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[7/16/2019] 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 situationOur aim is to prescind from human psychology 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 revolutionis 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]  [1]

 [7/17/19] The purpose of this section is to inquire into the manner in which the rate of saving Wis 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] [2]

 [7/18/19] No doubt Keynes was an economist first and a methodologist second, but he was none the less very articulate about his theorizing……..Lonergan, for his part, is perhaps a methodologist first and an economist second, but, as we shall see, he was able to push his economic reflections further than Keynes because he had a firmer grasp of the essentials of an effective theory.   [Gibbons, 1987] [3]

[7/22/19] real analysis (is) identifying money with what money buys. … And that is the source of the problem in real analysis. If you want to treat money that doesn’t make a difference, you can have a beautiful liberal monetary theory.  But it doesn’t say the way the thing works. [CWL 21, Editors’ Introduction xxviii] [4]

[7/23/19] There are two distinct views of how you, and we mean you, reach understanding: either you puzzle over some given situation and arrive at an understanding that leaves you with what is called a concept, or you somehow pick up concepts as you move through life, or an economic class, and you have to analyze them to make sense of them.  The first view we call the MAC view; the second view we call the McA view. The first view, in which the A stands for ah? and ah! is the view of …  Lonergan, you and us.  The second view is the dominant view, the view of Mankiw, to which we return in the second section.  It is associated with Scotus (1265-1308) and with the British tradition of Conceptual Analysis.  It is a view that murders education. [McShane, 2002-1, 51] [5]

[7/24/19] Traditional theory looked to shifting interest rates (to manage the economy).  The difficulty with this theory is that a.) it lumps together a number of quite different things and b.) it overlooks the order of magnitude of the fundamental problem… [CWL 15,  141-144] [6]

[7/25/19] 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] [7]

[7/26/19] Taking into account past and future values does not constitute the creative key transition to Functional Macroeconomic Dynamics.  Those familiar with elementary statics and dynamics will appreciate the shift in thinking involved in passing from (static) equilibrium analysis … to an analysis where attention is focused on second-order differential equations, on d2θ/dt2, d2x/dt2, d2y/dt2, on the primary relativities of a range of related forces, central, friction, whatever.  Particular secondary boundary conditions in Functional Macroeconomic Dynamics, past and future pricings and quantities, are relatively insignificant for the analysis of the primary relativity immanent in, and applicable to, every instance of the process. What is significant is the Leibnitz-Newtonian shift of context. [paraphrase in part of McShane, 1980, 127] [8]

[7/29/19] 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.  … 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. … The scientist selects the relations of things to us that lead more directly to knowledge of the relations of things among themselves.  Ordinary description is free from this ulterior preoccupation. [CWL 3, 291-92/316-17] [9]

[7/30/19] In implicit equations, the terms are implicitly defined by the relations in which they stand with one another.   In [d”inverno, 1992], under the heading of “Chapter 13, The Structure of the Field Equations”, Ray d’Inverno reads Einstein’s implicit field equations from right to left, left to right, and back and forth.  He states:

Before attempting to solve the field equations we shall consider some of their important physical and mathematical properties in this chapter.  The full field equations (in relativistic units) are

Gab= 8πTab

  1. The field equations are differential equations for determining the metric tensor gab from a given energy-momentum tensor Tab. Here we are reading the equations from right to left.  … one specifies a matter distribution and then solves the equations to ascertain the resulting geometry.
  2. The field equations are equations from which the energy-momentum tensor can be read off corresponding to a given metric tensor gab. Here we are reading the equations from left to right.
  3. The field equations consist of ten equations connecting twenty quantities, namely, the ten components of gabtand the ten components oftTab. Hence, from this point of view, the field equations are to be viewed as constraints on the simultaneous choice of  gab and Tab.  This approach is used when one can partly specify the geometry and the energy-momentum tensor from physical considerations and then the equations are used to try and determine both quantities completely. [d’Inverno, 1992, 169]

Analogously, focusing on one of Lonergan’s implicit equations, the terms are implicitly defined by the relations in which they stand with one another: P’Q’ = p’a’Q’ + p”a”Q”  [CWL 15,156-62].  We may read from left to right, right to left, or back and forth between right and left. [10]

[7/31/19] By now the reader is familiar with Lonergan’s explanatory schematic and the formulae preceding it [CWL 15, 52-55], but we ask the reader to read once more the text at the bottom of that framework:

Per interval, surplus demand [function], I”, pays E” for current surplus products, and receives dividends i”O” from surplus production [i.e. surplus supply function] and i’O’ from basic production [i.e. basic supply function].

Per interval, basic demand [function], I’, pays E’ for current basic products and for its services receives c”O” from surplus supply [function] and c’O’ from basic supply [function].

Vertical arrows represent transactions between the redistributional area and surplus and basic supply [functions]; horizontal arrows the dealings of demand [functions] with the redistributional area. [CWL 15, 55] [11]

[8/1/19] We are grateful to the editors of CWL 15, Lonergan’s Macroeconomic Dynamics: An Essay in Circulation Analysis, for helping us to place Functional Macroeconomic Dynamics in its historical and theoretical context.  We list here the headings of the editors’ Preface, Introduction, and Appendix:

  • Editors’ Preface, Charles C. Hefling, Jr. / xi
  • Editors’ Introduction, Frederick G. Lawrence ; xxv
  1. Lonergan’s Entry into Economics, 1930-1944 / xxvi
  2. Democratic Economics: An alternative to Liberalism and Socialism / xxxii
    1. Liberalism and Socialism as Economistic Ideologies / xxxv
    2. Free Enterprise as an Educational Project
  3. Lonergan’s Reentry into Economics, 1978-1983 / xxxix
  4. Lonergan’s Interlocutors in Economics / xliii
    1. Lonergan and Marx / xlvi
    2. Lonergan and Marshall / xlvii
    3. Lonergan and Keynes / xlviii
    4. Lonergan, Kalecki, and Others / li
    5. Lonergan and Schumpeter / li
  5. Macroeconomic Dynamic Analysis as a New Paradigm of Economic theory / liv
  6. The Systematic Significance of the Fundamental distinction between Basic and Surplus Production and Exchange
    1. Profit / lxiii
    2. Interest / lxvii
    3. Lonergan’s Critique of ‘Supply-Side’ and ‘Demand-Side’ Economics / lxvii
  7. Lonergan’s Critique of Secularist Ideologies: The Need for a Theological Viewpoint / lxix [CWL 15] [12]
  • Appendix: History of the Diagram, 1944-1998. Patrick H. Byrne / 177 ff. [12]


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  • N. Gregory Mankiw, Macroeconomics, Hardcover, 10thEdition, $220.34
  • Olivier Blanchard, Macroeconomics, Hardcover, 7thEdition, $218.92; Paperback, $57.99
  • Paul Krugman and Robin WellsMacroeconomics, Hardcover, 5thEdition, $186.48
  • Andrew B Abel and Ben Bernanke, Macroeconomics, Hardcover,  $272.32
  • Dr. Rudiger Dornbusch, Stanley Fischer, Richard Starz, Macroeconomics, 13thEdition, Hardcover $112.47
  • Bernard Lonergan, Macroeconomic Dynamics, An Essay in Circulation Analysis, Paperback, $31.01 [13]


[8/6/19] Lonergan understood relativity:  In the Note at the beginning of the Index of CWL 21, For a New Political Economy, McShane remarks, “Part Three … belongs almost entirely in what I call the Einsteinian context , in contrast to the Newtonian achievement of Part One, …” [CWL 21, 325]   What does McShane mean by “the Einsteinian context of Part Three, in contrast to the Newtonian achievement of Part One”?  That assertion would appear to state that Functional Macroeconomic Dynamics is a relativistic field theory superseding the deficient efficient-cause theories of today.  If so, might our gaining an understanding of what McShane meant help us to a deeper understanding of the economic process and better appreciation of Lonergan’s achievement?  Did Lonergan discover a relativistic macroeconomics, a process constituted by purely relational interdependencies?  Did he discover a deeper unity and a better explanation of the economic process?  Did he achieve a new paradigm by the discovery of a new science?  A sample of a) Lonergan’s understanding of relativity in particular and b) how Lonergan’s mind worked in general is contained in CWL 3.  “Now the principles and laws of a geometry are abstract and generally valid propositions.  It follows that the mathematical expression of the principles and laws of a geometry will be invariant under the permissible transformations of that geometry. … Such is the general principle and it admits at least two applications.  In the first application one specifies successive sets of transformation equations, determines the mathematical expressions invariant under those transformations, and concludes that the successive sets of invariants represent the principles and laws of successive geometries.  In this fashion one may differentiate Euclidean, affine, projective and topological geometries. … A second, slightly different application of the general principle occurs in the theory of Riemannian manifolds.  The one basic law governing all such manifolds is given by the equation for the infinitesimal interval, namely,

ds2= Σgijdxidxj           [i, j = 1,2…n]

where dx1, dx2… are differentials of the coordinates, and where in general there are n2products under the summation.  Since this equation defines the infinitesimal interval, it must be invariant under all permissible transformations. … … … Thus in the familiar Euclidean instance, gij is unity when equals j; it is zero when does not equal j; and there are three dimensions. In Minkowski space, the gij is unity or zero as before, but there are four dimensions, and xequals ict.  In the General Theory of Relativity, the coefficients are symmetrical, so that gij equals gji; and in the Generalized Theory of Gravitation, the coefficients are anti-symmetrical.”   [CWL 3, 146 -147/170-71] [14]

[8/7/19] Lonergan replaced the single circuit of the textbooks with the credit-centered, double circuit.  Please consider the significance of the key words (in bold) of several possible alternative titles below of Lonergan’s framework other than Diagram of Rates of Flow.  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 Production, Exchange, and Financing
  • The Diagram of Monetary Channels
  • The Diagram of Monetary Transfers
  • The Diagram of Monetary Circulations
  • The Diagram of the Monetary Correlate sof the Productive Process
  • The Diagram of Interdependent, Implicitly-Defining, Mutually-Conditioning, Velocitous Monetary 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  [15]

[8/8/19] 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. … 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 order, the 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] … The one issue is the locus of … 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.[?]  [16]

[8/12/19] Proviso: Our analysis … acknowledged the existence of schemes of recurrence in which a happy combination of abstract laws and concrete circumstances makes typical, further determinations recurrent, and so brings them under the domination of intelligence.  Moreover, it acknowledged that concrete patterns of diverging series of conditions are intelligible; granted both the requisite information and mastery of systematic laws, it is possible in principle to work from any physical event, Z, through as many prior stages of its diverging and scattering conditions as one pleases; and it is this intelligibility of concrete patterns that grounds the conviction of determinists, such as A. Einstein. … However, we agree with the indeterminists inasmuch as they deny in the general case the possibility of deduction and prediction. For while each concrete pattern of diverging conditions is intelligible, still its intelligibility lies not on the level of the abstract understanding that grasps systems of laws but on the level of the concrete understanding that deals with particular situations.  Moreover such concrete patterns form an enormous manifold that cannot be handled by abstract systematizing intelligence for the excellent reason that their intelligibility in each case is concrete. There results the peculiar type of impossibility that arises from mutual conditioning.  Granted complete information on a totality of events, one could work out from knowledge of all laws the concrete pattern in which the laws related the events in the totality.  Again, granted knowledge of the concrete pattern, one could use it as a guide to obtain information on a totality of relevant events.  But the proviso of the first statement is the conclusion of the second; the proviso of the second statement is the conclusion of the first; and so both conclusions are merely theoretical possibilities.  For the concrete patterns form a non-systematic aggregate, and so it is only by appealing to the totality of relevant events that one can select the concrete pattern; on the other hand, the relevant totality of events is scattered, and so they can be selected for observation and measurement only if the relevant pattern is known already  [CWL 3, 650/672-73] … … even when the laws involved in the process are thoroughly understood, even when current and accurate reports from usually significant centres of information are available, still such slight differences in matters of fact can result  in such large differences in the subsequent course of events that deductions have to be restricted to the short run and predictions have to be content with indicating probabilities. So perhaps it is that astronomers can publish exact times of the eclipses of past and future centuries but meteorologists need a constant supply of fresh and accurate information to tell us about tomorrow’s weather  [CWL 3, 51/74] [17]

[8/13/19]  Both Paul Romer and Bernard Lonergan made significant contributions to humanity.  Each achieved, consistent with his own purpose and scope, brilliant formulations of the economic process.  Romer’s analysis regards endogenous, constant, exponential, growth –  averaged, smoothed-out, and over the very long run.  Lonergan’s more comprehensive analysis regards the conditions of equilibrium throughout all the phases of the many differently-timed, nonsmooth expansions, which comprise the very long run.  If a Nobel Memorial Prize in Economics Sciences could be awarded posthumously, Lonergan would merit a Nobel Memorial Prize.  [18]

[8/14/19] Now it is important to distinguish two different aspects of equations (39) and (42).  Under a certain aspect these equations express a truism: if entrepreneurial receipts and payments equate, then they equate not only among entrepreneurs but also between entrepreneurs and the third party, demand.  But under another aspect the same equations, so far from expressing a necessary truth, express an almost unattainable ideal, namely a dynamic equilibrium to which any actual process continually attempts to approximate by varying prices and changing quantities of supply.  To study the truism is to study bookkeeping, to study the art of double entry, and to learn the magic of the variable items, profit and loss, which perforce make the books balance.  To study the ideal is to study equilibrium analysis.  The bookkeepers are wise after the event.  But if the entrepreneurs are to be wise, they have to be wise before the event, for their payments precede their receipts, and the receipts may equal the payments but they may also be greater or less, to give the entrepreneur a windfall profit or loss.  Such justification or condemnation of payments by receipts the bookkeeper records but the entrepreneur has to anticipate, and the grounds of his anticipations, their effects upon his decisions, and the interaction of all decisions form the staple topic of equilibrium analysis. Now the viewpoint of the present discussion is neither that of the bookkeeper nor that of the equilibrium analyst. Equations (39) to (42) are regarded not as a set of facts recorded by bookkeepers, nor as an ideal which entrepreneurs strive yet fail to attain, but as a first approximation to the law of circulation in the basic circuit. The first approximation to the law of projectiles is the parabola: one might, if one chose, consider the projectiles as aiming at or tending towards the ideal of the parabola yet ever being frustrated by wind resistance; one might elaborately describe the trajectory of the projectile as an indefinite series of parabolas, each one in succession the goal of its tendency only to be deserted because adverse circumstance set it on another track.  In such a description of trajectories there is to be found at least a superficial resemblance with the statement that an economy is tending towards equilibrium at every instant, though towards a different equilibrium at every successive instant.  But whatever the resemblance, and however deep and significant the difference, we here propose to take a circuit and examine first the implications of this law and then the second approximations that are relevant to our inquiry.  [CWL 21, 142-43] [19]

[8/15/19] The channels of Lonergan’s Diagram of Rates of Flow provide a general and universally-relevant explanatory framework of the always-current process.  The channels explain– rather than merely describe or postulate – both the dynamic equilibria of the pure cycle and the dynamic disequilibria of the booms and the slumps of the trade cycle.

  • More positively, the channels account for booms and slumps, for inflation and deflation, for changed rates of profit, for the attraction found in a favorable balance of trade, the relief given by deficit spending, …  [CWL 15, 17]
  • … positive or negative transfers to basic demand (D’-s”I’) and consequent similar transfers to surplus demand (D”-s”I”) belong to the theory of booms and slumps. They involve changes in (aggregate basic or aggregate surplus) demand, with entrepreneurs receiving back more (or less) than they paid out in outlay (which includes profits of all kinds).  The immediate effect (of these aberrational monetary transfers) is on the price levels at the final markets, and to these changes (in price), enterprise as a whole responds to release an upward (or downward)  movement of the whole economy.  But the initial increased transfers to demand [that is, excess transfers along (D’-s’I’) and (D”-s”I”) ] are not simply to be supposed.  For that would be postulating without explaining the boom or slump. [CWL 15, 64]  [20]  (Click here for previous “Single Paragraphs”)

[8/19/19] A condition of circuit acceleration was seen in Section 15 to include the keeping in step of basic outlay, basic income, and basic expenditure, and on the other hand, the keeping in step of surplus outlay, surplus income, and surplus expenditure.  Any of these rates may begin to vary independently of the others, and adjustment of the others may lag.  But any systematic divergence brings automatic correctives to work.  The concomitance of outlay and expenditure follows from the interaction of supply and demand.  The concomitance of income with outlay and expenditure is identical with the adjustment of the rate of saving to the requirements of the productive process. [CWL 15, 144] [21]

[8/20/19] Unless you are very alert and detached, you assume the orientation of the teacher.  This is all the more true if the orientation of the teacher corresponds to the orientation of the whole department, the whole school.  It is even worse if that orientation controls the textbooks, the journals, the publications. … after a while, or a year, or a degree in economics, such principles can become a fairly fixed point of view, especially as they are supported by Establishment Economics.  So, no other set of assumptions seems feasible. … All that is expected of Establishment Economics, more so at its higher level, is advanced mathematical tinkering. … present economic assumptions are a pretty poor collection of descriptive counsels, … [McShane, 2002-1, 57] [22]

[8/21 and 22/19]