… , positive or negative transfers (from the Redistributive Function) to basic demand (D’-s’I’) and consequent similar transfers (from the Redistributive Function) to surplus demand (D”-s”I”) belong to the theory of booms and slumps. (CWL 15, 64)
The channels of circulation replace the overall dominance claimed for general equilibrium theory, … More positively, the channels account for booms and slumps, for inflation and deflation, (CWL15, 17) 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.
We have commented elsewhere on so-called Modern Monetary Theory: See herein So-Called Modern Monetary Theory Does Not Qualify As Scientific Macroeconomics, FMD’s take on Greg Mankiw’s Take on Modern Monetary Theory, Alberto Bisin Re Modern Monetary Theory, and Modern Monetary Theory is Backward.
The economic process, like a motor car, has laws of its own which drivers-participants must respect in order to operate the “vehicle” properly and avoid driving it into a ditch or depression. (Continue reading)
The Wall Street Journal of 4/6/2022 featured an article by William A. Galston entitled “How Will Inflation End?” W. Galston noted that Larry Summers has had a reliable sense of recent excesses and their inexorable consequences. Summers has been right in emphasizing for a long time the inequitable consequences of the intrinsically-inflationary flooding of the money supply by the executive and legislative branches through the agency of the U.S. Treasury and the accomodative Federal Reserve Bank. Continue reading
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)
Textbooks must present a theory of macroeconomics independent of human psychology and anthropology.
A theory of macroeconomic dynamics is constituted by laws which are conceptually prior to and more fundamental than psychological categories such as utility, time preference, rational expectations, irrational behaviorism, etc.. The theory will present the laws and norms to which human psychology must adapt.
Accounting is an exercise within common sense. As such, it is descriptive rather than explanatory, and psychological rather than scientific. (Continue reading)
The list below is excerpted from The IS-LM, AD-AS Models and the Phillips Curve Correlation.
Features of the explanatory science of Functional Macroeconomic Dynamics include: Continue reading
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)
(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