medical and cultural institutions of Metropolitan Boston – upon which institutions the regional economy rides piggyback – cannot help but admire the beneficence, wisdom, and benefit of philanthropy: the Connors Center for Women’s Health and Gender Biology at Brigham and Women’s Hospital; the Connors Family Learning Center and the Clough Center for the Study of Constitutional Democracy at Boston College; the Yawkey Center for Outpatient Care and the Wang Building at Mass General; The Rosenberg Building at Beth Israel Hospital; the Salvation Army Kroc Center on Dudley St.; the Harry V. Keefe Library and the Clough Center for Global Understanding at Boston Latin School; the John A. Paulson School of Engineering and Applied Sciences at Harvard; the Carl J. and Ruth Shapiro Cardiovascular Center at Brigham and Women’s Hospital; museums, endowed scholarship funds, hundreds of endowed chairs, stained glass windows, etc. (Continue reading)