The macroeconomics textbooks feature three key macrostatic models, all three of which are sublated by the purely relational field theory called Functional Macroeconomic Dynamics.  The textbooks’ three featured graphs are two momentary intersections of supply and demand curves plus the Phillips Curve correlation of unemployment and interest rates:

1. the intersection of the supply and demand curves at a certain price of goods and services (the macrostatic AD-AS model),  
2. the intersection of the supply and demand curves at a certain interest-rate, rental-price of money (the macrostatic IS-LM model),  plus,
3. the now-debunked Phillips Curve correlation of unemployment and interest rates.

The key elements grounding the discovery and formulation of the immanent, field-theoretic intelligibility of the organic, unified, whole economic system include:

• Use of a scientific, dynamic heuristic seeking the immanent intelligibility of a system constituted by interdependent velocitous and accelerative flows.  The explanatory terms are abstract terms defined by their relations among themselves, rather than the accountant’s non-explanatory commonsense tallies, 
• Use of implicit definition where the explanatory terms are defined by their relations, the relations are defined by the terms, and insight fixes the concepts in a unified whole
• Precise axiomatic, analytic distinctions between point-to-point and point-to-line economic activities
• Logical and rigorous deduction from these basic analytic distinctions of a superstructure of coherent relations comprising a complete explanation of the system; the explanation would provide a tightly knit framework for critical analysis, monitoring, and practical control of the economic process
• Critical understanding of the hierarchical structure of the dynamic process of production and exchange and the projection of that structure onto correlated classes of payments
• understanding of how to measure the velocity of money as it performs a circuit of work
• proper use of a) the principle of concomitance (flows being theoretically correlated and conjoined), and b) the theoretic of credit 1) unifying the potential with the kinetics in a lagged acceleration of the process, and 2) overcoming the gap in time between payments made and payments to be received

This immanent intelligibility constitutes an abstract, completely explanatory, dynamical theory of what always is the current, purely dynamic, objective process – called variously Functional Macroeconomic Dynamics, Macroeconomic Field Theory, or Relativistic Macroeconomic Dynamics.

Concomitance is not necessarily simultaneity.  For example: borrowing now to run a fiscal deficit necessitates paying principle and interest later; therefore, ultimately, if not immediately, government deficit spending must be paid with tax inflows; thus, current spending outflows are ultimately in theoretical concomitance with tax inflows.

Concomitance is simply a theoretical explanatory correlation of certain flows.  The flows are associated in theory; they are associated in the formulation of an explanation.

Credit constitutes an expansion of the money supply to a) enable expansion of justified transactions and b) bridge the gap in time between payments made and payments to be received. The principle of concomitance and a sound theoretic of credit underly an explanatory association of flows of analytically distinct but theoretically associated classes of products and payments.  The idea and precept of concomitance, plus the proper use of credit tie all constituent flows together in a single intelligible organic unity.  Again, credit makes possible a proper expanding of the money supply and it bridges the gap of time between payments made and payments to be received. (Click re Concomitance, the Foundation of Equilibrium and Continuity; Concomitance; Stagflation; and Stagflation Demystified)

Concomitance is the theoretical conjoinment of explanatory flows in respect to quantity and pace with one another.  Some individual flows of products and payments are immediately concomitant with one another; some are ultimately, if not immediately concomitant; and by crossovers between circuits all explanatory flows are ultimately connected in an organic unity with all other explanatory flows. The Diagram of Internally Connected Rates of Flow represents a systematics of the organic economic process.  The principle of concomitance is foundational.  It underlies the notions of a) keeping pace of Outlays-Incomes and Expenditures-Receipts for circulatory continuity within a circuit, b) equilibrium constituted by the balance of crossover flows between interacting circuits, c) adjustment of Incomes within the full O-I-E-R sequence to the requirements of the pure cycle of expansion, d) concomitant proportionate variation of flows of money and products so as to avoid inflation and deflation, e) the proper relative intensities of basic and surplus activities in both stable and expanding process of production and exchange, f) the government’s balanced budget, and g) the functioning of credit to expand the money supply in correlation with the expanding magnitudes and frequencies.  In brief, the honoring of the concomitance constituting normative partial and general dynamic equilibrium is the principium; it is “the” key principle and precept suffusing Lonergan’s theory of Functional Macroeconomic Dynamics.

Concomitance is, I would claim, the key word in Lonergan’s economic thinking. (Philip McShane, Fusion 1, p. 4, ftnt 10]

My other extravagance (as Editor in preparing the Index of CWL 21) is to bring into focus, by entries under ‘Concomitance,’ the total challenge of the new political economy.  Are we to respect the heart-pulses of the productive machine, or are we to continue the ‘absurdity’ (see Index) of counterpulsing, locally and globally?  (Can we say with Wordsworth) “And now I see with eye serene, the very pulse of the machine.” [CWL 21, 326 Editor’s Introduction to the Index.]

There is nothing as practical as good theory.  A good theory explains completely.  It expresses the immanent intelligibility or “formal cause” of the process.  A good theory is enlightening and mandatory for monitoringand control of a process.  It explains how the dynamic system should work and how it must normally be controlled or managed.  It reveals precepts for adaptation by free people to the laws of the process. A good theory gives the principles and laws of operation or behavior to the government sector with its Central Bank, and to the private sector which hires, fires, expands and contracts – and whose criterion for ever increasing growth is in opposition to the laws of the finite surging and tapering process. The ur-principle – concomitance – aided by the pressure adjustment valve of credit, theoretically grounds and conjoins all classes of payments.

By it’s a) implicit definition, b) analytic foundation comprised of precise axiomatic, analytic foundational distinctions (of point-to-point and point-to-line), c) deduced superstructure of coherent explanatory relations among economic flows, d) principle of concomitance, and e) proper understanding of the role of credit Macroeconomic Field Theory sublates Establishment macroeconomics and reduces textbook macroeconomics to an historical curiosity.  By a single stroke Macroeconomic Field Theory replaces conventional Macroeconomics 101.  Macroeconomic Field Theory is a generalization of previous macroeconomics.  It brings macroeconomics into the twenty-first century.  It is a higher viewpoint; it is a system of more profound insights explaining a dynamic process.

A generalization will postulate a transformation not only of the old guard and its abuses but also of the reformers and their reforms; it will move to a higher synthesis that eliminates at a stroke both the problem of wages and the complementary problem of trade unions; it will attack at once both the neglect of economic education and the blare of advertisements leading the economically uneducated by the nose; it will give new hope and vigor to local life, and it will undermine the opportunity for peculation corrupting central governments and party politics; it will require the brain trust but it will make the practical economist as familiar a professional figure as the doctor, the lawyer, or the engineer; it will find a new basis both for finance and for foreign trade.  The task will be vast, so vast that only the creative imagination of all individuals in all democracies will be able to construct at once the full conception and the full realization of the new order. [CWL 21, 36-37] [#70]

… A science emerges when thinking in a given field moves to the level of system. Prior to Euclid there were many geometrical theorems that had been established.  The most notable example is Pythagoras’ theorem on the hypotenuse of the right-angled triangle, which occurs at the end of  Book 1 of Euclid’s elements.  Euclid’s achievement was to bring together all these scattered theorems by setting up a unitary basis that would handle all of them and a great number of others as well. … similarly, mechanics became a system with Newton.  Prior to Newton, Galileo’s law of the free fall and Kepler’s three laws of planetary motion were known.  But these were isolated laws.  Galileo’s prescription was that the system was to be a geometry; so there was something functioning as a system.  But the system really emerged with Newton.  This is what gave Newton his tremendous influence upon the enlightenment. He laid down a set of basic, definitions, and axioms, and proceeded to demonstrate and conclude from general principles and laws that had been established empirically by his predecessors.  Mechanics became a science in the full sense at that point where it became an organized system. … again, a great deal of chemistry was known prior to Mendeleev.  But his discovery of the periodic table selected a set of basic chemical elements and selected them in such a way that further additions could be made to the basic elements.  Since that time chemistry has been one single organized subject with a basic set of elements accounting for incredibly vast numbers of compounds.  In other words, there is a point in the history of any science when it comes of age, when it has a determinate systematic structure to which corresponds a determinate field. [Method, 241-42]

economics corrected political economy in the wrong way, … not by moving to the more general field and so effecting the correction without losing the democratic spirit of the old movement, but by staying on the same level of generality and by making up for lost ground by going into the more particular fields of statistics, history, and a more refined analysis of psychological motivation and of the investigation of decisions to exchange.  ¶Plainly the way out is through the more general field.  (Lambert and McShane, 102-3)

The explanatory principles and laws of Macroeconomic Field Theory constitute a systematics which can be understood in a single view by a comprehensive insight grasping the unified whole.

… , once initial difficulties are overcome and basic insights are reached, the investigation approaches a supreme moment when all data suddenly fall into a single perspective, … (CWL 3, 47) (Click here and here)

The Walrasian static intersection of supply and demand curves of Macroeconomics 101 is exact but not complete.  The economic process is a dynamic process; but Macro 101 is not dynamic analysis.  FMD’s macroequilibria are more fundamental than the microequilibria assembled by Walras.

… without further clarification Schumpeter acknowledged that dynamic analysis called for a new light on equilibrium.  Such new light arises when, over and above (DSGE’s) equilibria of supply and demand with respect to goods and services (classical microeconomics), there are recognized further equilibria (crossovers balancing, concomitance of outlays with income and of income with both outlays and expenditure, and actual technical coefficients conforming to normative coefficients) that have to be maintained if an economy chooses to remain in a stationary state, to embark on a long-term expansion, to distribute its benefits to the vast majority of its members, and so to return to a more affluent stationary state until such further time as further expansion beckons. … Moreover, such macroequilibria are more fundamental than the microequilibria assembled by Walras.  (FMD’s macroequilibria) are the conditions of a properly functioning economy. (CWL 15, 92)

The government, its Central Bank, and the private sector should be guided by a) the idea of the lagged technical accelerator, b) the proper functioning of the pure cycle of expansion, and c) the correlation of the magnitudes and frequencies of classes of payments with the magnitudes and frequencies of classes of productive activities.  The lagged technical accelerator _{(CWL 15, 37)}:

k_n [f’_n(t-a)-B_n] = f”_n-1(t) – A_{n-1  (CWL 15, 37)}

where k_n of  earlier time t-a is the coefficient of an increase in surplus activity resulting in a later acceleration of activity on lower level k_n-1 at later time t. (See CWL 15, 36-38) Both the increase in surplus activity, [f’_n(t-a)-B_n], and the long-term acceleration of basic activity, f”_n-1(t) – A_n-1  , are financed by commercial-bank loans originating in money-creating open-market purchases of the Central Bank and its regulation of reserve requirements.

Any violative divergence from normative, systematic, concomitance of comcomitandal flows of products and payments brings automatic correctives to work.  Examples of violative divergence would be a) forced draining of one circuit by the other through excess saving for excess investment or by miscalibrated taxation, b) a general flooding of the money supply causing the swindle of inflation both in the operative circuits and in the Redistributive Function, c) investing faster than can be absorbed causing a premature maximum of investment and a rapid decrease of investment, d) excessive borrowing through (D’-s’I’) to inflate demand and prices in the basic circuit.

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]

The excellence of the exchange solution becomes even more evident when contrasted with the defects of a bureaucratic solution.  The bureaucrat … (gives the people) what he thinks is good for them, and he gives it in the measure he finds possible or convenient; nor can he do other wise, for the brains of a bureaucrat are not equal to the task of thinking of everything; only the brains of all men together can even approximate to that. … when a limited liability company has served its day, it goes to bankruptcy court; but when bureaucrats take over power, they intend to stay. … when the pressure of terrorism is needed to oil the wheels of enterprise, then the immediate effect is either an explosion or else servile degeneracy. … the exchange solution is a dynamic equilibrium resting on the equilibria of markets. … every product of the exchange economy must mate through exchange with some other product, and the ratio in which the two mate is the exchange value.  The generality of this equilibrium makes it indifferent to endless complexity and endless change; for it stands on a level above all particular products and all particular modes of production.  While these multiply and vary indefinitely, the general equilibrium of the exchange process continues to answer with precision the complex question, Who, among millions of persons, does what, among millions of tasks, in return for which, among millions of rewards?  Nor is the dynamic solution unaccompanied by a continuous stimulus to better efforts and more delicate ingenuity.  For the uniformity of prices means that the least efficient of those actually producing will at least subsist, while every step above the minimum efficiency yields a proportionately greater return. CWL 21, 34-35)

Prices may rise normally due to scarcity or non-normatively due to the violative divergence from concomitance of a maldistribution of Incomes.  The proper adjustment of the ratio of basic to surplus Incomes to the phase of the process would fail to take place.  The economic process would respond spontaneously. (sua sponte – of its own accord)

… when prices rise or fall because the distribution of income has not anticipated these requirements correctly, then price variation is not a postulate for variation in E’ and E” but rather a spontaneous effort at adjusting what should already have been adjusted. (CWL 15, 131)

A condition of circuit acceleration was seen in section 15 to include the keeping in step of basic outlay, basic income, and basic expenditure, and on the other hand, the keeping in step of surplus outlay, surplus income, and surplus expenditure.  Any of these rates may begin to vary independently of the others, and adjustment of the others may lag.  But any systematic divergence brings automatic correctives to work.  The concomitance of outlay and expenditure follows from the interaction of supply and demand.  The concomitance of income with outlay and expenditure is identical with the adjustment of the rate of saving to the requirements of the productive process. [CWL 15, 144

To avoid inflation or deflation, Incomes must concomitantly adjust to the changing basic and surplus quantities per interval in a pure cycle of expansion.  Purchasing power must keep pace with increasing production.  Henry Ford knew this.

… the acceleration of the productive process, if it is to succeed and not be destroyed by circulation maladjustments, postulates that in a proportionate expansion the rate of saving be constant, that in a surplus expansion it increase, that in a basic expansion it decrease.  The implications of this postulate will concern us in subsequent sections on the cycle of basic income, the cycle of pure surplus income, and the cycle of price spreads. (CWL 15, 133)

The central adjustment is variation in the rate of saving.  This rate may be defined, conveniently for present purposes, as the ratio of surplus income to total income.  Assuming that the rate of saving will not differ appreciably because income is derived from basic or surplus outlay, we may denote this rate by the symbol w, so that

w = I”/(I’ + I”)  (CWL 15, 131-32)

 

The obverse of the rate of saving (I” = E”) associated with purchase of new and/or better capital (non-consumable items), is the rate of expending (I’ = E’) for one’s standard of living (consumption).  So we may paraphrase the above:

The central adjustment is variation in the rate of expending.  This rate may be defined, conveniently for present purposes, as the ratio of basic income to total income.  Assuming that the rate of expending will not differ appreciably because income is derived from basic or surplus outlay, we may denote this rate by the symbol 1-w, so that

1-w = I’/(I’ + I”)  (CWL 15, 131-32)

The concomitant variation of the two flows of a product and its purchase moneys is the condition of constant exchange value:

 It is now necessary to state the necessary and sufficient condition of constancy or variation in the exchange value of the dummy.  To this end we compare two flows of the circulation: the real flow of property, goods, and services, and the dummy flow being given and taken in exchange for the real flow….Accordingly, the necessary and sufficient condition of constant value in the dummy lies in its concomitant variation with the real flow. (CWL 21, 38-39)

We have to deal not with the quantity and velocity of money in all and any payments but only with the quantity and velocity in operative payments.  But operative payments have been defined as standing in a network congruentwith the network of the productive process; it follows that we have to deal with quantities of money congruent with the values emerging in the productive process, and with the velocities of money congruent with the velocities of the productive process.  In fact, we shall be able to deal with the more precise ideas of turnover size and turnover frequency instead of ill-defined ideas of quantity and velocity of money. (CWL 21, 135)

It is a truism or an absolute that actual supply always matches actual demand because they are merely two aspects of a single actual economic exchange.  A transaction is constituted by the exchange of something actually demanded-purchased only as it is sold-supplied.  In the sense that a) what is not yet sold is still under process because it has not yet exited the process, and b) no matter how much something is desired, if it is not bought it has not been supplied, in that sense it is a truism that actual supply and demand are both actually and theoretically conjoined and unitary.

In every unit of enterprise there is some determinate turnover magnitude and turnover frequency.  The magnitude of the turnover depends upon the number of items handled at once and the selling price of each item. The frequency of turnover depends upon the period of production plus any time lag involved in sales and collection.  In general, each unit of enterprise first estimates demand, which determines both rate of payments received and rate of supply; in the second place, it estimates turnover frequency from its conditions of production and of sale and, caeteris paribus, selects a more rapid rather than a less rapid frequency; in the third place, it finds its turnover magnitude determined by the other two factors.  The estimate of demand comes first, because there is no use producing without selling.  The estimate of frequency comes second, because a more rapid frequency is, in the main, an advantage but one can never have as rapid a frequency as one pleases.  Finally, turnover magnitude is left to be determined by the other two factors, because turnover magnitude is the easiest to control of the three.  (CWL 15, 58-59)

I can put together a Thomistic metaphysic of history that will throw Hegel and Marx, despite the enormity of their influence on this very account, into the shade. … (Lambert and McShane, 149)

The increment of money concomitant with the expanding economic process is injected into the supply function rather than the demand functioning, and, as one can see in the Diagram of Rates of flow, this inflow is expressed by positive (S’-s’O’) and (S”-s”O”).

(S’-s’O’) = ΔT’ + (O’-R”) +ΔR’   (CWL 15, 67),   and

(S”-s”O”) = ΔT” + (O”-R”) +ΔR” (CWL 15, 67)

“Transfers to or from supply, (S’ – s’O’), tend to equal the sum of the increments of aggregate turnover magnitudes in final payments (ΔR’) and transitional payments (ΔT’).  Of these, two, the increment in transitional payments will be the larger, since for each sale at the final market there commonly is a sale at a number of transitional markets.”  (CWL 15, 67)

Functional Macroeconomic Dynamics became a science in the full sense at that point where it became an organized system. There is a point in the history of any science when it comes of age, when it has a determinate systematic structure to which corresponds a determinate field.  Again,

… A science emerges when thinking in a given field moves to the level of system. Prior to Euclid there were many geometrical theorems that had been established.  The most notable example is Pythagoras’ theorem on the hypotenuse of the right-angled triangle, which occurs at the end of  Book 1 of Euclid’s elements.  Euclid’s achievement was to bring together all these scattered theorems by setting up a unitary basis that would handle all of them and a great number of others as well. … similarly, mechanics became a system with Newton.  Prior to Newton, Galileo’s law of the free fall and Kepler’s three laws of planetary motion were known.  But these were isolated laws.  Galileo’s prescription was that the system was to be a geometry; so there was something functioning as a system.  But the system really emerged with Newton.  This is what gave Newton his tremendous influence upon the enlightenment. He laid down a set of basic, definitions, and axioms, and proceeded to demonstrate and conclude from general principles and laws that had been established empirically by his predecessors.  Mechanics became a science in the full sense at that point where it became an organized system. … again, a great deal of chemistry was known prior to Mendeleev.  But his discovery of the periodic table selected a set of basic chemical elements and selected them in such a way that further additions could be made to the basic elements.  Since that time chemistry has been one single organized subject with a basic set of elements accounting for incredibly vast numbers of compounds.  In other words, there is a point in the history of any science when it comes of age, when it has a determinate systematic structure to which corresponds a determinate field. [Method, 241-42]

Again, there is nothing as practical as good theory.  A good theory explains.  A good theory gives the principles and laws of operation or behavior.  A good theory is enlightening and useful to Congress, the Federal Reserve Bank, and the private sector. The general principles of a) implicit definition, b) precise axiomatic analytical distinctions, c)rigorously, logically derived superstructure, d) concomitance of explanatory flows, and e) the proper functioning of credit can lead to the discovery and formulation of the general intelligibility sublating hundreds of Establishment textbook formulas and graphs.