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Alan S. Blinder, Wall Street Journal, Wednesday, December 29, 2021

Alan S. Blinder had an article in the Wall Street Journal of 12/29/2021 entitled “When It comes to Inflation, I’m Still on Team Transitory.”  Unlike many financial talk-show prognosticators, Professor Blinder did more than recite a bunch of hunches. He decomposed indexes (both CPI, PCE) and analyzed their measures of inflation in 2021.  He implicitly acknowledged Functional Macroeconomic Dynamics’ surplus circuit and he acknowledged that it takes time to implement capital expansion in order to cure supply shortages. He correctly reminded the readers that the government was forced to take extraordinary monetary actions to mitigate the Covid slowdown.  He implicitly characterized as probabilistic predictions by himself and others, including his prediction of “transitory inflation.” He asked, “What could make Team Transitory wrong?” Prof. Blinder is to be credited for being somewhat analytical and providing useful details.  However, the following comments are offered in order to a) improve the sketchiness of Walrasian macrostatics by means of Lonergan’s scientific systematics, and b) properly assign responsibility to avoid or correct inflation and unemployment.  (Click here)

Understanding the Causes of Boom or Slump, Inflation or Deflation

(Lonergan’s) massive part-time investment of his surplus intellectual energy in an effort to understand the “causes” of the Depression was a response specifically to the boom and bust dimension of that problem.  His response came in his exploration of the functional correlation between production, exchange and finance in an economy.  Central was the question, how in aggregate in an economy does money circulate?  His subsequent insights led him to divide it into distinct basic and surplus circuits causally interacting with a redistribution financial zone.  As a result he was able to show how with better financial management of that circulation the emergent standard of living of an economic community could advance cyclically to a higher level without any downward negative swings. [Mathews, 2009, 150] Mathews’ website

The economic process is a whole dynamic organic process constituted at once by dynamic production, exchange and finance, in conformity to principles and laws of concomitance, continuity, equilibrium and solidarity. Continue reading

Piero Sraffa: “Production Of Commodities By Means Of Commodities”

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”)

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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

Veritas est una et error multiplex; Brief Item #93

[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)

A Scientific Generalization of Macroeconomics; Brief Item #92

[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)

Controlled Media – Brief Item #90

[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

Stagflation

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)

Bernard Lonergan, Marx, and Liberty

In this section 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)