[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 situation**. **Our 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 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] [1]

** **[7/17/19] 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] [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 d^{2}θ/dt^{2}, d^{2}x/dt^{2}, d^{2}y/dt^{2}, 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

*G _{ab}= 8*

*π*

*T*

_{ab}- The field equations are differential equations for determining the metric tensor
*g*from a_{ab }**given energy-momentum tensor**. Here we are reading the equations from*T*_{ab}**right to left**. … one specifies a matter distribution and then solves the equations to ascertain the resulting geometry. - The field equations are equations from which the energy-momentum tensor can be read off corresponding to a
**given metric tensor**. Here we are reading the equations from*g*_{ab}**left to right**. - The field equations consist of
**ten equations connecting twenty quantities**, namely, the ten components of*g*and the ten components oft_{abt}*T*. Hence, from this point of view, the field equations are to be viewed as_{ab}**constraints**on the simultaneous choice of*g*and_{ab }*T*. 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]_{ab}

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’sfor helping us to place Functional Macroeconomic Dynamics in itsMacroeconomic Dynamics: An Essay in Circulation Analysis,historical and theoretical context.We list here the headings of the editors’Preface,Introduction,andAppendix:

Editors’ Preface, Charles C. Hefling, Jr. / xiEditors’ 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 [CWL 15] [12]

Appendix: History of the Diagram, 1944-1998. Patrick H. Byrne / 177 ff. [12][8/5/19]

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[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 theEinsteinian context, in contrast to theNewtonian achievementof 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 arelativistic field theorysuperseding 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,

ds^{2}=Σg_{ij}dx_{i}dx_{j}[i, j = 1,2…n]where

dx,_{1}dx… are differentials of the coordinates, and where in general there are_{2}nproducts under the summation. Since this equation defines the infinitesimal interval, it must be invariant under all permissible transformations. … … … Thus in the familiar Euclidean instance,^{2}gis unity when_{ij }iequalsj; it is zero whenidoes not equalj; and there are three dimensions. In Minkowski space, theg_{ij}is unity or zero as before, but there are four dimensions, andxequals_{4 }ict. In the General Theory of Relativity, the coefficients are symmetrical, so thatgequals_{ij }g; and in the Generalized Theory of Gravitation, the coefficients are anti-symmetrical.” [CWL 3, 146 -147/170-71] [14]_{ji}[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 thanDiagram 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 CircuitsConnected byOperativeCrossovers- The Diagram of
Functional Monetary Interdependencies- The Configuration of
MonetaryConditions- The Diagram of
Operative Functional Flowsof Production, Exchange, and Financing- The Diagram of
MonetaryChannels- The Diagram of
MonetaryTransfersThe Diagram of Monetary Circulations- The Diagram of the
MonetaryCorrelatesof the Productive Process- The Diagram of
Interdependent, Implicitly-Defining, Mutually-Conditioning, Velocitous Monetary Functionings- The
Double-Circuited,Credit-CenteredDiagram whichSublates, Supervenes, and Replacesthe Single-Circuit, Credit-Centered Diagram ofMacroeconomicsTextbooks- 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 hiscontributionsto 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 arethe breakdown and decay ofthe good of order, the failure ofschemes of recurrenceto 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 namedthegood 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 butprecepts to mankind, not specific remedies and plans to increase the power of bureaucracies, but universal laws whichmen 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 thatconcrete 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 ofdiverging conditionsis 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 forman enormous manifold that cannot be handled by abstract systematizing intelligence for the excellent reason that their intelligibility in each case is concrete. There resultsthe 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. Butthe 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 andpredictions 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 Romerand 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, expressan 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 studybookkeeping, to study the art of double entry, and to learn themagicof the variable items, profit and loss, which perforce make the books balance. To study the ideal is to studyequilibrium 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 formthe 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 asa 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 istending 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 thislawand then the second approximations that are relevant to our inquiry. [CWL 21, 142-43] [19][8/15/19] The

channelsof Lonergan’sDiagram ofRatesof Flow provide a general and universally-relevant explanatory framework of the always-current process. The channels explain– rather than merely describe or postulate – both thedynamic equilibriaof the pure cycle and thedynamic disequilibriaof the booms and the slumps of the trade cycle.

- More positively, the channels account for
boomsandslumps, forinflationanddeflation, 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”) ] arenot simply to be supposed. For that would bepostulating without explaining the boom or slump. [CWL 15, 64] [20] (Click herefor previous “Single Paragraphs”)[8/19/19] A condition of circuit acceleration was seen in Section 15 to include the

keeping in stepof 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. Theconcomitanceof outlay and expenditure follows from the interaction of supply and demand. Theconcomitanceof 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]

[23]

[8/23/19] Lonergan replaced the credit-centered, single circuit of the textbooks with the

credit-centered, double circuitof Functional Macroeconomic Dynamics.The entire tradition slipped past Lonergan’s simple move. I describe the move as paralleling Newton’s move. Newton started within an old culture of two flows: an earthly flow and, to recall ancient searchings, a quintessential flow. Newton went from two to one. Lonergan started with a dominant one-flow economic analysis – think in terms of the household-firm diagram – and separated it into two flows “to form a more basic concept and develop a more general theory.”

^{21 }[McShane 2017, viii]; also see [CWL 21, 11][24] (

Click herefor previous “Single Paragraphs”)[8/30/19]… 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 isa 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] These differences and correlations (of the productive process of a hierarchical, advanced economy) have now to beprojected into their monetary correlatesto set upclasses 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] [25][8/31/19] The point-to-line and higher

correspondencesare based upon the indeterminacy of the relation between certain products and the ultimate products that enter into the standard of living. … The analysis that insists on the indeterminacy is the analysis that insists on thepresent fact: estimates and expectations are proofs of thepresent indeterminacyand attempts to get round it; and, to come to the main point, an analysis based on such estimates and expectations can never arrive at acriticismof them; it would move in avicious 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] (Lonergan) approaches the focus armed withprecise analytic distinctionsupon which a superstructure of laws, coherent with one another and comprising a complete theory, may be constructed. Paraphrasing [CWL 3, 80/103]: Questions cannot be put in any order whatsoever. Some questions simply cannot be answered until others have been resolved. And sometimes the answers to one question immediately provide the answers to others. [CWL 12, 23] … the questions are put in such an order that, once the first is solved, the solutions to the others follow with almost no difficulty. Therefore, because the later solutions are connected to the first as conclusions are connected to some principle, all solutions after the first seem to be the proper province of knowledge. [CWL 12, 25] … if solving the first problem virtually solves all the others, the concepts and terms in which the first problem and the first solution are defined and expressed cannot be significantly changed if they are to serve to define and express the later problems and solutions. Clearly, then, it is not the arbitrary malice of professors but the interconnected questions and solutions themselves that demand both systematically formed concepts and a technical terminology that corresponds not to any concepts whatsoever but to systematic concepts. [CWL 12, 25] [26][9/2/19]

Bloomberg Surveillance and Bloomberg Markets: A year ago about this time there was seemingly endless conversation among the so-called pundits on Bloomberg Surveillance and Bloomberg Markets about how many times the Fed would raise interest rates in 2019. Presently all the talk is about how many times the Fed will reduce interest rates in 2019. You can’t predict the unpredictable. Not to be blasphemous but, if all the moderators and guests at Bloomberg would justchillandstopspewing so much hot airabout how many times, in what direction, and in what magnitudes the Fed will change rates next year, it might be just enough to start aNew Ice Age. [27]

*[9/4/19] re Max Planck on obscurantist professors: … the obscurantist, the obtuse, and the merely routine mind may be expected always to be with us. But however exasperating such minds may be in the short run, in the long run they are negligible; they can block but they cannot initiate; they can manipulate pressures but they cannot lead; and if they denounce you as a fool in your life-time, their sons will mistake you for a genius when you are dead. For they are indifferent to truth and falsity; they are concerned only with the familiar, which they strive to maintain, and with the unfamiliar, which they strive to oppose … people that cannot be persuaded by the suddenness of intelligence and reason, are easily convinced by the slow but inevitable gradualness of time. So it is in the sciences. For scientific method does not succeed in teaching old dogs new tricks. As Max Planck testified, a new scientific position gains general acceptance, not by making opponents change their minds, but by holding its own until old age has retired them from their professorial chairs. [CWL 3, 525-26/549]; and [ M. Planck, Scientific Autobiography and Other Papers; E.T. by F. Gaynor; New York 1949, p. 33 f] [28]*

**[9/5/19] re Ragnar Frisch et al.: **We frequently make the claim that Functional Macroeconomic Dynamics sublates all other macroeconomic theories by reaching an adequate level of abstraction, or a deeper unity, or a more profound point of view, or a purely relational, fully explanatory, scientific macroeconomics. This deeper intelligibility fully explains the economic process and eliminates at a stroke much of what is contained in the current popular 700-page textbooks.// Ragnar Frisch was a Norwegian economist and the co-recipient of the first Nobel Memorial Prize in Economic Sciences in 1969. “Frisch’s failure to develop a significant theory typifies the failure of economists who search for a dynamic heuristic. As well as a fundamental disorientation of approach there is also a tendency to shift to an inadequate level of abstraction with a premature introduction of boundary conditions in a determinate set of differential and difference equations.” [McShane, 1980, 114] [29]

[9/6/19] … as compositions of prices and quantities, so also price-quantity flow has a preliminary definition in terms of experiential conjugates and an explanatory definition in terms of pure conjugates. It was obvious and excusable for classical, neo-classical, and Keynesian economists to understand price and quantity within a subjective framework of utility or time-preference and then correlating these with an imagined supply curve, demand curve, or indifference curve. … this account of economic movement can be no more than preliminary for, throughout, it is cast in terms as related sensitively and perceptively to us, as in terms of subjective experiential utilities and preferences. What valued functional flowings are, when valued functional flowings are defined in terms of their relations to one another, is another question. The answer to it will depend upon the answer that determines interdependent, velocitous functionings as pure conjugates; and so it is that macroeconomics conceives an interdependent functional flow, not as a function of experiential elements, but in its functional relation to other functional flows and as a relativistic composition function of three pure conjugates, of which two are the pretio-quantital price and the pretio-quantital quantity and the third is the classic Newtonian interval. [paraphrase of CWL 3, 85] [30] (**Click here ****for previous “Single Paragraphs”**)

[9/9/19] A mere congeries of laws will not suffice. For if one is to operate upon the **concrete**, one must be able to employ at once several laws. To employ several laws at once, one must know the **relations of each law to all the others**. But to know many laws, not as a mere congeries of distinct empirical generalizations, but in the **network of interrelations of each to all the others**, is to reach **a system**. [CWL 3, 76/99] // **“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 ∫ … [CWL 15 26-27 ftnt 27]// To our knowledge, no one else considers the **functional ****distinctions **between different kinds of **productive rhythms **(the rhythms based upon 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 …

**only Lonergan**analyzes booms and slumps in terms of how their (explanatory) velocities, accelerations, and decelerations are or are not equilibrated in relation to the events, movements, and changes in two distinct monetary circuits of production and exchange as considered both in themselves (with circulatory, sequential dependence) and

**in relation to each other**by means of crossover payments. … Lonergan pointed out that this differentiation of economic activities into the production of consumer goods in the standard of living and the production of producer goods that transform the possibilities for future consumer-goods production is discussed by traditional economists such as S. M. Longfield (1802-1884), John Rae (1796-1872), Nassau Senior (1790-1864), Eugen von Bohm-Bawerk (1851-1914), and in the heavily disputed “Ricardo effect.” But Lonergan credits Piero Sraffa (1898-1983) as having clarified it most thoroughly in his famous essay,

*Production of Commodities by Means of Commodities*(1960). Yet even Sraffa does not use his sophisticated explanation of the “Ricardo effect” and the “roundabout” or “concertina”-like phenomena associated with it in the way Lonergan does [CWL 15, Editors’ Introduction lxii] [31]

[9/11/19] 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] [32]

[9/15/19] Bernard Lonergan sought to discover the theory that is **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: **“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]// To our knowledge, no one else considers the **functional distinctions **between different kinds of **productive rhythms **(the rhythms based ultimately upon the precise analytical distinctions between point-to-point (basic) and point-to-line (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 … **only Lonergan **analyzes booms and slumps in terms of how their (explanatory) velocities, accelerations, and decelerations are or are not **equilibrated **in relation to the (functional) events, movements, and changes in two distinct monetary circuits of production and exchange as considered both **in themselves **(with circulatory, sequential dependence) and **in relation to each other **by means of reciprocal dependence. … Lonergan pointed out that this differentiation of interdependent functional activities into the production of consumer goods in the standard of living and the production of producer goods that transform the possibilities for future consumer-goods production is discussed by traditional economists such as S. M. **Longfield** (1802-1884), John **Rae** (1796-1872), **Nassau Senior** (1790-1864), Eugen **von Bohm-Bawerk** (1851-1914), and in the heavily disputed “Ricardo effect.” But Lonergan credits **Piero Sraffa** (1898-1983) as having clarified it most thoroughly in his famous essay, Production of Commodities by Means of Commodities (1960). Yet even Sraffa does not use his sophisticated explanation of the “Ricardo effect” and the “roundabout” or “concertina”-like phenomena associated with it in the way Lonergan does [paraphrase of CWL 15, Editors’ Introduction lxii] [33]

[9/16/19] 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 of geometry, algebra, macroeconomic dynamics; the same relational structure can be found in all three. Consequently, one’ symbolism can be given a geometrical interpretation, or an algebraic interpretation, or a macrodynamic interpretation. [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 terms** in 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]

*q*_{i }=*Σq*_{ijk}_{ }*(CWL 15, 30)**p*_{i}= Σp_{ijk }(CWL 15, 30)*P =**√P*^{2}=Σp_{i}^{2 }(CWL 15, 74)*Q =**√Q*^{2}=Σq_{i}^{2 }(CWL 15, 74)*Σp’*_{ij}q’_{ij}= P’_{j}*Q’*_{j }= P’_{j}Q’_{j}cos A (CWL 15, 74)*k*(CWL 15, 37)_{n}[f’_{n}(t-a)-B_{n}] = f”_{n-1}(t) – A_{n-1 }*R’ = E’ (CWL 15, 54)**R” = E” (CWL 15, 54)**I’ = O’ +M’ (CWL 15, 54)**I” = O” +M” (CWL 15, 54)**G = c”O” –i’O’ (CWL 15, 54)**G = c”O” –i’O’ = 0*the condition of**dynamic equilibrium***(CWL 15, 50)**M’ = (S’ – s’O’) + (D’ – s’I’) + G (CWL 15, 54)**M” = (S” – s”O”) + (D” – s”I”) – G (CWL 15, 54)**(S’-s’O’) =**ΔT’ + (O’ – R’) +**ΔR’ (CWL 16, 67)**(S”- s”O”) =**ΔT” + (O” – R”) +**ΔR” (CWL 16, 67)**k*(CWL 15, 37)_{n}[f’_{n}(t-a)-B_{n}] = f”_{n-1}(t) – A_{n-1 }*DZ = PQ[(dP/P + dQ/Q + dPdQ/PQ) cos (A + dA) – 2 sin(dA/2) sin(A + dA/2)] (CWL 15, 108-9)**dI’*_{= }Σ(w_{i}dn_{i}+ n_{i}dw_{i}+dn_{i}dw_{i})y_{i }(CWL 15, 134)*df = vdw + wdv (CWL 15, 148-49)**P’Q’ = p’a’Q’ + p”a”Q’ (CWL 15, 158)**P’/p’ = a’ + a”(p”Q”)/(p’Q’), (CWL 15, 158)*or*J = a’ + a”R (CWL 15, 158)**d(P’/p’) = dJ = da’ + a”dR + Rda” (CWL 15, 160)*

[34]

[9/17/19] **DSGE models** accept **exogenous “shocks”** as stochastic in nature, and as *random***efficient causes**. “Every period, random exogenous events perturb the equilibrium conditions …, injecting uncertainty in the evolution of the economy and thus generating economic fluctuations. Without these shocks, the economy would evolve along **a perfectly predictable path**, with neither booms nor recessions.” **[Sbordone, Tambalotti, Rao, Walsh, 2010]// **… 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**. … Field theory is a matter of **the immanent intelligibility of the object**. CWL 10, 154/// **Paraphrasing …**as to the notion of cause, macroeconomists **mistakenly **conceive of subjective preferences as elements of **formal ****cause**, and they conceive of changes in subjective preferences as **random ****external efficient-cause shocks**. Functional Macroeconomic Dynamics drops the notion of subjective preferences; it gets along perfectly well without it. And it thinks in terms of a field theory, the set of relationships between *n *interdependent, implicitly-defined functional activities. The field theory of Functional Macroeconomic Dynamics is a set of intelligible functional relations linking functionings which are implicitly defined by the relations themselves; it is **a set of relational forms**. The form of any functioning is **known through its relations to all other functionings**. …. The **field theory of macroeconomic dynamics is a matter of the immanent intelligibility of the objective, dynamic functional process**. (Also, see The Significance of Burley’s and Csapo’s Characteristic Equation and Its Root Solution demonstrating that the normative interest rate and its inevitable normative changes are aspects of the immanent intelligibility of the economic process rather than external levers to be pushed or pulled.) (And also see Prediction is Impossible in the General Case. [35]

[9/21/19] **Bernard Lonergan’s Functional Macroeconomic Dynamics prescinds from human psychology**:

- A study of the mechanics of motor-cars yields
premises for a criticismof drivers, precisely because the motor-cars, as distinct from the drivers, havelaws of their ownwhich drivers must respect. But if the mechanics of motors included, in a single piece, theanthropologyof drivers, criticism could be no more thanhaphazard. [CWL 21, 109]- 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 definethe objective situationwith which man has to deal, and, in the second place, definethe psychological attitude that has to be adoptedif man is to deal successfully with economic problems. Thus something of aCopernican 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 greatestgeneralityand attempt to deduce the human adaptations necessary for survival. [CWL 21, 42- 43] [36]

[9/23/19] Fay Vincent: Time out from macroeconomics! In today’s Wall Street Journal, Fay Vincent, former Commissioner of Major League Baseball, has an op-ed piece in which he now praises two of his teachers from long ago. If memory serves, Mr. Vincent wrote another op-ed piece around last Father’s Day praising and thanking his father. I do not personally know Fay Vincent. I have never met him, though I’ve recognized him as Commissioner of Baseball. I would sometimes see him at Ring Bros. Market in Harwich, MA, chatting with and smiling at everybody. No airs, just one of us, an everyday humble man. Over the years, without paying much attention, I have picked up bits and pieces of information about Mr. Vincent’s career and principled personal life. He was never stopped by a paralysis; he was a man of special courage; and he was always true to his principles, even when such might threaten his job. His parents would be proud. Just as Mr. Vincent now sees fitto thankthose who had a strong and positive influence on him in the distant past, so I see fit to thank Mr. Vincent for having a sporadic, positive, even strong, influence on my own life in the present. Mr. Vincent has always had his head on straight and his heart in the right place. He is an inspiration to persons of power and influence. He is an inspiration to the whole public. So,Thank you Mr. Vincentfor alesson in unselfish thankfulness; thanksjust for being Fay Vincent. The world needs more men like you.John Costello [#37][9/29/19] … there is no intelligent conception of terms apart from relations or relations apart from terms, and so there is no possibility of their being apart. [CWL 3, 496/516]// Precisely because analysis is an ongoing process, it is subject to revision. In the measure that revision is radical, it involves new concepts and even new definitions. In this fashion the fact of revision displaces the old reliance on essential definitions and gives way to a search for significant basic variables. For

variables, because it is process that is under investigation; forsignificantvariables, because only significance contributes to the relevant acts of understanding; finally forbasicvariables, because others depend on them, and they depend on one another. In other words, basic variables form a closed circle, in which terms are fixed by their relations, relations fix the terms, and the whole is justified by the degree in which it and its implications are verified. [CWL 15, 9] [#38][10/1/19] It will be a basic position,

- if the real is the concrete universe of being and not a subdivision of the ‘already out there now’;
- if the subject becomes known when it affirms itself intelligently and reasonably and so is not known yet in any prior ‘existential’ state; and
- if objectivity is conceived as a consequence of intelligent inquiry and critical reflection, and not as a property of vital anticipation, extroversion and satisfaction
… On the other hand, it will be a basic counter-provision, if it contradicts one or more of the basic positions. … all counter-positions invite reversal. for any lack of coherence prompts the intelligent and reasonable inquirer to introduce coherence. But counter-positions, though coherent with one another, though the insertion of their symbolic equivalents into an electric computer would not lead to break-down, none the less are incoherent with the activities of grasping them intelligently and affirming them reasonably. For these activities contain the basic positions; and the basic positions are incoherent with any counter-position. … The only coherent way to maintain a counterposition is that of the animal; for animals not only do not speak but also do not make excuses for their silence. [CWL 3, 388/413] [#39]

[10/5/19] Now as the statistical approach differs from the descriptive, the analytic differs from both. Out of endless classificatory possibilities it selects not the one sanctioned by ordinary speech nor again the one sanctioned by facility of measurement but the one that most rapidly yields

terms which can be defined by the. [CWL 21, 112] [#40]functional interrelationsin which they stand[10/9/19] Lonergan brought a deep knowledge of mathematics and physics to his work in Functional Macroeconomic Dynamics.

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,

ds^{2}=Σg_{ij}dx_{i}dx_{j}[i, j = 1,2…n]where

dx,_{1}dx… are differentials of the coordinates, and where in general there are_{2}nproducts under the summation. Since this equation defines the infinitesimal interval, it must be invariant under all permissible transformations. However, instead of working out successive sets of transformations, one considers any transformations to be permissible and effects the differentiation of different manifolds by imposing restrictions upon the coefficients. This is done by appealing to the tensor calculus. … Thus in the familiar Euclidean instance,^{2}gis unity when_{ij }iequalsj; it is zero whenidoes not equalj; and there are three dimensions. In Minkowski space, theg_{ij }is unity or zero as before, but there are four dimensions, andxequals_{4 }ict. In the General Theory of Relativity, the coefficients are symmetrical, so thatgequals_{ij }g; and in the Generalized Theory of Gravitation, the coefficients are anti-symmetrical. [CWL 3, 146 -147/170-71] [#41]_{ji}[9/18/19] The point I wish to make is that modern science is not simply an addition to what was known before. It is the perfecting of the very notion of science itself, of knowing things by their causes, by analysis and synthesis. What are the causes? The

field of intelligible relations that implicitly define the objects.The objects with which a science deals are whatever is defined by its field of intelligible relations, whatever falls into that field. The causes are formal causes; it is only applied science that is concerned with agents and ends. [CWL 10, 155]Paraphrasing:modern scientific macroeconomics is not simply a horizontal and statistical refining of what was known before. It is the perfecting of the very notion of science itself, of knowing things by their causes, by analysis and synthesis. What are the causes? The field of intelligible relations thatimplicitly define the fundamental terms and relations. The objects with which Functional Macroeconomic Dynamics deals are whatever is defined by its field of intelligible relations, whatever falls into that field. The causes areformal causes; it is only applied science that is concerned with agents and ends. [#42][10/21/19] By ‘scientific development’ I mean

development in mathematics or natural science. The scientific horizon recedes, expands, when there occurs a crisis in existing methods, procedures, theories, assumptions which are seen to fail. They cannot handle known results, known observation or data, known conclusions. The crisis arises from a fundamental conflict between basic assumptions or methods or presuppositions and, on the other hand, something that within that order of investigation has to be accepted, something of the order of fact or inevitable conclusion. Upon this crisis there followsa radical revisionof basic concepts, postulates, axioms, methods, and a consequent new mathematical or scientific structure. Thus we have the triple revolution of Copernicus, Darwin, and Freud; the revolutions effected by Galileo, Newton, Einstein, quantum theory; the revolution in mathematics that began with analytic geometry and the calculus, went on to Riemannian geometry, and then to developments in algebra due to Galois and to later developments. In these cases there was a radical revision in concepts. ¶Now such a recession of the horizon within the scientific field meets with resistance.The subject dreads to change, to remodelthe organization that is himself, his living in the scientific world. Max Planck, who made the fundamental discoveries connected with quantum theory (black-body radiation), asked in his autobiography what it is that puts a new scientific theory across. Is it the clarity of the observations or the exactness of the measurements or the coherence of the hypothesis or the rigor of the deduction or the decisiveness of the observational and experimental results? No, he said, it is none of these; they have nothing to do with it. Rather a new scientific theory gets across when the present generation of professors is retired. (CWL10, 93) [#43][10/23/19] Newton was able to work out a magnificently compact theory of movements simply because he did not have to pay attention to constant velocity; constant velocity no more needs an explanation than does the state of rest. That was a case of determining the level in the sensible of what does not count, and what you attend to when you are understanding. It is a refinement on the notion of abstraction. Newton’s first law means that we abstract in our science of movements not only from rest but also from constant velocity. ¶Einstein’s special relativity is a transposition of that Newtonian idea from mechanics to electromagnetics, and

from a causal theory to a field theory. What is occurring in special relativity is a new way of determining the level of what one abstracts from. (CWL 10, 124-25) [#44][10/24/19] Note that the reports of the Federal Reserve Bank and the National Bureau of Economic Research are

compilations of “accountants’ unities.”An

“accountant’s unity”… is a category used in (conventional) accounting. For Lonergan, (conventional) accounting generally denotes an enterprisewithin common sensewhich usesdescriptive, as contrasted withexplanatoryterms (on these terms see Insight 37-38/61-62, 178-79/201-3, 247-48/272-73). Insofar as that is true, the accountant’s unity isnot an adequate indexfor the normative,explanatory analysisof the productive process. [CWL 15, 26, ftnt 26] … … Hence the feeling of hot and cold is not temperature; temperature is something in the scientist’s world that isoutside the world of common sense. There is a transformation, a movement from what is sensibly givento usto the relations of thingsto one another. What Einstein did was to show that what holds for the secondary qualities holds also for the primary qualities. Extensions and durations, just as color, sound, feeling, weight, pressure, and so on, are to be reduced to theirimmanent intelligibility. The canon of complete explanation demands that the scientific world, which expresses the relations of things to one another, be constructed completely. It isnot the world of common sense. (CWL 10, 144) [#45][10/29/19]

Peter Burleyearned a PhD in economics fromPrinceton University. (Curriculum Vitae) He possessed a strong background in mathematics, physics, macroeconomics, macroeconometrics, and game theory. After years of significant work in physics and economics, he found himself fascinated and persuaded by Lonergan’s new paradigm of Functional Macroeconomic Dynamics. We have cited and thanked him in our Acknowledgments. He is prominent in our Bibliography:

- Burley, Peter (1985) “A Summary of Lonergan’s Economic Diagram.”
Australian Lonergan Workshop,3-11.[Burley, 1985]- Burley, Peter (1989),
A von Neumann Representation of Lonergan’s production problem, Economic Systems Research, 1 (3),[Burley, 1989]- Burley, Peter and Csapo, Laszlo, (1992)
Money Information in Lonergan-von Neumann Systems, Economic Systems Research, Vol 4, No. 2, 1992[Burley and Csapo, 1992-1[- Burley, Peter (1992)
Evolutionary von Neumann Models, Journal of Evolutionary Economics 2 , 269-80[Burley, 1992-2]- Burley, Peter (1993)
Lonergan as a Neo-Schumpeterian, (Lanham, Md., University Press of America, ed. William J. Danaher)[Burley, 1993]- Burley, Peter. ”Economic Development as an Escape from Full Employment Entropy Ceilings.”
Economics and Thermodynamics: New Perspectives on Economic Analysis, ed. Peter Burley and John Foster (Boston-Dordrecht-London: Kluwer, 1994) 39-45.[Burley, 1994]- Burley, Peter (2002),
A 3-Level Lonergan-von Neumann Model, Australian Lonergan Workshop 2, ed. Matthew C. Ogilvie and William J. Danaher, Sydney: Novum Organum Press 68-74[Burley, 2002-1]- Burley, Peter (2002),
Lonergan and Interest Rates, Australian Lonergan Workshop 2, ed. Matthew C. Ogilvie and William J. Danaher, Sydney: Novum Organum 61-67[Burley, 2002-2]We recommend especially

[Burley, 1992-2]above for its simple yet cogentdemonstration of principlesregarding economic growth, interest rates, asset values, and mutual constraints in a finite world. Also see The Significance of Burley’s and Csapo’s Characteristic Equation and Its Root solution. [#46][11/1/19] I have spoken of the analysis as revealing channels and bringing to light an undertow. My meaning may become clearer by referring to the distinction sometimes made between

general equilibrium(Walras, Wicksell) andpartial equilibrium(Marshall). The channels of circulation replace the overall dominance claimed for general equilibrium theory, but they reveal the conditions under which partial equilibria can exist … More positively,the channels account forbooms 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, and the variant provided by multinational corporations and their opposition to the welfare state. [CWL15, 17] [#47] (Click here for previous “Single Paragraphs”)[11/6/19]

Paraphraseof (CWL 10, 93):Max Planck, quantum theory, and ‘scientific development’ in macroeconomics: The scientific horizon of macroeconomics (both) recedes and expands, when there occursa crisis in existing methods, procedures, theories, assumptionswhich are seen to fail. They cannot handle known results, known observation or data, known conclusions. The crisis arises from a fundamental conflict between basic assumptions or methods or presuppositions and, on the other hand, something that within that order of investigation has to be accepted, something of the order of fact or inevitable conclusion. Upon this crisis there follows aradical revision of basic concepts, postulates, axioms, methods, and a consequent new mathematical or scientific structure. Thus we have the triple revolution of Copernicus, Darwin, and Freud; the revolutions effected by Galileo, Newton, Einstein, quantum theory; the revolution in mathematics that began with analytic geometry and the calculus, went on to Riemannian geometry, and then to developments in algebra due to Galois and to later developments. In these cases there was a radical revision in concepts. ¶Now such a recession of the horizon within the macroeconomics field meets with resistance. The professional macroeconomistdreads to change, to remodelthe organization that is himself, his living in the scientific world. It is in macroeconomics what it was in quantum theory.Max Planck, who made the fundamental discoveries connected with quantum theory (black-body radiation), asked in his autobiography what it is that puts a new scientific theory across. Is it the clarity of the observations or the exactness of the measurements or the coherence of the hypothesis or the rigor of the deduction or the decisiveness of the observational and experimental results?No, he said, it is none of these; they have nothing to do with it. Rather a new scientific theory gets across when the present generation of professors is retired. (See CWL10, 93) [#48][11/10/19] An

explanatoryfunctional analysisof the concrete and objective economic process –- as distinguished from the conventional,non-explanatory descriptive analysisin terms of (C +I + G +X – Im) — would point out that the government is afalse third party. The government is simply we-the-people collectively; it performs the same point-to-point and point-to-line functions as the so-called private sector of we-the-people individually. Both are indistinguishable within the samefunctional aggregates; purely functionally, there is no distinction to be made between government and private sector. The division of the economic process is not based on proprietary differences, or on we-individually vs. we-collectively, or on the properties of materials. The division of the process ispurely functional.… 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 divisionof the structure of the productiveprocess: 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]a massive long-term acceleration is a massive development of surplus activity. Further, one is

notto think of this increment in Q” as concentrated infirms of certain types. The distinction between basic and surplus is not a material nor a proprietary but a. There are types of enterprise that in themselves are indifferently basic or surplus … [CWL 15, 118] [#49]functionaldistinction[11/13/19] The utterance

has many meanings, which we should distinguish carefully. At the risk of making the readers scratch their heads wondering whether there is a mysterious intelligible unity in the utterances oflightlightbelow or there are no intelligible relations, we offer the following ramble. // Fiat lux. //When we understand by ourintellectivepower, which isthe general light of our intellectual consciousness, and by the very fact that we understand, the knowledge contained in the act of our human understanding adds adeterminationto thegeneral light. [?] // Lonergan agreed with Schumpeter … that the economist had to know what are the significant variables inthe light of whichprice changes are to be interpreted. [CWL 15, Editors’ Introduction liii] // Our fundamental andutterly general lightis our created participation in The Uncreated Light, thesource in usthat gives rise to all our wonder, all our inquiry, all reflection. We attribute to this fundamental and utterly general light thosemost general principlesthat contain no determination drawn from our experience; in our thinking, the most general principles ofidentity, noncontradiction, and sufficient reason, or in our choosing and doing the precept thatgood must be done and evil must be avoided. [?] // 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 theenlightenmentof …enlightenedself-interest’ cannot be identified merely with the Enlightenment’s project of steering public opinion from unenlightened toenlightenedself-interest. Instead, Lonergan envisaged avast and long-term educational effort. He insisted that rational control of the economy ‘can be democratic only in the measure in which economic science succeeds in uttering not counsel to rulers butprecepts to mankind, not specific remedies and plans to increase the power of bureaucracies, butuniversal laws which men themselves administratein the personal conduct of their lives.’ [CWL 15, Editors’ Introduction, lxxi] [#50][11/14/19]

real analysis(is) identifying money with what money buys. … And that is the source of the problem in real analysis. If you want to treatmoney that doesn’t make a difference, you can have a beautiful liberal monetary theory. But it doesn’t saythe way the thing works. [#51] [CWL 21, Editor’s Introduction, xxviii][11/15/19] 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 psychologythat, in the first place, we may define theobjective situationwith which man has to deal, and, in the second place, define thepsychological attitude that has to be adoptedif man is to deal successfully with economic problems. Thus something of aCopernican revolutionis attempted:instead of taking man as he is or as he may be thought to beand from that deducing what economic phenomena are going to be,we take the exchange process in its greatest generalityand attempt to deduce thehuman adaptationsnecessary for survival. [CWL 21,42- 43] [#52]A distinction has been drawn between

description and explanation. Description deals with things as related to us. Explanation deals with the same things asrelated 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. But 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. … Not only are description and explanation distinct, but there are two main varieties of description. There are the ordinary descriptions that can be cast in ordinary language. There are also the scientific descriptions for which ordinary language quickly proves inadequate and so is forced to yield its place to a special, technical terminology. (But) both ordinary and scientific description are concerned with things as related to us, but both are not concerned with the same relations 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.[#53] [CWL 3, 291-92/316-17][11/18/19]

No doubtKeynes, Lonergan [Gibbons]Keyneswasan economist first and a methodologist second,but he was none the less very articulate about his theorizing……..Lonergan, for his part, is perhapsa methodologist first and an economist second, but, as we shall see, he was able to push his economic reflectionsfurther than Keynesbecause he had a firmer grasp of the essentials of an effective theory. [Gibbons, 1987] [#54][11/19/19]

Creative Key Transition [McShane]Taking into account past and future values does not constitutethe 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 d^{2}θ/dt^{2}, d^{2}x/dt^{2}, d^{2}y/dt^{2}, on theprimary relativitiesof a range of related forces, central, friction, whatever.Particular secondary boundary conditionsin Functional Macroeconomic Dynamics, past and future pricings and quantities, arerelatively insignificantfor the analysis of theprimary relativity immanent in, andapplicable to, every instance of the process. What is significant is theLeibnitz-Newtonian shift of context. [paraphrase in part of McShane, 1980, 127] [#55][11/16/19]

Aggregate functional costs: There is a sense in which one may speak of the fraction of basic outlay that moves to basic income as the“costs”of basic production. It is true that that sense isnot at all an accountant’s sense of costs; … But however remote from the accountant’s meaning of the term “costs,” it remains that there is an aggregate andfunctionalsense in which the fraction… is an index of costs. For the greater the fraction that basic income is of total income (or total outlay), the less the remainder which constitutes the aggregate possibility of profit. Butwhat limits profit may be termed costs.Hence we propose ….to speak of c’O’ and c”O” as costs of production, having warned the reader that the costs in question areaggregate andfunctional costs… .[CWL 15 156-57] [#56]

[11/21/19]

Galileo, Kepler, Newton, Einstein, Planck, Mendeleyev, et seq.; There is a further type of insight thatarises immediately from the data. Such is the grasp (insight, or act of understanding) thatprecedes and groundsthe 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, butto 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] [#57][11/22/19]

The Government as a False third Party: Anexplanatoryfunctional –repeat“functional” – analysisof the concrete and objective economic process –- as distinguished from the conventional,non-explanatory descriptive –repeat“descriptive”= analysis in terms of (Y =C +I + G +X – Im) — would point out that the government is afalse third party. The government is simply we-the-people collectively; it performs the same point-to-point and point-to-line functions as the so-called private sector of we-the-people individually. Both are indistinguishable within the samefunctional aggregates.Functionally, there is no distinction to be made between government and private sector. The division of the economic process is not based on proprietary differences, or on we individually vs. we collectively, or on the properties of materials. The division of the process ispurely functional.

- … 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 adynamic divisionof 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 afunctional divisionof the structure of the productiveprocess: 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]- … a massive long-term acceleration is a massive development of surplus activity. Further, one is
notto think of this increment in Q” as concentrated in firms of certain types. The distinction between basic and surplus is not a material nor a proprietary but a. There are types of enterprise that in themselves are indifferently basic or surplus … [CWL 15, 118] [#58]functionaldistinction- So physiology follows anatomy. A third step is to effect the transition from the thing-for-us to the thing-itself, from the insights that grasp described parts as organs to insights that grasp
conjugate forms systematizing otherwise coincidental manifoldsof chemical and physical processes. By this transition, one links physiology with biochemistry and biophysics. To this end, there have to be invented appropriate symbolic images of the relevant chemical and physical processes; in these images there have to be grasped by insight the laws of the higher system that account for the regularities beyond the range of physical and chemical explanation; from these laws there has to be constructed theflexible circle of schemes of recurrencein which the organismfunctions; finally, this flexible circle of schemes must be coincident with the related set of capacities-for-performance that previously was grasped in sensible presented organs. ¶The foregoing three steps of anatomy, physiology, and their transposition to the thing itself reveal one aspect of the organism as higher system in an underlying manifold of cells, chemical processes, and physical changes. Let us name that aspect the higher system as integrator.[#59] [CWL 3, 464/489]

[11/23/19]

A New Macroeconomics Textbook:A macroeconomics textbook may have 700-1000 pages. Usually this book would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions. A reader would not gain aclear theoryandcomplete explanationof thedynamicsof the real economic process. Those few who are familiar with Functional Macroeconomic Dynamics often yearn for someone to write a 700-page textbook based onFunctionalMacroeconomicDynamics, but perhaps modeled in some respects on the conventional textbooks. But is there not a book superior in many respects to a conventional textbook right in our hands? How about this?Reword the subtitleof CWL 15 fromAn Essay in Circulation Analysistoand have the professor tell the interested student to read the book three times, then report back for discussion about the following:A Textbook of Circulation Analysis,

- the
canonsof empirical method- a
scientific heuristic- the technique of
implicit definitionfunctionsofscientific and explanatory significancerather than accountants’ unities from the realm of description and common sense- the structure of the
lagged, rectilinearproductive processmoney as a dummyinvented by man- the perspective of a hierarchical series of
monetary circuits- how a
monetary circulationmeets the production-and-vending process- the
primary relativities and concomitancein the Diagram of Rates of Flow- the velocity of money in terms of
magnitudes and frequencies- interpretation of prices, quantities, interest rates in the light of
significant explanatory variables- the pure cycle and its
constituent phasesin the expansion of the objective economic process- the
primary relativitiesin the expansion of the economic process- the distinction between
efficient causeandformalcauseThe student will learn much that is radically different, explanatory, and very useful; and the student will gain a perspective or framework by which to evaluate and criticize the tenets of conventional textbooks and all traditional theories. [#59] (Click here for previous “Single Paragraphs”)

[11/22/19]

The Government as a False third Party: Anexplanatoryfunctional –repeat“functional” – analysisof the concrete and objective economic process –- as distinguished from the conventional,non-explanatory descriptive –repeat“descriptive”= analysis in terms of (Y =C +I + G +X – Im) — would point out that the government is afalse third party. The government is simply we-the-people collectively; it performs the same point-to-point and point-to-line functions as the so-called private sector of we-the-people individually. Both are indistinguishable within the samefunctional aggregates.Functionally, there is no distinction to be made between government and private sector. The division of the economic process is not based on proprietary differences, or on we individually vs. we collectively, or on the properties of materials. The division of the process ispurely functional.

- … 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 adynamic divisionof 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 afunctional divisionof the structure of the productiveprocess: 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]- … a massive long-term acceleration is a massive development of surplus activity. Further, one is
notto think of this increment in Q” as concentrated in firms of certain types. The distinction between basic and surplus is not a material nor a proprietary but a. There are types of enterprise that in themselves are indifferently basic or surplus … [CWL 15, 118] [#58]functionaldistinction- So physiology follows anatomy. A third step is to effect the transition from the thing-for-us to the thing-itself, from the insights that grasp described parts as organs to insights that grasp
conjugate forms systematizing otherwise coincidental manifoldsof chemical and physical processes. By this transition, one links physiology with biochemistry and biophysics. To this end, there have to be invented appropriate symbolic images of the relevant chemical and physical processes; in these images there have to be grasped by insight the laws of the higher system that account for the regularities beyond the range of physical and chemical explanation; from these laws there has to be constructed theflexible circle of schemes of recurrencein which the organismfunctions; finally, this flexible circle of schemes must be coincident with the related set of capacities-for-performance that previously was grasped in sensible presented organs. ¶The foregoing three steps of anatomy, physiology, and their transposition to the thing itself reveal one aspect of the organism as higher system in an underlying manifold of cells, chemical processes, and physical changes. Let us name that aspect the higher system as integrator. [CWL 3, 464/489] [#59] (Click here for previous “Single Paragraphs”)

[11/24/19] Generalizationcomes withNewton, who attacked thegeneraltheory of motion, laid down its pure theory, identified Kepler’s and Galileo’s laws by inventing the calculus, and so found himself in a position to account for any corporeal motion known. Aristotle, Ptolemy, Copernicus, Galilei, and Kepler had all been busy with particular classes of moving bodies. Newton dealt in the same way with all. He did so by turning to a field of greatergenerality, the laws of motion, and by finding a deeper unity in the apparent disparateness of Kepler’s ellipse and Galilei’s time squared. … Similarly thenon-Euclidean geometers and Einstein went beyond Euclid and Newton. … 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 Newtonby 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, , a scientificgeneralizationof 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 moregeneralfield. [CWL 21, 6-7][#60](Click here for previous “Single Paragraphs”)

ParaphrasingLonergan dealt in the same way with all macroeconomic phenomena. He did so by turning to a field of greater

generality, thefield theoryof macroeconomic phenomena, and by finding adeeper unity at a more adequate level of abstractionin the apparent disparateness of neoclassicism, Keynesianism, monetarism, and behaviorism. … Lonergan went beyond the schools and isms by employingimplicit definition, preciseanalytical distinctions, andfunctional analysis. It is this scientificgeneralizationof the old political economy and of modern economics that will sublate and transform the isms so as to yield the new political economy which we need. … Plainly the way out is through a moregeneralfield. [CWL 21, 6-7] [60]The helplessness of tolerance to provide coherent solutions to social problems called forth the totalitarian who takes the narrow and complacent practicality of common sense and elevates it to the role of a complete and exclusive viewpoint. On the totalitarian view, every type of intellectual dependence whether personal, cultural, scientific, philosophic, or religious, has no better basis than non-conscious myth. The time has come for the non-conscious myth that will secure man’s total subordination to the requirements of reality. Reality is the economic development, the military equipment, and the political dominance of the all-inclusive State. Its ends justify all means. Its means include not merely every technique of indoctrination and propaganda, .. but also the terrorism of a political police, of prisons and torture, of concentration camps, of transported and extirpated minorities, and of total war. [CWL 3, 231-32/256-57]

[#61](Click here for previous “Single Paragraphs”)[11/26/19]

Being Part of the System: On classical analysis, (the) economic mechanism is the pricing system. It coordinates spontaneously a vast and ever shifting manifold of otherwise independent choices of demand and decisions of supply. Butman does not stand outside this machine; he ispart of it; his choices and decisions arethemselves the variablesin the system. It follows that there isno possibilityof setting down methodically, on the one hand, the exigencies of the machine and, on the other, the consequent performance of man. [CWL 21, 109] [#62][12/1/19]

Editor’s Preface and Editor’s Introduction: The serious student cannot skip CWL 15’s Preface and Introduction; he/she must read both carefully. The Editor’s Introduction places Lonergan’s theory in its historical context, and by its comparisons inspires the interested person to advance to a thorough understanding of Functional Macroeconomic Dynamics. The contents of the Preface and Introduction are listed below. Note in particular the title and ideas of Section 5 of the Introduction:Macroeconomic Dynamic Analysis as a.New Paradigm of Economic TheoryEditors’ 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 [#63]
A macroeconomics textbook having 700-1000 pages would contain a lot of interesting history, a lot of fuzzy psychology, unscientific analysis, and uncertain conclusions. But a reader would not gain a

clear theoryandcomplete explanationof thedynamicsof the real economic process. Those few who are familiar with Functional Macroeconomic Dynamics often yearn for someone to write a 700+-page textbook based onFunctionalMacroeconomicDynamics, but perhaps modeled in some respects on the conventional textbooks. But is there not a book superior in many respects to a conventional textbook right in our hands? How about this?Reword the subtitleof CWL 15 fromAn Essay in Circulation Analysistoand let the professor instruct the serious student to read the book three times, then report back for discussion about the following:A Textbook of Circulation Analysis,

- the
canonsof empirical method- a
scientific, dynamic heuristic- the technique of
implicit definition;explanatory termsdefined by the functional relationsin which they standwith one anothervelocitous functional unitiesofscientific and explanatory significancereplacing the BEA’s descriptive, commonsense, accountants’ unities- the structure of the
lagged, rectilinearproductive processmoney as a dummyinvented by man- the perspective of a
hierarchical seriesofmonetary circuits- how a
monetary circulationmeets the rectilinear production-and-vending process- the
primary relativities and concomitancein the Diagram of Rates of Flowdynamic equilibriumreplacingstatic Walrasian general equilibrium- the
velocity of moneyin terms ofmagnitudes and frequenciesprices are not a givenandnot requiring explanation; rather prices arein need of explanation- interpretation of prices, quantities, interest rates in the light of
significant explanatory variables- the pure cycle and its
constituent phasesin the expansion of the objective economic process- the
abstractprimary relativitiesandconcrete secondary determinationsin the expansion of the economic process- the
statistical residueand whyprediction is impossiblein the general case; predictingweathervs. predictingplanetary motion- the significance of
investment’s monetary correlate- the
ineptitudeof manipulating interest rates- the
explanationof government and foreign-trade imbalances by the dynamics ofsuperposed circuits- the distinction between
efficient causeandformalcause- distinguishing between
self-healingand the effect of interventions- the intelligibility and explanatory power of the
basic price-spread ratio- Figures 14-1, 24-7, and 27-1 in CWL 15
The student will learn much that is radically different, explanatory, and very useful; and the student will gain a perspective or framework by which to evaluate and criticize the tenets of conventional textbooks and all traditional theories. [63B]

[12/5/19] What the analysis reveals is

a mechanism distinct though not separablefrom theprice mechanismwhich spontaneously coordinates avast and ever shifting manifoldof otherwise independent choices from demand and of decisions from supply. It is distinct from the price mechanism, for itdetermines the channelswithin which the price mechanism works. It is not separable from the price mechanism, for a channel is irrelevant when nothing flows through it. [CWL15, 17] … On classical analysis economic mechanism is the pricing system. It coordinates spontaneously a vast and ever shifting manifold of otherwise independent choices of demand and decisions of supply. Butman does not stand outside this machine; he is part of it; his choices and decisions arethemselves the variablesin the system. It follows that there is no possibility of setting down methodically, on the one hand, the exigencies of the machine and, on the other, the consequent performance of man. [CWL 21, 109] Lonergan’s (mechanism) of two circuits connected by crossovers replaces the conventional single-circuit (mechanism) of all macroeconomic textbooks.[1]His channels of circulation (of monetary aggregates) replace the overall dominance claimed for general equilibrium theory, but they reveal the condition under which partial equilibrium can exist. … More positively, the channels account for (explain) 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, and the variant provided by multinational corporations and their opposition to the welfare state. [CWL 15, 17] [#64][12/7/19]

Definition by relation in math and science: In mathematics rules determine operations, and operations generate numbers of every kind; in physics objects aredefined throughthe laws by which they are connectedto one another; in chemistry elements aredefined through the various series of relationsthat are found in the periodic table; in physiology organs aredefined by the functionsthey have with regard to the whole body; and so on. (CWL 12, 717) And in macroeconomicsinterdependent velocitous functioningsofscientific significancearedefined by the relations they have with one anotheras inner constituents of theobjective, dynamic, economic process. [#65][12/9/19]

Schumpeter, Canton, Quesnay, Leontieff: … it will be well at once to draw attention to J.A. Schumpeter’s insistence on the merits of the diagram as a tool. (Schumpeter,History240-43, on the Cantillon-Quesnay tableau.) … First, there is the tremendous simplification it effects. Frommillions of exchangesone advances toprecise aggregates, relativelyfew in number, and henceeasy to follow up and handle. … Next come the possibilities of advancing to numerical theory. In this respect, despite profound differences in their respective achievements, the contemporary work of Leontieff may be viewed as a revival of Francois Quesnay’stableau economique. Most important is the fact that this procedure was the first to make explicit the concept ofeconomic equilibrium. All science begins from particular correlations, butthe key discovery is the interdependence of the whole.… While it is true that a tableau or diagram cannot establish the uniqueness of a system or rigorously ground its universal relevance, it remains that the diagram (of the interconnections of a few precise aggregates) has compensating features that Quesnay’s system of simultaneous equations may imply but does not manifest. … There is the tremendous simplification (a diagram) effects the aims and limitations of macroeconomics make the use of a diagram particularly helpful, … For its basic terms aredefined by their functional relations. The maintaining of astandard of living(distinct process 1) is attributed to abasic process, an ongoing sequence of instances ofso much every so often. Themaintenanceandacceleration(distinct process 2) of this basic process is brought about by a sequence of surplus stages, in whicheach lower stageis maintained and accelerated by thenext higher. Finally, transactions that do no more than transfer titles to ownership (distinct process 3) are concentrated in aredistributivefunction, whence may be derived changes 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 ain 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 and 177] [#66]threefold process

[12/14/19] Alfred S. Eichner, John von Neumann, Peter Burley:

Introduction: There was a strong and persistent teaching in the Judeo-Christian tradition, extending from the Old Testament to the Medieval Church, that any taking of interest was usurious, being the getting of something for nothing and therefore illegitimate. The Section on Circuit Acceleration of Lonergan, however, cites as an obviously progressive development that laws against usury (were) attacked in the ensuing commercial and industrial revolutions! How are we to understand this contradiction? The present paper is concerned to answer this question in terms of a von Neumann model representation of the Lonergan production model. For reasons given by Eichner, whom Lonergan often cited approvingly, we consider the von Neumann representation more parsimonious than the more conventional neoclassical model. [Burley, 2002-2, 61]Conclusion: We thus have a model for the fluctuations in the interest rate over pure cycles in an intermittently innovating economy, which has mastered the distribution of surpluses to consumption when it has temporarily run out of ideas for innovative investment. In the upswings there is a general opportunity cost of lending corresponding to the interest one could have got lending to any innovator … an example of what the later scholastic doctors would have calledlucrum cessansand in our circumstances of a general expansion would have considered a justification for interest. [Burley, 2002-2, 66] [#67]To our readers in North America, Europe, Colombia, and Brazil; and to others,

Merry Christmas! Let there be light!

Joyeux Noël! Que la lumiere soit!

Buon Natale! Sia la luce!

Καλα Χριστουγενα! Γενεθητω φως!

Feliz Navidad! Que haya luz!

Feliz Natal! Que haja luz!

Frohe Weinachten! Es werde licht![12/16/19] Paul Krugman, Thomas Picketty: Today, for instance, I heard Paul Krugman speak of Picketty … as giving rise to a “unified field theory.” A video recording is available on You Tube at https://www.youtube.com/watch?v=heOVJM2JZxI Wow! LOL: as I listened, I could not but think of what I had written below, on the next page here: “their efforts do not escape the category of statistically-infested journalism.” [McShane, 2014, 65 ftnt 99] [#68]

[1/6/19] Note to proponents of neoclassical, new-Keynesian, rational-expectations, and modern-monetary economics:

An

explanatory accountof the intrinsically evolutionary processes of any industrial exchange economy’s cycles of surplus (i.e. producer-goods) and basic (i.e. consumer-goods) production and exchange has to reveal how thedifferent phasesin the distinct cyclesintermesh and coordinate in an intelligible sequence, by means ofdifferential ratesof crossover payments from basic to surplus and from surplus to basic,depending on what phaseof aggregate expansion or leveling of the economy happens to be in at any given time. (CWL 15, Editor’s Introduction lxiii) [#69][1/15/20]

Ageneralizationwill postulatea transformationnot only of the old guard and its abuses but also of the reformers and their reforms; it will move to ahigher synthesisthat 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 willundermine the opportunity for peculation 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] [#70][1/20/20]

Leon Walras, Alvin Hansen, Joseph Schumpeter:I will begin by noting three points of criticism of the present tradition. In thefirstplace, the tradition includes no serious effort at analysis of the productive process.Secondly, even when it takes on the trappings of a theory of growth, it remains economic macrostatics.Thirdly, inbuilt into it and into its political application, there is a fundamental ideology of alienation.

First: As opposed to the impoverished abstraction “leets” there is an enriching abstraction which holds together, within a general heuristics of process, the aggregate of rates at which goods and services move, directly or indirectly, into a standard of living, without excluding wheat or cotton, bread and dresses, ships and machine tools, management and innovation.

Second: Wedded to the difficulty of conceiving capital … is the difficulty of conceiving change. Nor can this be surprising if the accusation of macrostatic thinking is valid. …An early villain was Leon Walras. … AsSchumpeternotes, “the exact skeleton of Keynes’ system belongs, to use terms proposed by Ragnar Frisch, to macrostatics, not macrodynamics.”

Third:Hansen’scharacterization of the shift of interest in the twentieth century takes on a different hue from the perspective of Praxisweltanschauung and of the third stage of meaning. Then one sees it as an abandonment of the search both for a dynamic theory and for democracy.There is no doubt that the solar system, even macrodynamically speaking, involves an aggregate of bodies. Was, then, the solution of the two-body problem irrelevant? Again, there is no doubt that tidal waves are not sinusoidal. Should we then drop the dynamic question and settle for some equivalent of photography and comparative statics? Or should we not make sense of elementary rhythms, momenta, etc., acknowledging that we are only paving the way for such developments as Fourier analysis? [#71] [McShane, 1980,

104-106,and118-119]

[1/23/20] Field Theory: … Special Relativity is primarily a field theory, that is, it is concerned not with efficient, instrumental, material, 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. [#72] [3, 43/67][2/2/20] Bernard Lonergan’s shift in economic thinking goes much deeper than the usually cited instances of scientific revolution. It has been described elsewhere as

a transposition; it relates to “changes in the control of meaningthat mark off the great epochs of human history” (B. Lonergan:Collection, 1967, pp. 255-56) [#73][2/8/20]

Albert Einstein, Bernard Lonergan: In a paper recently presented before the Boston Colloquium of the History and Philosophy of Science, Prof. Max Jammer of Bar-Ilan University surveyed the history of the attempts to provide axiomatic (or conceptual) foundations for theSpecial Theory of Relativity(hereafter abbreviated as “STR”). Among other things, Prof. Jammer’s paper revealed that, in contrast to quantum mechanics, no generally accepted axiomatic foundations for STR have yet emerged. Furthermore, Jammer’s paper showed that several attempts at axiomatic foundations were beleaguered with problems not to be found in the use of the theory by Einstein or the successive generations of practicing physicists. ¶ The shortcomings of these efforts to develop axiomatic foundations for STR – and indeed of any parallel efforts directed towards the search for axiomatic foundations for the General Theory of Relativity as well – are, in my judgement, inherent in the theories themselves. That is, the proper foundations of the theories of relativity reside, not in conceptual axioms, but in the foundational reality of the subject as subject. It is not my purpose in this paper to enter into a detailed critique of the various attempts at axiomatization discussed in Prof. Jammer’s paper. Rather on this occasion celebrating the achievements of Bernard Lonergan, I simply intend to show how his phenomenological appropriation of the structure of consciousness has opened up the possibility of approaching the question of the foundations of the theories of relativity from the viewpoint of the subject as subject. Byrne, Patrick H. “Lonergan on the Foundations of the Theories of Relativity,”, Matthew Lamb (ed.), Milwaukee: University of Marquette Press, 1981, pp. 477-478 in pages 477-94. [#74]Creativity and Method[2/10/20]

Schumpeter, Walras: While we agree with Schumpeter that Walras’s system implicitly includes the aggregates commonly considered in macroanalysis, (Walras’s system) can hardly be credited with distinctions between basic and surplus expenditure, receipts, outlay, income, and much less with an account of their various dynamic relations. Butuntil such distinctions are drawn and their dynamic significance understood, the aggregates and relations cannot becontained implicitly in any system. [#75] [CWL 15, 91-92][2/12/20] (In) 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]… it will be well at once to draw attention to J.A. Schumpeter’s insistence on the

merits of the diagramas a tool. (Schumpeter,History240-43, on the Cantillon-Quesnay tableau.) … First, there is the tremendous simplification it effects. Frommillions of exchangesone advances toprecise aggregates, relatively few in number, and henceeasy to follow up and handle. … Francois Quesnay’stableau economique. … was the first to make explicit the concept of economicequilibrium. All science begins from particular correlations, but thekey discoveryisthe interdependence of the whole.… the diagram (of the interconnections of a few precise aggregates) has compensating features that Quesnay’s system of simultaneous equations may imply but does not manifest. [CWL 15, 53 and 177]

To understand how the system of

interdependent monetary circulationsmeets the system of production and exchangeis to understand how the economy works. It is to graspall the production and monetary conceptstogether ina single coherent set of relations. It is to see all thedynamic interactionsof the current dynamic processin a single view, or better, tounderstand explanatory macroeconomics ina single comprehensive act of understanding. “All science begins from particular correlations, but thekey discoveryisthe interdependence of the whole.”… 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]More positively, the channels account for

boomsandslumps, forinflationanddeflation, for changed rates of profit, for the attraction found in a favorable balance of trade, the relief given by deficit spending, … [CWL 15, 17] [#76] [2/16/20]Albert Einstein, Bernard Lonergan, and thetheory of Riemannian manifolds:The contents of the excerpt below from CWL 3 are pretty standard stuff in an advanced physics course. The ideas are not Lonergan’s discoveries. Nevertheless, it is worthwhile to point out that Lonergan knew his physics and indeed taught physics. He understood and appreciated the difference betweenNewtonian mechanicsandmodern field theory. And he brought that thinking to his revolutionary ideas inpurely relationalFunctional Macroeconomic Dynamics. So, to provide an indication of the mind that Lonergan brought to macroeconomics, we print this excerpt.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

invariantunder the permissibletransformationsof 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 thetheory of Riemannian manifolds. The one basic law governing all such manifolds is given by the equation for the infinitesimal interval, namely,

ds^{2}=Σg_{ij}dx_{i}dx_{j}[i, j = 1,2…n]where

dx,_{1}dx… are differentials of the coordinates, and where in general there are_{2}nproducts under the summation. Since this equation defines the infinitesimal interval, it must be invariant under all permissible transformations. … … … Thus in the familiar Euclidean instance,^{2}gis unity when_{ij }iequalsj; it is zero whenidoes not equalj; and there are three dimensions. In Minkowski space, the g_{ij}is unity or zero as before, but there are four dimensions, andxequals_{4}ict. In the General Theory of Relativity, the coefficients are symmetrical, so thatgequals_{ij}g; and in the Generalized Theory of Gravitation, the coefficients are anti-symmetrical. [#77] [CWL 3, 146 -147/170-71]_{ji}

[2/23/20]

M. Leon Walrasdeveloped 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 accountthe phases of the productive rhythms. As has been shown,economic activity moves through a seriesof transformations and exploitations; and this series generates the succession of (point-to-line,point-to-point, cultural, and static phases.) Now each phase in the exchange economy will have its exchange equilibrium, but the equilibria of the different phasesdiffer radically from one another. By thiscyclic variationwithin the exchange equilibria there is effected the “curvature” of the exchange equations. [CWL 21, 51-52] [#78](Click here for previous “Single Paragraphs” or “Brief Items”)[3/18/20] Michael Gibbons’ essay,

“Economic Theorizing in Lonergan and Keynes”is a gem.Gibbons, M. (1987) “

Economic Theorizing in Lonergan and Keynes”,Religion and Culture: Essays in Honour of Bernard Lonergan S.J., Eds. J.P. Fallon and P.B. Riley, University of New York Press, Albany[Gibbons, 1987, pp. 313-23]Gibbons’ essay is followed in the collection by essays of Patrick Byrne and Eileen De Neeve; all three are available together

on lineatThe two papers following Gibbon’s paper are entitled

“Economic Transformations; the Role of Conversions and Culture in the Transformations of Economics”, pp. 327-48, by Patrick Byrne, and

“The Possibility of a Pure Cycle of the Productive Process: The Potential for Decline in Economic Growth”, pp. 349-66, by Eileen De Neeve. [#79]So we are brought to the profound disillusionment of modern man and to the focal point of his horror. He had hoped through knowledge to ensure a development that was always progress and never decline. He has discovered that the advance of human knowledge is ambivalent, that it places in man’s hands stupendous power without necessarily adding proportionate

wisdom and virtue, that the fact of advance and the evidence of power are not guarantees of truth, that myth is the permanent alternative to mystery and mystery is what his hubris rejected. ¶The real issue, then, is truth.Though it has concerned us all along, it will not be amiss to bring together at least the main points made on different occasions and in different chapters. Accordingly, we distinguish

- the criterion of truth,
- the definition of truth,
- the ontology of truth,
- truth in expression,
- the appropriation of truth, and
- the truth of interpretation.
(#80) (CWL 3, 549/572-73)

[5/2/2020] … , the task of developing a

dynamic theoryis very difficult and cannot be accomplished simply by adding dynamic qualifications to static theory. It requiresnew techniquesand raises fundamental problems of its own. An example of the new techniques required is the theory of difference equations. An example of the new fundamental problems iseconomic equilibrium, which, if considered from a dynamic standpoint, appears ina new light. (Schumpeter, Joseph A.,(London: Oxford University Press, 1954, page 110, as quoted in CWL 15, 91]History of Economic AnalysisWhile we agree with

SchumpeterthatWalras’ssystem implicitly includes the aggregates commonly considered in macroanalysis, (Walras’s system) can hardly be credited with distinctions between basic and surplus expenditure, receipts, outlay, income, and much less with an account oftheir various dynamic relations. Butuntil such distinctions are drawn and their dynamic significance understood, the aggregates and relations cannot becontained implicitly in any (explanatory) system. [CWL 15, 91-92]Taking into account past and (expected) future values does not constitute

Those familiar with elementary statics and dynamics will appreciate the shift in thinking involved in passing from equilibrium analysis – even if one is discussing virtual displacements – to an analysis where attention is focused on second-order differential equations, on dthe creative key transition to dynamics.^{2}θ/dt^{2}, d^{2}x/dt^{2}, d^{2}y/dt^{2}, on a range of related forces, central, friction, whatever. Particular boundary conditions, “past and future value”, are relatively insignificant for the analysis. What is significant is the Leibnitz-Newtonian shift of context. As second-order differential equations are the upper blade in large areas of physics, as the heuristics of genetic development are the upper blade for an integral study of plants, so aPraxisweltanschauungon efficient world productivity provides the upper blade for dynamic economics.[McShane, 1980, 127]… it will be well at once to draw attention to J.A. Schumpeter’s insistence on the merits of the diagram as a tool. (Schumpeter,

History240-43, on the Cantillon-Quesnay tableau.) … First, there is the tremendous simplification it effects. Frommillions of exchangesone advances toprecise aggregates, relativelyfew in number, and henceeasy to follow up and handle. … Next come the possibilities of advancing to numerical theory. In this respect, despite profound differences in their respective achievements, the contemporary work of Leontieff may be viewed as a revival of Francois Quesnay’stableau economique. Most important is the fact that this procedure was the first to make explicit the concept ofeconomic equilibrium. All science begins from particular correlations, butthe key discovery is the interdependence of the whole.… While it is true that a tableau or diagram cannot establish the uniqueness of a system or rigorously ground its universal relevance, it remains that the diagram (of the interconnections of a few precise aggregates) has compensating features that Quesnay’ssystem of simultaneous equations may imply but does not manifest. … There is the tremendous simplification (a diagram) effects; the aims and limitations of macroeconomics make the use of a diagram particularly helpful, … For its basic terms aredefined by their functional relations. The maintaining of astandard of living(distinct process 1) is attributed to abasic process, an ongoing sequence of instances ofso much every so often. Themaintenanceandacceleration(distinct process 2) of this basic process is brought about by a sequence of surplus stages, in whicheach lower stageis maintained and accelerated by thenext higher. Finally, transactions that do no more than transfer titles to ownership (distinct process 3) are concentrated in aredistributivefunction, whence may be derived changes 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 ain 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 and 177] [#81]threefold process[5/20/20] Bernard Lonergan: The analysis has revealed that the economic system is a pattern of aggregate dynamic relationships arranged in different kinds of velocity and accelerator rhythms. …

is that this complex machine hasthe general theorem of continuitya nature that must be respected. Thegeneral theorem of continuityis theabstractandformalaspect of such limitations in the economic order. … there has to be an internal coherence … , and to violate this coherence is to rout economic organization. Just as the movements of the controls of an airplane must be coordinated and all coordinations are not possible at all instants, so alsothe economic machine has its controls, which can be moved only in concert and only in a limited number of ways at any given time. … Such is the general theorem of continuity. In theabstractand in ageneralway, it affirms thatthe economic process can proceed only within the limits of equilibriumof the various phases. To step outside them is to bring about ageneral breakdown. (CWL 21, 73) [#82][5/20/20] I will begin by noting three points of criticism of the present tradition. In the first place, the tradition includes no serious effort at analysis of the productive process. Secondly, even when it takes on the trappings of a theory of growth, it remains economic macrostatics. Thirdly, inbuilt into it and into its political application, there is a fundamental ideology of alienation. [McShane 1980, Lonergan’s Challenge to the University and the Economy, 103-104]

In support of the first criticism:

As opposed to the impoverished abstraction (of capital equipment as) “ ” (steel), there is an enriching abstraction which holds together, within a general heuristics of process, the aggregate of rates at which goods and services move, directly or indirectly, into a standard of living, without excluding wheat or cotton, bread and dresses, ships and machine tools, management and innovation. [McShane 1980, 104]

In support of the second criticism:

Wedded to the difficulty of conceiving capital … is the difficulty of conceiving change. Nor can this be surprising if the accusation of macrostatic thinking is valid. … An early villain was Leon Walras. … As Schumpeter notes, “the exact skeleton of Keynes’ system belongs, to use terms proposed by Ragnar Frisch, to macrostatics, not macrodynamics.” [McShane 1980, 105]

In support of the third criticism:

Hansen’s characterization of the shift of interest in the twentieth century takes on a different hue from the perspective of Praxisweltanschauung and of the third stage of meaning. Then one sees it as an abandonment of the search both for a dynamic theory and for democracy. [McShane 1980, 106] [#83]