Functional Velocity as a Technical Term

Function is a technical term, like mass or charge.

Our function, or functioning, is a flow; as such it is so much per period.  Thus, it is a velocity.  So our basic technical terms are interrelated velocities.

Economists had previously, but unsuccessfully, wrestled with functional distinctions between the production of consumer goods and the production of capital goods, but Lonergan stands alone in analyzing these distinctions and formulating the dynamics within the triply-conditioned economic process.

“Functional” is a technical term pertaining to the realm of explanation, analysis, theory; it does not mean “who does what” in some commonsense realm of activity………”Let us say, then, that for 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…….Lonergan (identified) the contemporary notion of a “function” as one of the most basic kinds of explanatory, implicit definition – one that specifies “things in their relations to one another”…In Lonergan’s circulation analysis, the basic terms are rates – rates of productive activities and rates of payments.  The objective of the analysis is to discover the underlying intelligible and indeed dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates to one another. [CWL 15 26-27  ftnt 27]

Lonergan sought to “discover the network.”  He sought to discover the “network of functional, mutually conditioning, and interdependent relationships of these rates to one another.”

To be sure, the corporate income statement’s unities and the changes in the balance sheet’s balances are flows.  The Bureau of Economic Analysis reports these flows in its National Income and Product Accounts. (NIPAs) and the Federal Reserve reports flows in its Flow of Funds matrix.  But these flows are not explanatory flows.  They do not formulate the interdependencies, conditionings, and interrelations that express the immanent intelligibility of the current, purely dynamic process.  They do not explain.  The accounts are not significant variables; they are not of systematic significance. They cannot provide a formulation of equilibrium or distortion.  They are not discovered in an insight grounding a circle of relations.

Let us say, then, that for 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. … [CWL 15  26-27  ftnt 27]

That abstractive grasp of intelligibility is the insight … [CWL 3, 62/85]

Other economists had struggled with functional distinctions.

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]

Lonergan is alone in using this difference in economic activities to specify the significant variables in his dynamic analysis…..no one else considers the functional distinctions between different kinds of productive rhythms 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.[CWL 15, Editors’ Introduction lxii]