One cannot help but think that Bernard Lonergan had functional macroeconomic dynamics clearly in mind as he treated the intelligibility of world process in CWL 3, Insight: …, which is very much an implementation of the act of understanding of mathematicians and natural scientists. In his understanding of mathematics, the natural sciences, and the science of macroeconomics in particular, he grasped that the explanation of the dynamic concrete process is expressed by a mathematical conjunction of component abstract primary relativities with component concrete secondary determinations from the non-systematic manifold. And these secondary determinations, such as particular prices and quantities, are to be interpreted in the light of the significant, abstract, explanatory variables rather than in the obscurity of the IS-LM, and AD-AS models. (Continue reading)
Our references in this section are [Burley, 1992-2] and [Burley and Csapo, 1992-1].
Burley, Peter and Csapo, Laszlo, (1992) Money Information in Lonergan-von Neumann Systems, Economic Systems Research, Vol 4, No. 2, 1992 [Burley and Csapo, 1992-1]
Burley, Peter (1992) Evolutionary von Neumann Models, Journal of Evolutionary Economics 2 , 269-80 [Burley, 1992-2]
We consider a game-theoretic, von Neumann model of the transitional process from an initial stationary state to a more abundant stationary state, with matrix A of inputs and matrix B of outputs containing explanatory functional variables. (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)
Andrei Shleifer is a professor of economics at Harvard University. Nicola Gennaioli is a professor in the Department of Finance at Bocconi University, Milan.
A Crisis of Beliefs is well worth reading as either a treatise on psychology or as an application of a model of psychology to people’s mistaken thinking and acting in certain economic circumstances.
But Gennaioli and Shleifer must ask, How would the human participants act if, instead of being a bundle of desires, fears, cognitive biases, and ignorance regarding the abstract primary relativities of the economic process, they understood the laws of the process and the precepts for adaptation yielded by the laws? That is to ask, Is there a set of laws independent of human psychology and above intellectual ignorance to which human participants would enlightenedly adapt if they understood them? And, if so, is not the primary responsibility of professors of macroeconomics to educate and enlighten participants as to the laws they are violating so as, thus, to curb automatically their irrational psychological tendencies? Continue reading
Lonergan’s two-circuit diagram (below) represents a theoretical breakthrough. It replaces the single-circuit diagram common to the textbooks of macroeconomics.
Lonergan started with a dominant one-flow economic analysis – think in terms of the household-firm diagram – and separated it into two flows “to form a more basic concept and develop a more general theory.” 21 …The distinction was never built scientifically (by other economists) into a systematics of dynamic economics [McShane, 2017, viii; ftnt 22]
To reach a theory of macroeconomic dynamics we need, in the first place, a scientific and dynamic heuristic guiding us to a scientific explanation of the current, purely dynamic, concrete, economic process.
(Ragnar) Frisch’s failure to develop a significant theory typifies the failure of economists who search for a dynamic heuristic. As well as a fundamental disorientation of approach there is also a tendency to shift to an inadequate level of abstraction with a premature introduction of boundary conditions in a determinate set of differential and difference equations. [McShane, 1980, 114]
This set of excerpts has been assembled so as to inform and inspire. In its own way it informs the reader of the minds of Lonergan and key commentators. And it will, we hope, inspire the serious macroeconomist to reach up to those minds.
The section has not been arranged in a rigorous manner. On the contrary, it is a sort of random walk. But we hope the benefit of one’s reading it attentively will be great.
Schumpeter acknowledged that dynamic analysis called for a new light on equilibrium. Such new light arises when, over and above, the equilibria of supply and demand with respect to goods and services, there are recognized further equilibria that have to be maintained…..Moreover, such macroequilibria are more fundamental than the microequilibria assembled by Walras. The former are the conditions of a properly functioning economy [CWL 15, 92] (continue reading)