Lonergan’s Purely Relational and Purely Functional Frame of Reference

I would add that the aims and limitations of macroeconomics (that is, the circulation analysis presented here) make the use of a diagram particularly helpful, …  For its basic terms are defined by their functional relations.  [CWL 15, 54]

Lonergan’s frame of reference, i.e. his framework, presented the underlying intelligible and dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates of functional flows to one another.

“Lonergan’s analysis is concrete but heuristic.  It focuses on functional relations intrinsic to the productive process to reach eventually a general theory of dynamic equilibria and disequilibria.” [McShane 1980, 117]

I have insisted on focusing on the central issue: the need of a functional analysis of the productive process and its correlated monetary flow. [McShane 1980,200]

The division is not a matter of social relations or of property or of the properties of things: it is a functional analysis. … The aim of the analysis is to reveal the possibilities of the productive process as a dynamic system. [McShane 1980, 119-20]

Lonergan sought to discover a general  macroeconomic theory of functional interdependencies and interrelations.  He sought to explain both equilibria and disequilibria among functional flows in a coherently unified and universally applicable theory.  In order to explain, “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 of flows to one another.”[CWL 15, 26/27 ftnt 27 ]

Lonergan analyzed the structure of the functional interdependencies in the velocitous flows comprising the productive process, and he discovered the science of monetary circulation required for the continuity and equilibrium of the process of production and payments.  His conceptualization was of the interrelated velocities of aggregate functionings rather than of the BEA’s sectoral or proprietary classifications. His analysis was functional.

“Functional” is for Lonergan a technical term pertaining to the realm of explanation, analysis, theory; Lonergan illustrates his basic meaning of ‘explanation’ by referring to D. Hilbert’s method of implicit definition: …  In Lonergan’s circulation analysis, the basic (dynamical) terms are rates (implicitly defined by their functional relations to one another) – rates of mutually conditioning, and interdependent productive activities and rates of mutually conditioning, and interdependent payments.  The objective of analysis is to discover the … functional (inter)relationships (which implicitly define these rates and explain the dynamics of these rates to one another). [CWL 15,  26-27 ftnt 27][1]

Lonergan worked privately, with an open and independent mind; he read economic theory voraciously; he learned from everyone, but used implicit definition to achieve his own higher-level, more abstract, insights.  His purely relational systematics surpasses that of every one else.

To our knowledge, no one else considers the functional distinctions between different kinds of productive rhythms (emanating from the distinctions between basic and surplus 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]

On such a methodological model (i.e. explanatory definition and implicit definition superseding nominal definition)… classes of payments (correlated with the productive process by projection of the structure of the productive process onto classes of payments) quickly become rates of payment standing in the mutual conditioning of a circulation; to this mutual and, so to speak, internal (monetary) conditioning there is added the external (monetary) 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 (and sequential) rhythms of goods and services;[2] and from the foregoing dynamic configuration of conditions during a limited interval of time, there is deduced a catalogue of possible types of change in the configuration over a series of intervals. 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.  Through such a frame of reference one can see and express the mechanism to which classical precepts are only partially adapted; and through it again one can infer the fuller adaptation that has to be attained. [CWL 21, 111]

Below is the Diagram of Rates of Flow from page 55 of  CWL 15.  Depending on one’s momentary interest and point of view, this schematic may alternatively be called:

  • The Diagram of Two Operative Circuits Connected by Operative Crossovers
  • The Diagram of Functional Monetary Interdependencies
  • The Configuration of Monetary Conditions
  • The Diagram of Operative Functional Flows of Products, Payments, and Financings
  • The Diagram of Monetary Channels
  • The Diagram of Monetary Transfers
  • The Diagram of the Monetary Correlates of the Productive Process
  • The Diagram of Interdependent, Implicitly-Defining, Mutually-Conditioning Velocitous Functionings
  • The Double-Circuited, Credit-Centered Diagram which Sublates, Supervenes, and Replaces the Single-Circuit, Credit-Centered Diagram of Macroeconomics Textbooks
  • The Functional Framework
  • (Colloquially, because of its shape) Lonergan’s Baseball Diamond

I would add that the aims and limitations of macroeconomics (that is, the circulation analysis presented here) make the use of a diagram particularly helpful, …  For its basic terms are defined by their functional relations.  [CWL 15, 54]

This version of the diagram prescinds from a) trade imbalances, b) government surpluses and deficits, and c) other collective surpluses and deficits, which can be imaged by superposed circuits lacking vital c’O’ and c”O” flows. These superposed circuits are treated in CWL 15, 162-76.  Also, we have shown a superposed circuit in the blog of October 7, 2018 entitled “The Simple Move to Two Explanatory Circuits.”

Diagram of Rates of Flow 2

Diagram of Rates of Flow

 

[1]I have rearranged the quote.  The original wording is as follows:

“Functional” is for Lonergan a technical term pertaining to the realm of explanation, analysis, theory; ¶Lonergan illustrates his basic meaning of ‘explanation’  by referring to D. Hilbert’s method of implicit definition: …  In Lonergan’s circulation analysis, the basic terms are rates – rates of productive activities and rates of payments.  The objective of 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  26-26 ftnt 27][1]

[2]… In figure 14-1 the reader will notice five circles representing the monetary functions. … I would add that the aims and limitations of macroeconomics (that is, the macroeconomic circulations presented here) make the use of a diagram particularly helpful, …  For its basic terms are defined by their functional relations.  The maintaining of a standard of living is attributed to a basic process (distinct process 1), an ongoing sequence of instances of so much every so often.  The maintenanceand acceleration (positive or negative) (distinct process 2) of this basic process is brought about by a sequence of surplus stages, in which each lower stage is maintained and accelerated by the next higher.  Finally, transactions that do no more than transfer titles to ownership are concentrated in a redistributive function, whence may be derived changes (distinct process 3) in the stock of money dictated by the acceleration (positive or negative) in the basic and surplus stages of the process. … So there is to be discerned a threefold process in which a basic stage is maintained and accelerated by a series of surplus stages, while the needed additions to or subtractions from the stock of money in these processes is derived from the redistributive area. … it will be possible to distinguish stable and unstable combinations and sequences of rates in the three main areas and so gain some insight into the long-standing recurrence of crises in the modern expanding economy. [CWL 15, 53-54]