Heuristic ⇒ Method ⇒ Images ⇒ Insights ⇒ Formulations ⇒ Coherent Hypothesis and Theory ⇒ Verification ⇒ Implementation

.1.  Science is explanation of phenomena by implicit formulas wherein the relations define the terms, the terms define the relations, and insight fixes both.  All relations are coherent – of terms with terms and formulas with formulas – with one another so as to comprise a complete theory.

.2.  Insights yield terms related to one another; thus, properly representative terms in their relations may qualify as possible explanatory conjugates.

.3.  A heuristic states the goal of a search.  A method is the process or procedure which leads to a goal.

.4. Generalization is needed to unify and supersede the scattered insights of Establishment Economics.

.5.  A Macroeconomic Field Theory consists of abstract terms related strictly internally among themselves.  It drops the notion of an external efficient cause and explains the functional relations.

.6.  The economic process always is the current process.  It is dynamic, and it has a structure with functional divisions.

.7. Economic process – like other world processes – has an immanent intelligibility (Click here and here) consisting of primary abstract relativities which can be applied to the coincidental secondary concrete determinations occurring in a non-systematic manifold.

.8.  The economic process is the current process at rates (velocities) of so much or so many every so often (per interval).  Its immanent intelligibility is that of a current dynamic process represented by differentials of velocity and acceleration; i.e. of d/dt and d2/dt2. So, if one seeks to explain and manage a dynamic process, one’s field-theoretic explanation of interdependent functional flowings must be in terms of the relations to one another of the constituent, interdependent, internal, functional velocities and their changes.  It is current velocities and their changes – d/dt and d2/dt2 – that are the explanatory conjugates of explanation of the purely-dynamic process.

.9. The properly managed economic process is a necessary constituent of the good of order.

.10.  The field-theoretic formulation of macroeconomic relationships is an invariant, universally applicable determination of the immanent intelligibilities of the current process.  This abstract formulation is applied to the concrete boundary conditions of prices and quantities occurring in the non-systematic manifold of world events.

.11.  The concrete economic process of pretio-quantital exchange in the non-systematic manifold of exchanges consists of velocitous production and exchange of goods and services for money.  Money is a fellow-traveler – a correlative and a concomitant – with the primary process of velocitous production and saleThe abstract structure of velocitous production and sale is the primary analyzand.  And money plays the role of a dummy invented by humans to enable and grease the divided exchanges in a large, aggregated, complex, production-and-exchange process.

.12.  Since the purely dynamic process is a process of interdependent flows – with some resemblances to flows in circuits of electricity and of water –, the field theory will specify the formulations and conditions of continuity, equilibrium, “kinetic economic energy”, “potential economic energy”, and what constitutes the realization of full potential in both production and employment.

.13.  The formulation of the explanation will be isomorphic with the patterns in the data of the measurements of the constituent functional velocities and accelerations.  It will express combinations of combinations and correlations.

.14.  The terms of the explanation, though perhaps originally descriptive terms of things as related to us,  become abstract, explanatory, technical terms, i.e. “conjugate forms”, whose abstract relations to one another explain the process.

.15.  Possesing explanation of how the economic process works, the Central Bank, the Bureau of Economic Analysis, bureaucrats-as-bureaucrats and participants-as-participants can adapt their analyses and behavior to the norms yielded by the explanation.

.16.  In summary, a scientific, dynamic heuristic and  empirical method guide one to an explanatory and normative Modern Macroeconomic Field Theory, which is universally relevant in any instance and by which bureaucrats as bureaucrats, and participants as participants manage the economic process.

 

.1.  Science is explanation of phenomena by implicit formulas wherein the relations define the terms, the terms define the relations, and insight fixes both.  All relations are coherent – the relations of terms with terms and formulas with formulas – with one another so as to comprise a complete theory.

A distinction has been drawn between description and explanation.  Description deals with things as related to us.  Explanation deals with the same things as related among themselves.  The two are not totally independent, for they deal with the same things and, as we have seen, description supplies, as it were, the tweezers by which we hold things while explanations are being discovered or verified, applied or revised. … [CWL 3, 291/316]

 “Functional” is for Lonergan a technical term pertaining to the realm of explanation, analysis, theory;  … Lonergan (identified) the contemporary notion of a function as one of the most basic kinds of explanatory, implicit definition – one that specifies “things in their relations to one another” … [CWL 15  26-27  ftnt 27]

… despite their intimate connection, it remains that description and explanation envisage things in fundamentally different manners.  The relations of things among themselves are, in general, a different field from the relations of things to us. [CWL 3, 291/316]

.2.  Insights yield terms related to one another; thus, properly representative terms in their relations may qualify as possible explanatory conjugates.

Let us say, then, that for every basic insight there is a circle of terms and relations, such that the terms fix the relations, the relations fix the terms, and the insight fixes both.  If one grasps the necessary and sufficient conditions for the perfect roundness of this imagined plane curve, then one grasps not only the circle but also the point, the line, the circumference, the radii, the plane, and equality.  All the concepts tumble out together, because all are needed to express adequately a single insight.  All are coherent, for coherence basically means that all hang together from a single insight.  [CWL 3, 12/36]

There is a further type of insight that arises immediately from the data.  Such is the grasp (insight, or act of understanding) that precedes and grounds the definition of the circle.  Such was Galileo’s insight formulated in the law of falling bodies.  Such was Kepler’s insight formulated in the laws of planetary motion.  Such was Newton’s insight formulated in the theory of universal gravitation.  Such has been the point in the now well established technique of measuring and correlating measurements.  Such is the goal of classical heuristic structure that seeks to determine some unknown function by working out the differential equations, of which the unknown function will be a solution, and by imposing by postulation such principles as invariance and equivalence …Fourthly, it notes that this intelligibility, immanent in the immediate data of sense, resides in the relations of things, not to our senses, but to one another.  Thus, mechanics studies the relations of masses, not to our senses, but to one another.  Chemistry defines its elements, not by their relations to our senses, but by their places in the pattern of relationships named the periodic table.  Biology has become an explanatory science by viewing all living forms as related to one another in that complex and comprehensive fashion that is summarily denoted by the single word, evolution. [CWL 3, 77-78/100-102]

.3.  A heuristic states the goal of a search.  A method is the process or procedure which leads to a goal.

… as the heuristic assumption of classical method is the indeterminate function to be determined, so the heuristic assumption of genetic method lies in the notion of development. (CWL 3, 461/486)

(man can) determine in advance certain general attributes of the object under investigation. So the methods of the empirical sciences rest on the (heuristic) anticipation of systems of laws, of ideal frequencies, of genetic operators, of dialectical tensions [CWL 3, 634/657]

On such a methodological model (i.e. implicit definition according to functional relation)… (Descriptive) Classes of payments quickly become explanatory rates of payment standing in the mutual conditioning of a circulation; to this mutual and, so to speak, internal conditioning there is added the external conditioning that arises out of transfers of money from one circulation to another; in turn this twofold conditioning in the monetary order is correlated with the conditioning constituted (in the hierarchical productive order) by productive rhythms of goods and services; … There results a closely knit frame of reference that can envisage any total movement of an economy as a function of variations in rates of payment, and that can define the conditions of desirable movements as well as deduce the causes of breakdowns. … [CWL 21, 111]

Classical and statistical investigations exhibit marked differences …  … … while classical investigation heads towards the determination of functions and their systematization, statistical investigations cling to concrete situations.    Hence, while classical conclusions are concerned with what would be if other things were equal, statistical conclusions directly regard such aggregates of events as the sequences of occasions on which a coin is tossed or dice are cast, the sequences of generations in which babies are born, the young marry, the old die. [CWL 3, 53/76]

statistical science is empirical … Its attention is directed to frequencies that are straightforward numerical answers to the straightforward question, How often? [CWL 3, 55/77]

… there is a profound difference in the mentality of classical and statistical inquirers. … As long as differences in frequency oscillate about some average, they are esteemed of no account; only when the average itself changes, is intellectual curiosity aroused and further inquiry deemed relevant. [CWL 3, 54/77]

Now, at the root of classical method there are two heuristic principles.  The first is that similars are understood similarly, that a difference of understanding presupposes a significant difference of data.  The second is that similarities, relevant to explanation, lie not in the relations of things to our senses but in their relations to one another.  Next, when these heuristic principles are applied, there  result classifications by sensible similarity, then correlations, and finally the verification of correlations and of systems of correlations.  But verified correlations necessarily involve the verification of terms implicitly defined by the correlations; and they do not involve more than such implicitly-defined terms as related, for what is verified accurately is not this or that particular proposition but the general and abstract proposition on which ranges of ranges of particular propositions converge. … there is a fundamental heuristic structure that leads to the determination of conjugates, that is, of terms defined implicitly by their empirically and explanatory relations.  Such terms as related are known by understanding, and so they are forms. Let us name them conjugate forms.[CWL 3, 435/460]

How does the empirical scientist determine that function?  By the method and the method is twofold.  There is a component from above downward, and a component from below upward.  It is a scissors action. … The movement from below upward is illustrated by the selection of aspects of the matter one can measure, by performing the measurements, by their tabulation, by the work of curve fitting that yields the best formula according to the mean square root deviation. … But the scientist … also works from above downward. … In general, any functions are solutions to a type of equation called the differential equation.  And differential equations can be written down simply on inspection. … So what the physicist means by a wave is something extremely general. … And so differential equations are employed by the physicist in a movement from above downward.  The possible law is going to be a function that is a solution of certain determinate differential equations. [CWL 10, 138]

.4. Generalization is needed to unify and supersede the scattered insights of Establishment Economics.

As Newton discovered a deeper unity that generalized the isolated insights of Galileo and Kepler, so Lonergan sought to discover a deeper unity that generalized the insights of S.M. Longfield, John Rae, Nassau Senior, Eugen von Böhm-Bawerk, and Piero Sraffa[2]; a deeper unity in the relations among economic functionings. [CWL 25, Editors’ Introduction lxii]

At some point, the scientist comes to realize that he cannot construct a million theories based upon each of millions of particular analyses of particular sets of prices and quantities; he must move to a higher level of abstraction in order to discover the few general laws, which can be applied generally to explain every particular case.

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. … 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]

We are not going to discuss wealth or value, … capital and labor, interest and profits, production, distribution, and consumption. Because we are not, it certainly will be objected that our discussion has nothing to do with economic science, for economics is precisely the study of wealth and value … .  The answer is as follows.  The discussion moves on a more general plane to terminate in a more general conclusion.  Because the general includes the particular, a generalized economics cannot but include the particular economics. [CWL 21, 8]

The first chapter of any textbook of differential equations walks the student through the general differential equation governing the dynamics of some system such as a coiled spring, and/or a pendulum, and/or a projectile.  The commentary and diagrams lead one to the insight by which one understands the differential equation which will generally govern all possible particular instances, so that one can then apply

  • a.) any particular initial conditions of position and linear or angular velocity, or
  • b.) particular boundary values

to the solution of that general differential equation to get the particular law of behavior in the particular case.  The student comes to appreciate quickly that, in any search for the general rule, it would be a pointless waste of time to analyze each and every possible combination of particular conditions.  Particular values are of no interest in a general treatment.[1]

As an example, consider the general treatment of the simplified motion of a pendulum with a mass suspended from a massless rod and with no air resistance:[2]

d2θ/dt2 + g sinθ/L = 0

The terms of the general formula are the variables: angle (θ), and time (t); and the constants length (L) of the massless rod, and acceleration due to gravity (g).  The particular values of the initial position or angle, initial velocity, particular length, are not fixed elements of the general specification or general governing rule. They are merely values in the particular case.  The general specification, i.e. primary relativity, remains the general governing form, no matter what values these secondary determinations and the constants may happen to have on this or that pendulum in the particular case.

While the a) corporate accountants’ price-quantity unities such as materials, labor, overhead, and interest expenses, and b) anthropological or psychological factors such as the psychology of property, individuals’ varying perception of “utility,” notions of ambition and success, feelings of failure and resentment, and some social relations of some vaguely-defined psycho-political situation may have business, political, or sociological import, these unities – as subjective, and as related-to-us – cannot serve as objective explanatory functional terms.   They are not abstract explanatory terms at an adequate level of generality.  They are not terms implicitly defining one another by the functional relations in which they stand.  They cannot serve as systematically-interrelated and explanatory functional flows in an overall functioning process.  They cannot be coherently related to one another in a system of coherent explanatory equations which constitute a theory which explains the general dynamics of the objective economic system.

It is imperative that there be a general understanding, at an adequate level of abstraction, of the system’s immanent intelligibility, the system’s implicit norms of proper behavior, and consequently what adaptation is required for successful operation.

Appreciation of the notion of generalization – one of Lonergan’s main goals, as was Newton’s goal and Clerk-Maxwell’s goal – is critical to full appreciation of what Lonergan has accomplished.

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]

If idealism can be brought to learn the discipline of logic and of scientific reflection, then it will impose a generalization of the exchange economy.  To determine the nature of such a generalization is the aim of this inquiry … [CWL 21, 36]

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[3] 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]

.5.  A Macroeconomic Field Theory consists of abstract terms related strictly internally among themselves.  It drops the notion of an external efficient cause and explains the functional relations.

… as to the notion of cause, Newton conceived of his forces as efficient causes, and the modern mechanics drops the notion of force; it gets along perfectly well without it.  It thinks in terms of a field theory, the set of relationships between n objects.  The field theory is a set of intelligible relations linking what is implicitly defined by the relations themselves; it is a set of relational forms.  The form of any element is known through its relations to all other elements.  What is a mass?  A mass is anything that satisfies the fundamental equations that regard masses.  Consequently, when you add a new fundamental equation about mass, as Einstein did when he equated mass with energy, you get a new idea of mass.  Field theory is a matter of the immanent intelligibility of the object. [CWL 10, 154]

Special Relativity is primarily a field theory, that is, it is concerned not with efficient, instrumentalmaterial, or final causes of events, but with the intelligibility immanent in data; but Newtonian dynamics seems primarily a theory of efficient causes, of forces, their action, and the reaction evoked by action. … Special Relativity is stated as a methodological doctrine that regards the mathematical expression of physical principles and laws, but Newtonian dynamics is stated as a doctrine about the objects subject to laws.  [3, 43/67]

Taking into account past and (expected) future values does not constitute the creative key transition to dynamics.  Those familiar with elementary statics and dynamics (in physical mechanics) will appreciate the shift in thinking involved in passing from equilibrium analysis (of for example a suspended weight or a steel bridge)…to an analysis where attention is focused on second-order differential equations, on d2θ/dt2, d2x/dt2, d2y/dt2, on a range of related forces, central, friction, whatever.  Particular boundary conditions, “past and future values” are relatively insignificant for the analysis.  What is significant is the Leibnitz-Newtonian shift of context. [McShane, 1980, 127]

.6.  The economic process always is the current process.  It is dynamic, and it has a structure with functional divisions.

… the productive process was defined as a purely dynamic entity, a movement taking place between the potentialities of nature and products.  In the present section, there has been attempted a dynamic division of that entity..  Elements in the process are in a point-to-point, or point-to-line, or point-to-surface, or even some higher correspondence with elements in the standard of living. … The division is not based upon proprietary differences, … for the same firm may be engaged at once in different correspondences with the standard of living.  Again, it is not a division based upon the properties of things; the same raw materials may be made into consumer goods or capital goods; and the capital goods may be point-to-line or point-to-surface or a higher correspondence; they may have one correspondence at one time and another at another. … the division is, then neither proprietary nor technical.  It is a functional division of the structure of the productive process: it reveals the possibilities of the process as a dynamic system, though to bring out the full implications of such a system will require not only the next two sections, on the stages of the process, but also later sections on cycles. [CWL 15, 26-7]

(Again:) Taking into account past and (expected) future values does not constitute the creative key transition to dynamics.  Those familiar with elementary statics and dynamics (in physical mechanics) will appreciate the shift in thinking involved in passing from equilibrium analysis (of for example a suspended weight or a steel bridge)…to an analysis where attention is focused on second-order differential equations, on d2θ/dt2, d2x/dt2, d2y/dt2, on a range of related forces, central, friction, whatever.  Particular boundary conditions, “past and future values” are relatively insignificant for the analysis.  What is significant is the Leibnitz-Newtonian shift of context. [McShane, 1980, 127]

.7. Economic process – like other world processes – has an immanent intelligibility (Click here and here) consisting of primary abstract relativities which can be applied to the coincidental secondary concrete determinations occurring in a non-systematic manifold.

The immanent intelligibility consists of primary abstract relativities which can be applied to the coincidental secondary concrete determinations occurring in a non-systematic manifold.  The whole economic organism is constituted by the schemes of recurrence in its own organic parts and in the parts’ interactions with one another.  The schemes are under the dominance of abstract principles and laws; nevertheless, the actual concrete working of the economic schemes of recurrence is shot through with the indeterminacy intrinsic to a non-systematic manifold.  So, while the set of field-theoretic primary relativitiesis an invariant, the concrete secondary determinations have diverging series of conditions; thus, the occurrences constituting producings and pricings vary and are probabilistic.  So, prediction is impossible in the general case, since the concrete patterns of aggregate functional occurrences over time are a non-systematic aggregate. The abstract point-to-line functional correspondences exhibit concrete determinations in an always-present probabilistic  relation between what might be this period’s surplus production and what might be the subsequent accelerated series of basic products.

An event-occurrence has a diverging series of prior conditions.  With knowledge of all applicable laws, we can look back and explain completely the determinate occurrence, but, because of a diverging series of conditions, we cannot look forward to predict accurately the precise future determination.

.8.  The economic process is the current process at rates (velocities) of so much or so many every so often (per interval).  Its immanent intelligibility is that of a current dynamic process represented by differentials of velocity and acceleration; i.e. of d/dt and d2/dt2. So, if one seeks to explain and manage a dynamic process, one’s field-theoretic explanation of interdependent, interlocking, functional flowings must be in terms of the functional relations to one another of the constituent, interdependent, internal, functional velocities and their changes.  It is current velocities and their changes – d/dt and d2/dt2 – that are the explanatory conjugates of explanation of the purely-dynamic process.

In Lonergan’s circulation analysis, the basic terms are rates – rates of productive activities and rates of payments.  The objective of the analysis is to discover the underlying intelligible and dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates to one another.  [CWL 15  26-27  ftnt 27]

An ‘accountant’s unity’ is a category used in (conventional) accounting.  For Lonergan, (conventional) accounting generally denotes an enterprise within common sense which uses descriptive, as contrasted with explanatory terms (on these terms see CWL 3, 37-38/61-62, 178-79/201-3, 247-48/272-73).  Insofar as that is true, the accountant’s unity is not an adequate index for the normative, explanatory analysis of the productive process. [CWL 15, 26, ftnt 26]

The Fed’s tools are adequate neither to effect realization of the economy’s full potential nor to correct distortions.

Traditional theory looked to shifting interest rates to provide suitable adjustment.  In the main we shall be concerned with factors that are prior to changing interest rates and more effective.  [CWL 15, 133]

The purpose of this section is to inquire into the manner in which the rate of saving W is adjusted to the phases of the pure cycle of the productive process.  Traditional theory looked to shifting interest rates to provide suitable adjustment.  In the main we shall be concerned with factors that are prior to changing interest rates and more effective.  [CWL 15, 133]

… …  Evidently, then, suitable migrations (among strata of incomes) are a means of providing adjustments in the community’s rate of saving.  To increase the rate of saving, increase the income of the rich; while they may be too distant from the current operations of the economic process to judge, at least they can put their money into the bank or bonds or stocks, and perhaps others there will see how it can best be used.  To decrease the rate of saving, increase the income of the poor. … The foregoing is the fundamental mode of adjusting the rate of saving to the phases of the productive cycle. [CWL 15, 133-134]

Similarly a lowering of interest rates may encourage the expansion of basic industry; but it also will encourage the expansion of well-intentioned but not well-thought-out innovations, the number of bankruptcies, etc.  What is needed is the egalitarian shift in incomes, that will compensate for the previous and shorter anti-egalitarian shift, and will produce the things that people really need and can learn to purchase without the help of self-seeking advertisers.   [CWL 15, 141 ftnt 198]

Rates of interest, when increasing, encourage saving (but discourage borrowing).  This double edge is not the per se means of effecting the enormous shift in saving to bring about the transition from a slump or a basic expansion to a surplus expansion. [CWL 15, 141 ftnt 198]

.9. The properly managed economic process is a necessary constituent of the good of order.

Order is good (adjective).  Order is a good (noun).  To avoid breakdown, a nation requires civil order and coordinated operations among free persons, who grasp the ideas of both social order and economic order. Free persons must understand what constitutes the good social and economic order and must wisely adapt to the normative exigencies of the order in a spirit of cooperation.

The economy underpins social and cultural structures.[1]  The economy is a set of schemes of recurrence depending upon humans cooperating.

A series of ecologies (in which abstract relationships are complemented by concrete probabilities) can form chains of sequential dependence, with prior ecologies grounding the probability of the emergence of the next….Human communities devise their own schemes of recurrence: the commonly understood and commonly accepted ways and means of cooperating.  Among them are the firms that keep producing goods and rendering services and no less the households that purchase the goods produced and the services rendered.  Such is the economy, which is a structure resting on the ecologies of nature and underpinning social and cultural structures. [CWL 15, 3-4]

We return to the idea of the good of order.  For, as we said above, 1) persons, 2) interpersonal partnerships, 3) cognitive and appetitive habits, 4) many coordinated operations among many persons, 5) a succession and series of particular goods, are, as it were, organically interconnected. All these elements taken together constitute an intelligible good of order. [CWL 12, 505]

There’s the good of order.  The good of order is very well represented negatively by an economic depression.  In an economic depression there is no lack of material, there is no lack of capital, there is no lack of people willing to work, and there is no lack of people willing to buy, but things don’t run, they don’t work.  You can prime the pump, and you get a single burst of water going round, but it doesn’t keep going round as when the economic system is functioning properly. You can keep priming and repriming and build up an enormous national debt, and things still aren’t clicking. … What is lacking is a good of order.  And what is this good of order? It is the dovetailing of one thing with another that you have when the economic system is functioning properly. A makes shoes, B wants shoes and makes something else, and the whole thing clicks together and it works.  The ofdifficulties, of course, why the thing periodically does not work, the reasons for that are more complex.  But there is a good of order. … Again, you have the good of order in a family, a family as an institution. … There is a good of order of the polity, the state.  These objective schemes of recurrence – you have a good breakfast this morning, you have a good breakfast the next morning, and you keep on having a good breakfast every morning; you have a job to do that interests you today, and you’ll have it tomorrow and so on. … and the good of order is when the whole thing clicks together.  It is good in the intelligible sense.  It is the object of an insight.  (CWL 5, 378-379;  Please read these and following pages in CWL 5 in full.)

Thus it is that in the history of human societies there are halcyon periods of easy peace and tranquility  that alternate with times of crisis and trouble.  In the periods of relaxed tension, the good of order has come to terms with the intersubjective groups.  It commands their esteem by its palpable benefits; it has explained its intricate demands in some approximate yet sufficient fashion; it has adapted to its own requirements the play of imagination, the resonance of sentiment, the strength of habit, the ease of familiarity, the impetus of enthusiasm, the power of agreement and consent.  Then a man’s interest is in happy coincidence with his work; his country is also his homeland; its ways are the obviously right ways; its glory and peril are his own. [CWL 3, 216/241]

Economic break-down and political decay are the breakdown and decay of the good of order, the failure of schemes of recurrence to function.

In civil community there has to be acknowledged a further component, which we propose to name the good of order.  It consists in an intelligible pattern of relationships that condition the fulfillment of each man’s desires by his contributions to the fulfillment of the desires of others, and similarly, protect each from the object of his fears in the measure he contributes to warding off the objects feared by others.  This good of order is not some entity dwelling apart from human actions and attainments. … much … Again, economic break-down and political decay are not the absence of this or that object of desire or the presence of this or that object of fear; they are the breakdown and decay of the good of orderthe failure of schemes of recurrence to function.  Man’s practical intelligence devises arrangements for human living; and in the measure that such arrangements are understood and accepted, there necessarily results the intelligible pattern of relationships that we have named the good of order. [CWL 3, 213-214/238-39]

Now the general theorem of continuity is that this (organic whole) has a nature that must be respected. … to violate this organic interconnection is simply to smash the organism, to create the paradoxical situation of starvation in the midst of plenty, of workers eager for work and capable of finding none, of investors looking for opportunities to invest and being given no outlet, and of everyone’s inability to do what he wishes to do being the cause of everyone’s inability to remedy the situation.  Such is disorganization.  Continuity, on the other hand, is the maintenance of organization, the stability of the sets and patterns of dynamic relationships that constitute economic well-being in a society. [CWL 21, 74]

.10.  The field-theoretic formulation of macroeconomic relationships is an invariant, universally applicablespecification of the immanent intelligibilities of the current process.  This abstract formulation is applied to the concrete boundary conditions of prices and quantities occurring in the non-systematic manifold of world events.

As the general formulations of the simple pendulum, the shot-put’s trajectory, Clerk-Maxwell’s electromagnetics, and Special Relativity are relevant in any instance, so the field-theoretic formulation is relevant in any instance.  It is a set of laws applicable universally.

The abstract formulation is not DSGE’s sense of a probabilistic series of efficient causes, but a set of abstract, universally-relevant, primary relativities to be applied to boundary values consisting of secondary probabilistic determinations from the non-systematic manifold of prices and quantities.

.11.  The concrete economic process of pretio-quantital exchange in the non-systematic manifold of exchanges consists of velocitous production and exchange of goods and services for money.  Money is a fellow-traveler – a correlative and a concomitant – with the primary process of velocitous production and saleThe abstract structure of velocitous production and sale is the primary analyzand.  And money plays the role of a dummy invented by humans to enable and grease the divided exchanges in a large, aggregated, complex, production-and-exchange process.

… money is an instrument invented to fulfill a definite task; it is not the ultimate master of the situation.  … Accordingly money has to conform to the objective exigencies of the economic process, and not vice versa. (CWL 21, 101)

These differences and correlations (of the productive process of a hierarchical, advanced economy) have now to be projected into their monetary correlates to set up classes of payments.  Thus a restrictive supposition is introduced into the argument.  The productive process is now envisaged as occurring in an exchange economy.  It will be supposed to be an economy of notable size, complexity, and development, with property, exchange, prices, supply and demand, money.  [CWL 15, 39]

Behind all the symbols rests the central requirement of faithMoney serves its indispensable purposes as long as we believe in it.  It ceases the moment we do not.  Money has well been called the promise men live by. [Philip McShane, Implementing Lonergan’s Economics (quoting R.L. Heilbroner, The Economic Problem (New Jersey, 1972) p. 532 in The Lonergan Review, Culture Science and Economics, Vol. III, No 1, Spring 2011, Seton Hall University p. 198]

… the real issue is the value of the dummy (money in divided exchange rather than barter)… the relative value is its usefulness….the scarcity of the dummy is attended to by the technicians of the technical rules governing its issuance.  Whether it issues from the printing press or from the credit structure makes no difference.  The economic value lies in the human effort against scarcity… the exchange value is the ratio or proportion in which are exchanged the different categories of objects for which men strive because they are useful and scarce….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….More briefly, if there is concomitance between the two flows, then the proportion in which dummies and goods exchange remains the same.  If there is lack of concomitance, then this proportion changes.  But exchange value is a proportion.  Therefore, the concomitance of the two flows is the condition of constant exchange value. [CWL 21, 38-39]

At the end of these lines of production are a.) the finished products, b.) the aggregate receipts of industry and commerce, and c.) the aggregate expenditures of final buyers. … (The connection of expenditures by final buyers and receipts by entrepreneur-sellers) with production is immediate: they …  are, so to speak, the immanent manifestation of the productive process as a process of value. … production is not a merely technical affair;… intrinsically it is an economic affair, … production for sale, production in view of and at every instant adapted to payments. [CWL 21, 114]

.12.  Since the purely dynamic process is a process of interdependent flows – with some resemblances to flows in circuits of electricity and of water –, the field theory will specify the formulations and conditions of continuity, equilibrium, “kinetic economic energy”, “potential economic energy”, and what constitutes the realization of full potential in both production and employment.

Dynamic Equilibrium among flows requires a concomitant balance of flows between circuits of the unitary system. The condition of equilibrium is G = c”O” – i’O’ = 0 (CWL 15, 54)

(Re continuity and equilibrium, click  here,  Re continuity, click here.)

 

.13.  The formulation of the explanation will be isomorphic with the patterns in the data of the measurements of the constituent functional velocities and accelerations.  It will express combinations of combinations and correlations of correlations.

In the following we have paraphrased, and we have substituted “macroeconomics” and “economics” for “physics” and “macroeconomic” and “economic” for “physical.”  We thereby gain a good idea of Lonergan’s dynamic heuristic.

… if someone is doing macroeconomics and you open his book, what do you find?  You find just mathematical equations.  He is solving problems, and what is it?  It is more mathematics.  Why do you say he is doing macroeconomics?  He seems to be doing mathematics all the time.  It is because there are regions of mathematics that are isomorphic with macrodynamic reality.  There is the same relational structure between a given mathematical theory or system as there is between macroeconomic functionings that can be observed.   This is another case, a big case, of isomorphism: on the one hand, mathematical expressions, and on the other hand, macroeconomic functionings.  There is the same relational structure.  But in the mathematical case, the relational structure links symbolic expressions, or mathematical concepts, with one another, while in the economics case what are related are concrete macroeconomic dynamic functionings.  ¶ So there is an isomorphism [Paraphrase of CWL 18, 32-33]

… just as a mathematical equation may be said to be the most adequate expression of purely intelligible relations among explanatory termsin certain instances – for example, Einstein’s gravitational field tensor equations – something closely akin to Lonergan’s diagram (and the equations it represents) seems necessary for the realm of dynamic economic functioning.  So, for example, the existence and manner of dynamic mutual interdependence of the two circuits of payment, basic and surplus, is not adequately expressed either by descriptive terms (since this pattern does not directly relate to the senses of anyone operating in a common-sense way in a concretely functioning economy) nor by the series of (simultaneous) equations that do not explicitly manifest the interchanging of ‘flows.’ [CWL 15, 179]

…  The mathematical meaning of an expression resides in the distinction between constants and variables and in the sign or collocations that dictate operations of combining, multiplying, summing, differentiating, integrating, and so forth.  It follows that, as long as the symbolic pattern of a mathematical expression is unchanged, it’s mathematical meaning is unchanged.  Further, it follows that if a symbolic pattern is unchanged by any substitutions of a determinate group, then the mathematical meaning of the pattern is independent of the meaning of the substitutions. [CWL 3, 18-19/43]

(Again:) How does the empirical scientist determine that function?  By the method and the method is twofold.  There is a component from above downward, and a component from below upward.  It is a scissors action. … The movement from below upward is illustrated by the selection of aspects of the matter one can measure, by performing the measurements, by their tabulation, by the work of curve fitting that yields the best formula according to the mean square root deviation. … But the scientist … also works from above downward. … In general, any functions are solutions to a type of equation called the differential equation.  And differential equations can be written down simply on inspection. … So what the physicist means by a wave is something extremely general. … And so differential equations are employed by the physicist in a movement from above downward.  The possible law is going to be a function that is a solution of certain determinate differential equations. [CWL 10, 138]

The three cases are a rough illustration of what is meant by isomorphismIsos means equal, morphê means form.  There is a similarity of form in the square made up of marbles, the square with the area 1764, and the square with the sides a + b or 10a + b. To think of mathematics in terms of group theory  is to think of the operations.  The operations may be very concrete, as upon the marbles, or intermediate, as upon the numbers, or remote, as upon the symbols.  But there is fundamentally a similar form, the same idea, the same insight involved in all three cases.  Consequently, a group theory, the notion of a science in terms of a group of operations, enables the science to be indifferently abstract and symbolic, or as concrete as you please, all in virtue of the isomorphism of operations.  Symbols can be given a physical interpretation, as they are all generated and controlled by certain operations such as adding, multiplying and so on.  What we have in the algebra, …  and the pattern can appear in a series of quite different instances or realizations.  These different realizations will all be isomorphic; they will all have the same intelligibility. [CWL 10, 130[

.14.  The terms of the explanation, though perhaps originally descriptive terms of things as related to us,  becomeabstract, explanatory, technical terms, i.e. “conjugate forms”, whose abstract relations to one another explainthe process.  E.g. “Classes of payments quickly become rates of payment.”

On such a methodological model (i.e. implicit definition according to functional relation)…Classes of payments quickly become rates of payment standing in the mutual conditioning of a circulation; to this mutual and, so to speak, internal conditioning there is added the external conditioning that arises out of transfers of money from one circulation to another; in turn this twofold conditioning in the monetary order is correlated with the conditioning constituted (in the hierarchical productive order) by productive rhythms of goods and services; … There results a closely knit frame of reference that can envisage any total movement of an economy as a function of variations in rates of payment, and that can define the conditions of desirable movements as well as deduce the causes of breakdowns. … [CWL 21, 111]

.15.  Possesing explanation of how the economic process works, the Central Bank, the Bureau of Economic Analysis, bureaucrats-as-bureaucrats and participants-as-participants can adapt their analyses and behavior to the norms yielded by the explanation.

our inquiry differs radically from traditional economics, in which the ultimate premises are not production and exchange but rather exchange and self-interest, or later, exchange and a vaguely defined psychological situation.  Our aim is to prescind from human psychology (so) that, in the first place, we may define the objective situation with which man has to deal, and, in the second place, define the psychological attitude that has to be adopted if man is to deal successfully with economic problems.  Thus something of a Copernican revolution is attempted: instead of taking man as he is or as he may be thought to be and from that deducing what economic phenomena are going to be, we take the exchange process in its greatest generality and attempt to deduce the human adaptations necessary for survival. [CWL 21,42- 43]

Lonergan’s intention was to formulate the laws of an economic mechanism more remote and, in a sense, more fundamental than the pricing system…laws which men themselves administrate in the personal conduct of their lives. In 1978 he began to refer to Nicholas Kaldor in support of his judgment that the significance traditionally accorded to price theory by conventional economics since Adam Smith’s Wealth of Nations (1776) amounted to a virtual derailment of economic theory. [CWL 15, Editors’ Introduction xlv]

The one issue is the locus of that control.  Is it to be absolutist from above downwards? Is it to be democratic from below upwards? Plainly it can be democratic only in the measure in which economic science succeeds in uttering not counsel to rulers but precepts to mankind, not specific remedies and plans to increase the power of bureaucracies, but universal laws which men themselves administrate in the personal conduct of their lives … [T]o deny the possibility of a new science and new precepts is, I am convinced, to deny the possibility of the survival of democracy. [?]

The idea of engineering human welfare is repugnant to Lonergan, for ‘managing people is not treating them as persons.  To treat them as persons one must know and one must invite them to know.’  Making the survival of democracy possible by ‘effectively augmenting the enlightenment of … enlightened self-interest’ cannot be identified merely with the Enlightenment’s project of steering public opinion from unenlightened to enlightened self-interest.  Instead, Lonergan envisaged a vast and long-term educational effort.  He insisted that rationalcontrol of the economy ‘can be democratic only in the measure in which economic science succeeds in uttering not counsel to rulers but precepts to mankind, not specific remedies and plans to increase the power of bureaucracies, but universal laws which men themselves administrate in the personal conduct of their lives.’ [CWL 15, lxxi]

Also, see Practical Precepts For Free People – Consumers, Entrepreneurs, Bankers, Investors

.16.  In summary, a scientific, dynamic heuristic and  empirical method guide one to an explanatory and normative Modern Macroeconomic Field Theory, which is universally relevant in any instance and by which bureaucrats as bureaucrats, and participants as participants manage the economic process.

See also New foundations in 30 minutes and Previous Brief Items.

Elements of Analysis

[1] Complementary to this treatment of generalization is our treatment of a) classical and statistical laws, and b) primary relativity and secondary determinations. See on this website the section Prediction and Control; The Ideal Pure Cycle and Probabilistic Indeterminacy

[2] Fred Brauer and John A. Nohel, Ordinary Differential Equations, 1967, W. A. Benjamin, Inc; New York, pp. 7-11

[3] embezzlement