.3.1. Stephanie Kelton’s “The Deficit Myth”
.3.1. Stephanie Kelton’s “The Deficit Myth”
A graduate student of economics should find it rewarding – intellectually, monetarily, and prestigewise – to present to the economic community an analysis of how Piero Sraffa’s work influenced Lonergan’s insistence on understanding the structure of the economic process before treating the two dependent topics of exchange and finance. (See “Why Analyze The Rhythmic Pattern of the Productive Process First”)
The “Editors Introduction” to Lonergan’s Macroeconomic Dynamics: An Essay In Circulation Analysis notifies us that “Lonergan alone” and “only Lonergan” has scientifically formulated the functional relations which explain the dynamic economic process. Continue reading
[5/4/2021] It is an old saying that veritas est una et error multiplex. Truth is constructed and apprehended as a unity, but error takes many grotesque shapes. … The worst of truth’s enemies is the one in one’s own household that so spontaneously and so naturally tends to adjust and color the truth which one knows to the hue of one’s temperament and to the exigencies of one’s socio-cultural milieu – the milieu of one’s tribe, political party, income stratum, macroeconomic “school” or “ism”, etc. One must courageously meet the challenges of one’s intelligence and of objective truth, goodness, unity, and order and, by meeting them, rise above one’s blind instincts of egoism, ressentiment, and tribal loyalty to the light of truth vs. falsity, good vs. evil, love vs. hate, and order vs. disorder. (Adapted for paraphrase from CWL 3, 682-83/705) [#93] (Click here for previous Brief Items)
[5/1/2021] It is, we believe, a scientific generalization of the old political economy and of modern economics that will yield the new political economy which we need. … Plainly the way out is through a more general field. [CWL 21, 6-7]
Generalization comes with Newton, who attacked the general theory of motion, laid down its pure theory, identified Kepler’s and Galileo’s laws by inventing the calculus, and so found himself in a position to account for any corporeal motion known. Aristotle, Ptolemy, Copernicus, Galilei, and Kepler had all been busy with particular classes of moving bodies. Newton dealt in the same way with all. He did so by turning to a field of greater generality, the laws of motion, and by finding a deeper unity in the apparent disparateness of Kepler’s ellipse and Galilei’s time squared. … Similarly the non-Euclidean geometers and Einstein went beyond Euclid and Newton. … 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. … Einstein went beyond Newton by employing the new geometries to make time an independent variable; and as Newton transformed the formulation and interpretation of Kepler’s laws, so Einstein transforms the Newtonian laws of motion. … (Again) It is, we believe, a scientific generalization of the old political economy and of modern economics that will yield the new political economy which we need. … Plainly the way out is through a more general field. [CWL 21, 6-7] [#92] (Click here for previous Brief Items)
As there exists such a thing as absolute value, there can be relative value by which “excellence may belong to an object in its relativity, its utility, its aptitude to excel in serving ulterior purposes … only some of them relative to man.” Economic value is the human relative value that regards abundance or scarcity. Economic value is specified by both the proportion of a product relative to the effort of producing it, and by the exchange value that results from any decision to strive for an object, even when the decision is independent of either the striving or the effort involved in producing it. Adam Smith and all the proponents of the “labor” theory of value were never able to clarify the relationship between exchange value and “toil and trouble” as the measure of value. Lonergan shifted the issue entirely by explaining that an “economic value relates an object to human effort, but an exchange value relates objects among themselves.”31 (CWL 21, 31) [Fred Lawrence; “Money, Institutions, and The Human Good,” in Liddy, 2010, 183-84]
However, like Smith, Locke, Ricardo, and Marx later on, Aristotle did not seem to understand money in terms of exchange value, and therefore as relating objects among themselves in relation to the concomitance or lack of concomitance between “the real flow of property, goods, and services and the dummy flow being given and taken in exchange for the real flow.”39 CWL 21, 40 Still less did they grasp that in an advanced industrial society, the real flow and the money flow are channeled within two separate circuits of production and circulation functionally distinguished into producer goods and consumer goods, and operating in real time in accord with distinct phases of expansion. Besides misunderstanding money of account, they misunderstood the relationship of money to time. [Fred Lawrence; “Money, Institutions, and The Human Good,” in Liddy, 2010, 186] Continue reading
[4/26/2021] As healing can have no truck with hatred, so too it can have no truck with materialism. For the healer is essentially a reformer; first and foremost he counts on what is best in man. But the materialist is condemned by his own principles to be no more that a manipulator. He will apply to human beings the stick-and-carrot treatment that the Harvard behaviorist B.F. Skinner advocates under the name reinforcement. He will maintain with Marx that cultural attitudes are the byproduct of material conditions, and so he will bestow upon those subjected to communist power the salutary conditions of a closed frontier, clear and firm indoctrination, controlled media of information, a vigilant secret police, and the terrifying threat of labor camps. [CWL 15, 104] Continue reading
The Wall Street Journal of 4/18/ 2019 had a column entitled “Easy Money, Bad Decisions” by James Grant reviewing Andrew H. Browning’s book, The Panic of 1819. Grant related how the government’s financing of excessive expansion with careless loans led to panic and crisis.
In the mid-70’s, economists were mystified by stagflation, the combination of stagnant production and rising prices. According to the Phillips Curve, the correlation of inflation with unemployment, stagflation should not happen. Economists could describe the phenomenon, but they could not explain it.
… the U.S. economy was experiencing the phenomenon of ‘stagflation’ – a clearly discernible overturning of the conventional economic wisdom about the tradeoff between inflation and unemployment so neatly expressed in the Phillips curve. So-called ‘Keynesian fine tuning onto the neoclassical track’ was not working; and forms of socialist planning only promised to deepen rather than resolve the anomalies of welfare economics. … (Lonergan) believed he had an explanation for what, in a statement from the essay we are editing, he described as a “situation – sometimes thought mysterious – in which consumer prices continuously inflate, new enterprise is evaded, unemployment becomes chronic, and despite inflation the value of stocks declines.” [CWL 15, Editors Introduction, xli] (Continue reading)
This section, Bernard Lonergan, Marx, and Liberty, is simply a gathering of excerpts from different sources. Careful reading should inspire the reader to consult the sources for the rich context of each excerpt and for a fuller appreciation of Lonergan’s understanding and reasoning about the need for liberty. In brief, Lonergan demonstrates that Marx’s economics is insufficiently abstract and is contaminated by descriptive sociological and political categories; he finds Marx’s summons to class conflict perilous to humanity because it promotes and enforces a drift away from liberty to a totalitarianism culminating in the dreadful conditions of a no-escape “frontier, clear and firm indoctrination, controlled media of information, a vigilant secret police, and the terrifying threat of labor camps,” – all in the name of a mythical macroeconomics. (Continue reading)
One of our longer sections is of the same title: Practical Precepts for Free People – Consumers, Entrepreneurs, Bankers, Investors. The precepts are based upon the norms yielded by the immanent intelligibility of the objective economic process. The precepts are mandated by a non-political, scientific Functional Macroeconomic Dynamics.
We extract a few of the precepts, but we encourage the reader to click onto the fuller entry (underlined above) , which includes several passages providing the scientific, explanatory basis for the precepts: Continue reading