Philip McShane understands Lonergan’s Functional Macroeconomic Dynamics better than anyone else alive, due I believe to his ability to apply his background in mathematics and theoretical physics to a scientific macroeconomics. He has stated:
Concomitance is, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane]
As Editor of CWL 21 he stated with strong conviction,
My other extravagance (in preparing the index) is to bring into focus, by entries under ‘Concomitance,’ the total challenge of the new political economy. Are we to respect the heart-pulses of the productive machine, or are we to continue the ‘absurdity’ (see Index) of counterpulsing, locally and globally? (Can we say with Wordsworth) “And now I see with eye serene, the very pulse of the machine”
In treating the current, purely dynamic, economic process, we deal with correlated, companionate flows. Let bare concomitance denote a bare companionship of flows.
In Latin, comes, comitis denotes a “fellow traveller,” “a companion”. The prefix con is from cum denoting “with.” We need not stray far from the Latin meaning a “traveller with” or a “fellow traveller” to grasp the importance of concomitance in Functional Macroeconomic Dynamics.
Concomitance of the functional flows is required for the achievement of normative continuity and dynamic equilibrium.
There are flows of types of products, and, as indicated in the Diagram of Rates of Flow, there are companionate flows of money which must keep pace with the flows of products. Thus, there are flows of money in a conditional dependence on one another. Expenditures for goods and services are conditioned by a concomitance with incomes. Incomes are conditioned by a concomitance with outlays. Outlays are conditioned by a concomitance with receipts from expenditures or from credit.
Let normative concomitance denote the requisite keeping pace of interdependent, mutually conditioning, functional flowings.
Concomitance of flows is a condition of continuity. The absence of normative concomitance constitutes a slowdown or break in the action.
The quantity of a product flow is the numerator in dQ/dt or ΔQ/dt. A moving together with respect to time is expressed in a full ratio of so much or so many per standard interval .
So, assuming a constant price, a velocity which is to keep pace with another velocity is expressed as d(PQ)/dt = PdQ/dt or Δ(PQ)/Δt = PΔQ/Δt with PQ representing a sum of money, P representing price, and Q representing a quantity of units of material or service.
In the three loaded excerpts at the end of this list, please note
- the synonymity of “keeping in step” and “concomitance”
- that any systematic divergence from concomitance brings automatic correctives to work
- that in a system composed of a basic and a surplus circuit, the concomitance of respective incomes with outlay and expenditure is identical with the adjustment of the rate of saving to the requirements of the productive process
- that the concomitance of the two flows of a product and its purchase moneys is the condition of constant exchange value, and
- the truism or absoluteness of supply matching demand and demand matching supply because of their mutuality in an exchange interaction. A transaction is constituted by the exchange of something demanded-purchased and sold-supplied. In the sense that a) what is not yet sold is still under process because it has not yet exited the process, and b) no matter how much something is desired, if it is not bought it has not been supplied, in that sense it is a truism that actual supply and demand are conjoined and unitary.
- Now it is important to distinguish two different aspects of equations (39) and (42) – “truism” and “ideal”. 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 an necessary truth, express an almost unattainable ideal, namely a dynamic equilibrium to which any actual process continually attempts to approximate by varying prices and changing quantities of supply. To study the truism is to study bookkeeping, to study the art of double entry, and to learn the magic of the variable items, profit and loss, which perforce make the books balance. To study the ideal is to study equilibrium analysis. The bookkeepers are wise after the event. But if the entrepreneurs are to be wise, they have to be wise before the event, for their payments precede their receipts, and the receipts may equal the payments but they may also be greater or less, to give the entrepreneur a windfall profit or loss. Such justification or condemnation of payments by receipts the bookkeeper records but the entrepreneur has to anticipate, and the grounds of his anticipations, their effects upon his decisions, and the interaction of all decisions form the staple topic of equilibrium analysis. Now the viewpoint of the present discussion is neither that of the bookkeeper nor that of the equilibrium analyst. Equations (39) to (42) are regarded not as a set of facts recorded by bookkeepers, nor as an ideal which entrepreneurs strive yet fail to attain, but as a first approximation to the law of circulation in the basic circuit. The first approximation to the law of projectiles is the parabola: one might, if one chose, consider the projectiles as aiming at or tending towards the ideal of the parabola yet ever being frustrated by wind resistance; one might elaborately describe the trajectory of the projectile as an indefinite series of parabolas, each one in succession the goal of its tendency only to be deserted because adverse circumstance set it on another track. In such a description of trajectories there is to be found at least a superficial resemblance with the statement that an economy is tending towards equilibrium at every instant, though towards a different equilibrium at every successive instant. But whatever the resemblance, and however deep and significant the difference, we here propose to take a circuit and examine first the implications of this law and then the second approximations that are relevant to our inquiry. [CWL 21, 142-43]
- A condition of circuit acceleration was seen in section 15 to include the keeping in step of basic outlay, basic income, and basic expenditure, and on the other hand, the keeping in step of surplus outlay, surplus income, and surplus expenditure. Any of these rates may begin to vary independently of the others, and adjustment of the others may lag. But any systematic divergence brings automatic correctives to work. The concomitance of outlay and expenditure follows from the interaction of supply and demand. The concomitance of income with outlay and expenditure is identical with the adjustment of the rate of saving to the requirements of the productive process. [CWL 15, 144]
- (We) state the necessary and sufficient condition of constancy or variation in the exchange value of the dummy (money). To this end we compare two flows of the circulation: the real flow of property, goods, and services, and the dummy flow being given and taken in exchange for the real flow….Accordingly, the necessary and sufficient condition of constant value in the dummy lies in its concomitant variation with the real flow….More briefly, if there is concomitance between the two flows, then the proportion in which dummies and goods exchange remains the same. If there is lack of concomitance, then this proportion changes. But exchange value is a proportion. Therefore, the concomitance of the two flows is the condition of constant exchange value. [CWL 21, 37-39]
Concomitance is a condition of continuity, dynamic equilibrium, circuit acceleration, and stable prices. Again,
…: two types of firms implies two interdependent circuits, and two types of income; and continuity within and among the interdependencies necessitates concomitance.