This website is a companion to Bernard Lonergan’s two seminal books on Functional Macroeconomic Dynamics:
Lonergan, Bernard (1999), Macroeconomic Dynamics: An Essay in Circulation Analysis, ed. Frederick G. Lawrence, Patrick H. Byrne, and Charles Hefling, Jr., vol 15 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press) (referred to as CWL 15)
Lonergan, Bernard (1998), For a New Political Economy, ed. Philip McShane, vol 21 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press); (referred to as CWL 21)
It has been established to help the student understand the technical and scientific aspects of Functional Macroeconomic Dynamics. The claim is that Lonergan achieved a new paradigm, and a new standard model, by advancing macroeconomics from an endeavor of description or of comparative statics to a fully explanatory dynamics of interdependent, functional, productive and monetary flows.
Lonergan’s analytic search for explanation culminates in a discovery of the explanatory functional relations among the interdependent flows of the concrete economic process. He employed a scientific heuristic, seeking generalization and sublation of others’ isolated and conflicting, lower-level insights. Consider:
To our knowledge, no one else considers the functional distinctions between different kinds of productive rhythms (emanating from the distinctions between point-to-point flows and point-to-line flows and their order of timings) prior to, and more fundamental than, wealth, value, supply and demand, price levels and patterns, capital and labor, interest and profits, wages, and so forth … [CWL 15, Editors’ Introduction, lxii]
“Functional” is a technical term pertaining to the realm of explanation, analysis, theory; it does not mean “who does what” in some commonsense realm of activity … 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”…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 indeed dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates to one another. [CWL 15, 26-27 ftnt 27]
Lonergan brought a masterful understanding of mathematics, physics, chemistry, and scientific method to functional macroeconomics: In his seminal work, Insight, A Study of Human Understanding, Lonergan analyzed human knowing in mathematics and science. From that endeavor he brought to macroeconomic dynamics his understanding of
- cognitional theory and its relevance to science
- classical and statistical methods of research and explanation in physical science
- the insights of Newton, Lagrange, Hamilton, Einstein and others in mechanics, field theory, and special and general relativity
- Mendeleyev’s and others’ insights in chemistry
- a dynamic heuristic; i.e. a method to guide the search for and the characterization of the intelligibility which explains a dynamic process
- the nature and significance of the implicit definition of the basic, fundamental terms of a science by the functional relations in which they stand to one another
- velocitous and accelerative aggregate concrete functionings as the basic terms of explanation in macroeconomics
- the descriptive, non-explanatory nature of corporate accounting and national income accounting
- what constitutes a complete theory of equilibria and disequilibria
We hope that we can help the reader to understand the technicalities of what constitutes this “new paradigm in economics.” Also, and critically, we hope to place macrodynamics within its historical context, so that the readers – many of whom have not concentrated in macroeconomics and bring meager backgrounds to the subject – will better appreciate its historically revolutionary nature. For unless one understands Lonergan’s goal and method in their historical context, one will likely fail to understand and fully appreciate the revolutionary nature of his accomplishment.
We quote Philip McShane:
An analogy may help here. Millenia of alchemy and descriptive chemistry preceded the breakthroughs of Mendeleev and Meyer in the 1860s. There is nothing obvious about the relational structuring of elements that these two men brought into scientific being. Nor was there a rush to accept it: but now the periodic table is part of our culture. That shift in chemistry (the relational structuring of elements) stands out as the major paradigm shift in the field. Is something similar possible in economics? [McShane, 2017, 8]
Lonergan’s achievement has still not reached the community of theoretical economists and econometricians, much less the community of journalists and politicians. The members of these groups do not understand how the intrinsically-cyclical and intrinsically-dynamic economy really works. This website has been developed to encourage and aid those communities in particular. It provides elaboration of many topics which, perforce, are either treated summarily or given scattered coverage in the compact treatments constituting Lonergan’s two books.
This website may be perused casually before one reads carefully the essays herein; there is something to be said for descending from 30,000 feet and gradually seeing more clearly the outstanding features of the landscape into which one is headed. But this is not the recommended sequence. CWL 15, which contains Lonergan’s most developed thinking, should be read first; then CWL 21, which contains earlier essays and traces key developments of Lonergan’s understanding, should be read second; then McShane 1980 and 2017 should be read for historical hints, inspirational understanding, and provocative phrases; then CWL 15 should be studied ever more intensely; finally, the student may select from among the topics herein to gain further development or clarification.
One commentator (P. McShane) on Lonergan’s work suggests that students be introduced to macroeconomic dynamics in their senior year of high school, before being indoctrinated in college-level microeconomics and macroeconomics. The problem is that college students so indoctrinated – having the 101’s fixed so deeply in their consciousness – will find Lonergan’s work unusual; they will rashly judge it to be a waste of their time; thus, they may unwisely tend to discard it after reading only a few pages.
The appeal of Walrasian equilibrium is strong. Walras’ “conception is exact, but it is not complete.” The exactness makes it appear to be “the last word” to young minds not yet sufficiently advanced in any theory of dynamics; the incompleteness is not noticed; the inadequacy of statics is not recognized.
M. Leon Walras developed the conception of the markets as exchange equilibria. Concentrate all markets into a single hall. Place entrepreneurs behind a central counter. Let all agents of supply offer their services, and the same individuals, as purchasers, state their demands. Then the function of the entrepreneur is to find the equilibrium between these demands and potential supply. … The conception is exact, but it is not complete. It follows from the idea of exchange, but it does not take into account the phases of the productive rhythms. [CWL 21, 51-52]
Therefore, if young minds have in fact studied conventional microeconomics and macroeconomics, in order to deindoctrinate themselves, they should commit to reading CWL 15 several times, noticing and understanding more each time, and refraining from comment or rejection until they have gained an advanced understanding. Each reading will provide wider and deeper understanding; gradually readers will begin to appreciate this new way of analyzing and, by their greater understanding and appreciation, become significantly enriched and more critically skilled.
The treatments herein will be found to vary in nature depending upon the importance of the topic and the type of elaboration considered most useful to the reader. Some sections seek to demonstrate, to prove, to justify, and to persuade by careful argument. Some sections may seem, in the main, a gathering of excerpts from CWL 15, CWL 21, and other works, plus brief relevant introductory or concluding commentary. Some present mathematical models. Some seek to verify Lonergan’s hypothesis by analysis of time-series data. Some are mixtures of quotation, demonstration, verification, and persuasion. In every case the treatment is intended to aid understanding and appreciation by supplementing in a beneficial way what Lonergan said so compactly.
Because the theory of Functional Macroeconomic Dynamics is a single coherent set of several coherent functional interrelations, and because any explanatory element is interconnected with all other explanatory elements, the topics intersect, overlap, and fuse; but ultimately they compose a fully explanatory unity.
“Moreover, 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, 47/71]
The interested reader must read carefully CWL 15’s Editors’ Preface and Introduction, which places Lonergan’s theory in its historical context, and by its comparisons inspires the interested person to advance to an understanding of Functional Macroeconomic Dynamics. The contents of that Introduction are worth listing here and now. Note in particular the title of Section 5 of the Introduction: Macroeconomic Dynamic Analysis as a New Paradigm of Economic Theory.
Editors’ Preface, Charles C. Hefling, Jr. / xi
Editors’ Introduction, Frederick G. Lawrence / xxv
- Lonergan’s Entry into Economics, 1930-1944 / xxvi
- Democratic Economics: An alternative to Liberalism and Socialism / xxxii
- Liberalism and Socialism as Economistic Ideologies / xxxv
- Free Enterprise as an Educational Project
- Lonergan’s Reentry into Economics, 1978-1983 / xxxix
- Lonergan’s Interlocutors in Economics / xliii
- Lonergan and Marx / xlvi
- Lonergan and Marshall / xlvii
- Lonergan and Keynes / xlviii
- Lonergan, Kalecki, and Others / li
- Lonergan and Schumpeter / li
- Macroeconomic Dynamic Analysis as a New Paradigm of Economic Theory / liv
- The Systematic Significance of the Fundamental distinction between Basic and Surplus Production and Exchange
- Profit / lxiii
- Interest / lxvii
- Lonergan’s Critique of ‘Supply-Side’ and ‘Demand-Side’ Economics / lxvii
- Lonergan’s Critique of Secularist Ideologies: The Need for a Theological Viewpoint / lxix
For the interested readers – theorists intent upon a problem – knowledge can make a slow entrance; one learns that “To learn thoroughly … calls for relentless perseverance.” “To become more than a weekend celebrity calls for (one to be) more or less constantly absorbed in the effort to understand.” If one is interested in the truth, one must persevere.
In the theorist, intent upon a problem, even the subconscious goes to work to yield at unexpected moments the suggestive images of clues and missing links, of patterns and perspectives, that evoke the desiderated and the delighted cry, ‘Eureka.’ … one’s experience skips easily into the intellectual pattern, … one’s sensitive spontaneity responds quickly and precisely to the exigencies of mind. Insights come readily. Exact formulation follows promptly. … (but) even with talent, knowledge makes a slow, if not a bloody, entrance. To learn thoroughly is a vast undertaking that calls for relentless perseverance. To strike out on a new line and become more than a weekend celebrity calls for (one to be) more or less constantly absorbed in the effort to understand. [CWL 3, 186/209-10]
Despite the profundity of its contents, CWL 15 can be read speedily and superficially, as one might read an op-ed column, or some other type of nontechnical prose. The technical treatments themselves can be glossed over and the conclusions casually accepted without serious questioning and analysis and competent mastery. The formulae require no more than algebra and differential calculus at the high-school level. Once through the entire book, the neophyte may even claim to be an expert in macroeconomic dynamics and consider himself an overnight sensation. However, a deep and thorough knowledge makes a slow … entrance, and with more careful and purposive readings of CWL 15, one comes to understand upon each reading what one did not understand from the previous reading(s); one pushes on; and one gradually gets drawn deeper and deeper into the contexts of
- the history of economics,
- the heuristics of empirical science,
- the calculus of differential and difference equations,
- the notion of implicit definition,
- intelligibilities in the dynamics of physics
- the unique nature of the macroeconomic process
- the deficiencies of macrostatics
- the velocities of interdependent, mutually defining, functions as explanatory terms,
- the econometrics of time-series data
- the inner relations of cognitional theory; and the conditions and constitution of verification
More and more one is driven to compare and contrast the intelligibilities in other scientific fields with the distinctive intelligibility of macroeconomics. One’s approach to macroeconomics gradually becomes more mathematical, theoretical, and scientific; one advances from description to explanation. Slowly but surely one grasps complex interconnections and interdependencies; one avoids mistaking a single aspect of a single part for the complex unified whole; and one comes to understand and appreciate that Lonergan achieved a fully explanatory science of macroeconomic dynamics in contrast to a deficient comparative statics.
Eloquence and rhetorical excellence will herein take a back seat to instruction. Certain quotations and phrases are repeated unabashedly, but our repeated quoting is not a lame, diffident appeal to authority; rather our purpose is always to advance the reader to further understanding by providing compelling insights relevant to the subject. Repetition is not a fault.
But another kind of argument is that of the teacher in the schools. It seeks not to remove error but to instruct the students so that they understand the truth that the teacher hopes to convey. In such cases it is important to base one’s argument on reasons that go to the truth in question, that makes hearers understand how what is said is true. Otherwise, if the teacher settles the question simply by an appeal to authorities, the students will have their certitude that the facts are indeed as stated; but they will acquire no knowledge or understanding, and they will go away empty. [CWL 12, 9]
The same excerpts may be included in several treatments and, in some cases, twice in the same treatment. There are at least five reasons for this. First, they are clear and precise expressions obviously relevant to the topic under consideration. Second, we are attempting to motivate and help the reader to be so inspired by Lonergan’s insights and expression as to become determined to reach up to his level of understanding. Third, we wish to send the reader to the original text for the fuller context of the excerpt. Fourth, we want to give credit where credit is due; we will not pretend that the ideas of others are our own discoveries. Fifth, the excerpt may simply be a masterful expression of brilliant thinking, worth quoting on purely intellectual or aesthetic grounds, for which we feel compelled to find a spot.
Lonergan’s paradigm shift in economics is so massive (that) every fragment of his efforts towards that shift is relevant to the challenge of reaching for his meaning. [CWL 21, Editor’s Introduction, xxii]
This website and, by the criterion of word count, most of Lonergan’s essays are narrative, but the descriptions are merely pincers to facilitate explanatory insight.
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]
the scientist is seeking … an intelligibility that can be expressed mathematically. … The first basic assumption is that the purpose of science is the search for an intelligibility that can be expressed mathematically. [CWL 10, 139]
The descriptions guide one to symbols, symbols guide one to their images, images are the ground of insights and understanding, and isolated insights are unified into a general set of coherent relations expressed in the mastery of the field in mathematical formulae.
An adequate understanding of scientific, purely objective macroeconomics is critical today, especially in this society of free people. A little learning is a dangerous thing. Misunderstanding is even worse. Politicians regulate and (mis)manage a US economy of more than 300 million people; academics consult with politicians and instruct students; journalists mold public opinion. None of these three groups has a verifiable and reliable theory; they use faulty economic hunches suffused with, and therefore tainted or destroyed by, subjective psychological dispositions and political inclinations; they play up to their political or tribal group’s emotions, contradict one another, spout half truths, and exploit absolutes vs. percentages in order to deceive deliberately, confuse the nation, and foment hatred and division. On any day one can access the financial and political talk shows and hear so-called experts misconvinced of their objectivity, interpreting data piecemeal, entertaining conflicting premises, hypotheses, and theories, and mistaking hunches for certain knowledge.
The claim is not only that Lonergan discovered a new, purely theoretical paradigm but also that he raised economics from a matter of tribalism and political opinion to an objective science on which all can agree. The free world desperately needs a strong dose of complete explanation in the form of a scientific macroeconomic theory, so that it can order itself appropriately and remain a free world. This website is intended to help promote and achieve a zeitgeist of scientific objectivity, to replace psycho-political ideology, and to stop society’s relentless socialist drift to the horror of totalitarianism.
The serious reader is encouraged to have handy at all times for ready reference
- the Bibliography,
- the diagrams in CWL 15, on pages 55, 124, 125, 150, 164, and 174, and
- any other diagrams he or she has found to be useful.
Incidentals regarding certain terms and usage:
- The masculine will often stand for both the masculine and the feminine.
- The word “products” will often stand for “goods and services.”
- The word “goods” will often stand for “goods and services” unless the context indicates otherwise.
- Workers include all persons in the unit of enterprise: accountants, laborers, salespersons, executives, in-house lawyers, software coders, owner-managers, et al.
- In the same vein, the word “labor” refers to any and all types of contribution to the production process. The salesperson, the accountant, and the owner-manager are all laborers.
- The phrase “velocitous flows” is redundant but deliberate.
- Lonergan’s early use of the phrase “pure surplus income” is often retained, though that phrase is unfavorable in today’s environment of shallow catchphrases. Although it may connote to the ignorant and unwary “exclusively excess income,” it has no such meaning. A careful reading will reveal that the phrase is an explanatory term – like mass or electrical intensity – not a descriptive term with a psycho-political residue. When possible, we replace pure surplus income with phrases such as “exclusively expansionary income” or “capital expansion’s monetary correlate” or “exclusively point-to-line income”.
- Conventions of the use of boldface, italic, capitalization, quotation marks, and commas before or after quotation marks are not honored consistently according to rules. However, the inconsistent use should not confuse any reader. In most cases the use is only for emphasis and focus; and we request the reader’s forebearance.
- Split infinitives are used frequently and without remorse.
- For pedagogical reasons we took liberties with insertion of clarifying parentheses into excerpts from Lonergan’s and others’ works. The reader is directed to always read the original passages; and compliance with this directive will require purchase of at least CWL 3, CWL 15, CWL 21, McShane 1980, and McShane 2017.*
- There will be frequent tweaks to the contents of this website. It is not expected that the changes will involve any changes of fundamental concepts or ideas. Any changes for clarity or merely for the sake of style will not be announced.
- The website has been composed in Microsoft Word and used Word’s equation editor. The website’s software accepts Word’s text , but not its equation editor. Consequently, we must either download a scan or photo of equations or recompose the equations using Word’s features for brackets, superscripts, subscripts, and operators. In the meantime, we request the reader’s patience regarding the quality of the scans or photos, and instead – what is far more significant – we request total concentration on the functional relationships expressed by the equations.
We now must roll up the scroll , publish, and revise as time and opportunity allow.
The Functional Macroeconomic Dynamics Collaborative
*The late Philip McShane was not a participant in The Functional Macroeconomics Collaborative. In the Thanks (Acknowledgments) section, tribute is paid to him for his vital and indispensable commentary on Lonergan’s works.