Modern Monetary Theory Is Backward; It Creates “Illegal” Superposed Circuits

Preliminary note: In this section we are addressing the proper understanding and management of the economic process in normal, non-pandemic times.  We affirm that the current pandemic calls for extraordinary measures.


Unwittingly, first out of ignorance and recently as necessitated by a pandemic, some nations, including the U.S., are wandering into the ultimate menace to the financial system, the spending without constraint blessed and recommended by unscientific Modern Monetary Theory. (Click here and here) The systematic result of MMT’s unconstrained printing of money, unjustified by corresponding, concomitant production of goods and services, is rampant inflation in prices for a) goods and services and/or b) financial assets.  (Continue reading)

Catherine Blanche King’s Comments And Addendum

I quoted Catherine King in the very first line of my previous blog (below) entitled “Functions Are Not Seen, But Must Be Understood.”

I am grateful to Catherine for responding with valuable comments providing needed context to the quote.  Herewith are, first, her original comments, then, Catherine’s recent Addendum to her comments (sent as her Reply to my previous blog):

Hello John:

Glad to hear from you.

About that quote, it’s really brief but probably needs to be in some contexts at least.

But the underlying issue is one of an already-learned idea about opening our eyes and seeing, and then wrongly equating that common activity with what happens when we understand.  The more nuanced point, then, is that we do sense, but also that WHAT we sense we also ask about . . . so that the wrong-view that seeing equates to understanding can give way to the right view that wonder, questioning, and then having insights is what gives way to understanding and then even to knowing.

But the fundamental issue is to understand that the sensible, and much more, is also intelligible; and that we understand that intelligibility through intelligent process.

Just knowing that intellectually, however, is only a beginning to changing one’s already-set but erred viewpoint, which is usually set in our childhood . . . so it takes a good amount of thought to unearth that view and to experience change at the luminous core of our understanding.

As always, good luck and good insights as you undergo your work.


An addendum: Having recently had conversations about functions and the seeing-understanding complex, I’d like to add this: Functions actually occur in the real world that we commonly and wrongly equate with ONLY “the sensible world.” Ride a bike and you are involved with a set of ACTUAL functions–insofar as your bike riding occurs in the continuum of this particular space and time, which involves sensible elements, one of which, in part, is you.

What was missing in my correspondent’s thinking was his understanding: that instantly recognizing and then riding a bike is a highly-contextualized meaningful reality . . . it already involves a huge background of understanding that the rider has undergone and now is “instantly” privy to . . . including functions that flow into concrete reality, for instance, when we ride a bike. So we can think of functions abstractly, but also as concretely operating in the real world . . . a world we could not operate in had we not understood . . . the intelligibility of the sensible and much more.

In this context, then, “functions cannot be seen,” but they manifest regularly in WHAT we see. And WHAT we see is not seen in abstraction but is already an answer to a prior question about its intelligibility . . . or WHAT is understood, or to be understood.

The person I was conversing with still found the above to be problematic. My guess is that the erred idea . . . that reality is sensible-out-there-only, and that anything we think is in-here, and so not really real . . . is still “stuck” so to speak, in his thinking, having been accepted a long time ago. . . . to which I would say: self-reflection must include the hard-won recovery of early-made framing ideas; that is, if any philosophical progress is to be had.


Functions Are Not Seen, But Must Be Understood

Functions are not seen, but must be understood. (Catherine Blanche King, private communication)

A systematic explanation, then, requires a normative theoretical framework.  The basic terms and relations of such a framework would specify the distinctions and correlations that articulate the causes, which are not necessarily visible, of events that are apparent to all.  (CWL 15,  Editors’ Introduction, lv) (Continue reading)

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. (Continue reading)

McShane’s Six Areas Of Intervention; Economists’ Massive Disorientation Regarding Basic Variables


McShane, Philip, “Implementing Lonergan’s Economics”; in Liddy, Richard M. ed. The Lonergan Review, Vol. III No. 1 – Spring 2011, Copyright 2011, The Bernard Lonergan Institute, Seton Hall University, South Orange, New Jersey

I, (Philip McShane) list here six areas of non-functional economic intervention: there are more pointers elsewhere, and more to come from our collaboration. ¶ First, then there is a matter of competence. What Lonergan envisaged is democracy of sufficient understanding of economic rhythms, … ¶ Secondly, there is the challenge of influencing school economics. … What is needed now, and feasible, is the supplementing of present texts – that have to be taught in fairness to students – with a few initial classes that, as well as raising the issue of the good life and good credit, raise bluntly the deep yet obvious mistake that I mention next.  ¶ Thirdly, there is the challenge of a multi-faceted intrusion into present economics that would draw attention to the massive mistake regarding basic variables. Ftnt. 20

Footnote. 20:  It seems best to note here a strategy not listed: that of comparison and contrast.  Present economic theory, application, criticism, is grounded in erroneous fundamental variables, and overlaid with stupidities about money, credit, market indicators, interest rates, government responsibilities.  These flaws certainly need exposure.  But the larger challenge is the redoing of the statistical work of the past century, as best we can, in the light of the new variables.

¶ Fourthly, there is the central issue … of the nature of credit, implicitly raising – at many levels – the question, What is money? … ¶ Fifthly, there is a massive foundational theoretical effort needed that is quite beyond present economists.  Without the doctrines emergent from such foundational efforts, the subtle idiocy of treating money not as a promise but as a commodity will continue its casino frenzy.  ¶ Sixthly and finally, I return to the issue of school education, … Under secondly, above , there was the immediate possibility of competent (firstly) Lonergan people persuading grade 12 economics or social studies teachers to build into the accepted course, say, my single class on proper economic variables. …



The Animal Organism and the Economic Organism





Three Displays of the Diagram of Rates of Flow

We print three displays of the same Diagram of Rates of Flow, AKA the Diagram of Interdependent Velocities.  The second and third displays simply suggest that the serious reader must keep in mind certain precepts as he/she seeks to achieve a new paradigm and a new framework for macroeconomic dynamics. Continue reading

The Principle of Concomitance: The Foundation of Equilibrium and Continuity

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

Recall that the subtitle of CWL 15 is “An Essay in Circulation Analysis”.  It is by virtue of concomitance that continuity and equilibrium are achieved so as to constitute an orderly process of circulations.  (Continue reading)

Explaining “Present Fact”: An Ever-Varying Process; A Never-Varying Systematics

The economic process is always the current, purely-dynamic, concrete functioning. The analysis of the dynamic process is always relevant to the present fact. The immanent intelligibility of such a dynamic, ever-varying process may itself be an invariant; i.e. though the differentials may change in magnitude, the relation of the differential velocities and accelerations among themselves is invariant.  So it is in the case of dynamic pendular motion, elliptic motion, the variables of electromagnetic phenomena, and in the dynamic economic process.  The general laws of the process are applicable in any instance.  These primary, abstract, general, field-theoretic laws may be applied to whatever may be the secondary determinations from the concrete non-systematic manifold.  Thus we can get the particular law explaining the particular concrete process under investigation.

The overall economic functioning has an objective immanent intelligibility.  This intelligibility is an invariant – a set of differential equations which implicitly define the explanatory, conjugate, differentials of the dynamic process. The explanatory terms are abstract functions defined by their functional relations to one another. In the implicit equations, the terms define the relations and the relations define the terms, and insight fixes both. And the equations cohere with one another to constitute a fully-explanatory field theory.

The point-to-line and higher correspondences are based upon the indeterminacy of the relation between certain (surplus) products and the (later ultimate basic) products that (exit the process and eventually) enter into the standard of living. … the indeterminacy is very much a present fact.  One has to await the future to have exact information.   And while estimates in the present may be esteemed accurate, the future has no intention of being ruled by them: owners do not junk equipment simply because it has outlasted the most reliable estimates; nor are bankrupts kept in business because their expectations, though mistaken, are proved to have been perfectly reasonable.  The analysis that insists on the indeterminacy is the analysis that insists on the present fact: estimates and expectations are proofs of the present indeterminacy and attempts to get round it; and, to come to the main point, an analysis based on such estimates and expectations can never arrive at a criticism of them; it would move in a vicious circle.  It is to avoid that circle that we have divided the process in terms of indeterminate point-to-line and point-to-surface and higher correspondences. [CWL 15, 27-28]

in the long run, and especially in the very long run, such a correlation exists.  It is that surplus production is the accelerator of basic production.  In other words the correspondence between the two is not a point-to-point but a point-to-line correspondence; … Now such a correspondence, if it is to be expressed not in terms of expectations of the future but in terms of present fact, is a correspondence of accelerator to accelerated. … If the system is to move into a long-term expansion, this movement has to begin with a surplus quantity acceleration: surplus production has not merely to maintain or renew existing capital equipment but has to reach a level at which it turns out new units of production and maintains or renews a greater number of existing units; this gives the quantity surplus expansion. [CWL 21, 132]

(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) … 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 maintenance and acceleration (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 in the stock of money (distinct process 3) 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]