Lonergan insisted upon real analysis.  Lonergan’s premise is production and exchange.

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]

Lonergan shared Alfred Marshall’s willingness in his Principles of Economics to make economics utterly independent of ethics and politics, insofar as this meant establishing the intellectual autonomy of economic science. [CWL 15, Editors Introduction xlii]

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]

Paraphrasing:

Lonergan moved macroeconomics back to premises more remote than Walrasian statics, microeconomic price theory, neoclassical macroeconomics and Keynesian macroeconomics, he developed explanatory formulae quite unlike others’, and though he did not impugn them, neither was he very interested in them; casually and incidentally combinations of prices and quantities turn up as particular cases in an enlarged and radically different field. … Lonergan employed a new dynamics to make aggregate, mutually-defining, velocitous functionings the basic interdependent variables; and as Newton transformed the formulation and interpretation of Kepler’s laws, so Lonergan transforms the neoclassical and Keynesian laws of motion. … He achieved a scientific generalization of the old political economy and of modern economics that yields the new political economy which we need. … Plainly the way to settle disputes about economic change is through a sublating, more general, dynamics of functionings.

In CWL 15, Lonergan first analyzed the precise structure of the productive process.  Only after that did he turn to a) the structure of the exchange process correlative to the production process and b) to exchange value. He did not create out of nothing an imaginary castle in the air of a theory of bond-market interest rates and values.  He did real analysis.

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  quoting Lonergan]

These differences and correlations (within the productive process) have now to be projected into their monetary correlates to set up classes of payments… The productive process (occurs) 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]

The argument … moves from classes of payments to rates or flows of payments, and from the rates or flows to their circulatory interdependence.  Just as there is a dynamic structure of the productive process, so also there is a dynamic structure of the monetary circulation. The classes of payments provide the link between the two: the classes are based upon the dynamic structure of the (productive) process; the rates or flows, constructed from the classes, aim at an analysis of the circulation. [CWL 15, 45-46]

At the end of these lines of production are a.) the finished products, b.) the aggregate receipts of industry and commerce, and c.) the aggregate expenditures of final buyers. … (The connection of expenditures by final buyers and receipts by entrepreneur-sellers) with production is immediate: they …  are, so to speak, the immanent manifestation of the productive process as a process of value. … production is not a merely technical affair;… intrinsically it is an economic affair, … production for sale, production in view of and at every instant adapted to payments. [CWL 21, 114]

In an exchange economy, the production functionings of producing and selling have correlative monetary functionings.   A monetary function is a flow of money correlated with a flow of producings or a flow of purchasings.  The payment of money to a worker-employee to purchase the worker’s productive services enables production and provides income for purchases.  The payment of money by a worker-consumer to purchase a finished good completes the productive process and provides to the entrepreneur receipts for the next round of outlays.

In both the basic and surplus circuits there are productive and monetary flows: a) workers’ services applying factors of production and receiving monetary compensation, b) transitional flows of products and payments as value is added in the rectilinear sequence of contributions to a completed product, and c) final flows of final payments to purchase products exiting the process.

So, in real analysis, differences and correlations among basic and surplus categories within the productive process are projected into their monetary correlates.  And “real analysis” (is) identifying money with what money buys,” connecting the monetary flow to the productive flow.  Identifying money as a standalone entity apart from productive flows is not “real analysis.”

the work for money to do is to move, say, wheat from the western plains to the householder’s table, and increasing the number of owners that intervene in the process gives no more than a phenomenal increase in the velocity of money. … the velocity of money in the main circuits is tied to the velocity with which goods are produced and sold. …the velocity of money in the main circuits coincides with the velocity, the time interval, between the initiation of production and the moment of final sale. [CWL 21, 61-62]

To study the exchange equilibrium it is necessary to introduce a system of reference, a method of listing the different funds or accumulations that are standing in equilibrium. … Such a system may be any degree of generality.  The absolute minimum of generality would be to list all the individual persons, firms, banking institutions, etc. that possessed funds.  Such a procedure would be very thorough, but it would not be science, for science is of the general and it is guided not by quantitative considerations but by the selection of significant differences. … Let us define a balance as a sum of money or credit held in view of some definite purpose or indefinite eventuality.  Then, from the viewpoint of our analysis, there exist five types, and so five aggregates, of balances. …  First there are redistributional balances (like) the reserves assuring the liquidity of banks, insurance companies, underwriters, dealers in stocks and bonds, and the accumulations for the purchase of land, used capital equipment, and secondhand products such as houses, used motorcars, and the like. … Second and third, there are trader balances … to bridge the gap between the initiation of his turnover and its completion: he has to purchase materials, pay wages, and it is only  when he has sold his product that the monetary return of his outlay begins.  To bridge this gap he must have circulating capital. (Thus we have) primary trader balances and secondary trader balances. Fourth and fifth there are primary consumer balances and secondary consumer balances.  On the principle of equilibrium, defined in the preceding section, there must be in the general case an equilibrium between movements into each of these and movements out to all the others.  [CWL 21, 58-59]

 

 

 

 

 

 

 

 

 

 

Again, real analysis is not the building of imaginary castles floating in the air.

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  quoting Lonergan]