“Dynamic”; and a Mankiw-Weinzierl Essay

In Newtonian mechanics the phenomenon of motion is explained in the fundamantal terms of space, time, mass, and external force.  Newton’s two foundational formulas are

F = m d2x/dt2, F = ma


F = gm1m2/D2

The Greek for the utterance “force” is dunamis.  But, we are also describing a phenomenon which occurs over time, dt2. So, in Newtonian mechanics, when we speak of dynamics or a dynamic, we are combining minimally the notions of an external efficient cause named force, and an occurrence through space and over time.

Examples of phenomena occurring through some type of distance and over time – i.e. so much or so many per interval – would be planetary motion (Kepler’s Laws); the oscillation of a coiled spring (Hooke’s Law); the path of a pendulum; the trajectory of a home run or a split-fingered fastball; the application of productive factors per period; the sales of automobiles, the harvesting of corn, the monetary transfers per period correlated with production or sale per period.

But, in functional macroeconomics, we must be careful about how we include the matter of agency or force; we depart from Newton’s external causality and enter the realm of macroeconomic field theory, in which explanation has no need for the subjective and squishy causality of elements such as utility, indifference curves, or time preferences.  To be sure, humans are, as it were, external agents to the system.  But, in explanation,  there are prior and more fundamental relationships among interdependent productive and monetary functionings – independent of human psychology – which stand prior in the analysis to human agency.  The injection of human agency is a premature introduction of secondary determinations.  It amounts to taking happenstantial boundary values, forcing them into a Procrustean form, and calling that Procrustean arrangement of secondary boundary values the primary relationships of the system.

It is the viewpoint of the present inquiry that, besides the pricing system, there exists another economic mechanism, that relative to this system man is not an internal factor but an external agent, and that the present economic problems are peculiarly baffling because man as external agent has not the systematic guidance he needs to operate successfully the machine he controls. [CWL 21, 109]

We set out to indicate the existence of an objective mechanical structure of economic activity, of something independent of human psychology, of something to which human psychology must adapt itself if economic activity is not to become a matter of standing in a tub and trying to lift it. [CWL 21, 56]

Static equilibrium is usually spoken of in the field of microeconomics in connection with the static balance between supply and demand represented by supply-demand curves and the indifference curves of firms and households. This static analysis uses no time subscripts and, therefore, has no regard for the process’s rhythms and evolutionary phases.  The point of intersection of the supply and demand curve marks the point of balance or of static equilibriumat the intersection of supply and demand so as to clear the market of products for sale. And that is all there is to it.

Dynamic equilibrium in macroeconomics is constituted by a proper balance of interdependent, mutual conditioning functional flowsof money payments correlated with the interdependent functional flows of products in the productive process.  Concrete flows, as so much every so often, are, though concrete, understood as abstract velocities and accelerations.

Static equilibrium is a balance of “fixtures.”  Dynamic equilibrium is a continuing balance of interdependent “flowings.”

Recall, Lonergan‘s title is Macroeconomic Dynamics, an Essay in Circulation AnalysisThe title of this website is Functional Macroeconomic Dynamics.  And McShane insists that the creative key transition required by economists is the shift to the calculus invented by Leibnitz and Newton – Leibnitz-Newtonian shift of context, i.e. the shift in analysis from statics and comparative statics to second-order differential equations. And these equations would regard the primary relativities of interdependent, explanatory, functional flowings rather than the secondary determinations of coincidental pricings, quantities, and human psyches

The Mankiw-Weinzierl essay, An Exploration of Optimal Stabilization Policy (http://www.people.hbs.edu/mweinzierl/paper/AnExplorationOfOptimalStabilizationPolicy_BPEA_2011.pdf

is premised upon the subjective preferences of households and the preferences of entrepreneurs.  So, from that premise, the entire analysis falls short of the level of abstracting primary functional relativities independent of human psychology and, though mathematically virtuous, is neither dynamic nor explanatory.