Pointers and Principles; An Invitation to Minds

This set of excerpts has been assembled so as to inform and inspire.  In its own way it informs the reader of the minds of Lonergan and key commentators.  And it will, we hope, inspire the serious macroeconomist to reach up to those minds.

The section has not been arranged in a rigorous manner.  On the contrary, it is a sort of random walk.  But we hope the benefit of one’s reading it attentively will be great.

Schumpeter acknowledged that dynamic analysis called for a new light on equilibrium.  Such new light arises when, over and above, the equilibria  of supply and demand with respect to goods and services, there are recognized further equilibria that have to be maintained…..Moreover, such macroequilibria are more fundamental than the microequilibria assembled by Walras.  The former are the conditions of a properly functioning economy [CWL 15, 92]

The whole structure is relational: one cannot conceive the terms without the relations nor the relations without the terms.  Both terms and relations constitute a basic framework to be filled out, first by the advance of the sciences and, secondly, by full information on concrete situations. [CWL 3, 492/516]

A study of the mechanics of motor-cars yields premises for a criticism of drivers, precisely because the motor-cars, as distinct from the drivers, have laws of their own which drivers must respect. But if the mechanics of motors included, in a single piece, the anthropology of drivers, criticism could be no more than haphazard. [CWL 21, 109]

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.  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. … [CWL 3, 291/316]

Taking into account past and (expected) future values does not constitute the creative key transition to dynamics.  Those familiar with elementary statics and dynamics (in physical mechanics) will appreciate the shift in thinking involved in passing from equilibrium analysis (of a suspended weight or static supply and demand curves)…to an analysis where attention is focused on second-order differential equations, on d2θ/dt2, d2x/dt2, d2y/dt2, on a range of related forces, central, friction, whatever. Particular boundary conditions, “past and future values” are relatively insignificant for the analysis.  What is significant is the Leibnitz-Newtonian shift of context. [McShane, 1980, 127]

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 greater generality, the laws of motion, and by finding a deeper unity in the apparent disparateness of Kepler’s ellipse and Galilei’s time squared. [CWL 21, 6-7]

Our immediate task is to work out the correlations that exist between the velocity and accelerator rhythms of production and the corresponding rhythms of income and expenditure.  The set of such correlations constitutes the mechanical structure, a pattern of laws that stand to economic activity as the laws of mechanics to buildings and machines. [CWL 21, 43]

To our knowledge, 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 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 and in relation to each other by means of crossover payments. [CWL 15, Editors’; Introduction lxii]

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 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]

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]

The point-to-line and higher correspondences are based on the indeterminacy of the relation between certain products and the ultimate products that enter into the standard of living.  Now (some would object that) such indeterminacy does not seem to be a fact.  (Lonergan proceeds to refute.) [CWL 15, 27]

… The analysis that insists on the indeterminacy is the analysis that insists on the present fact: estimates and expectations are proofs of the present indeterminacy and attempts to get round it; and, to come to the main point, an analysis based on such estimates and expectations can never arrive at a criticism of them; it would move in a vicious 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, 28]

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. … 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.  But what 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 are aggregate and functional costs…. [CWL 15 156-57]

Previously I have suggested a lack of adaptation in the free economies to the requirements of the pure cycle.  What that lack is can now be stated.  It is an inability to distinguish between the significance of a relative and an absolute rise or fall of monetary prices.  A relative (i.e. “real”) rise or fall is, indeed, a signal for a relatively increased or reduced production (of one product relative to another) … (much)… Inversely, the rising prices of the surplus expansion are not real and relative but only monetary and absolute rising prices; to allow them to stimulate production is to convert the surplus expansion into a boom (which must be followed out of systematic necessity by a correlative and devastating slump).  This I believe is the fundamental lack of adaptation to the productive cycle that our economies have to overcome.  The problem, however, has many ramifications of which the most important is the relativity of the significance of profits (“pure surplus income”).  To this we now turn.  [CWL15, 139-140]

At the root of the depression lies a misinterpretation of the significance of pure surplus income. In fact it is the monetary equivalent of the new fixed investment of an expansion…..our culture can not be accused of mistaken ideas on pure surplus income as it has been defined…; for on that precise topic it has no ideas whatever………However the phenomena referred to by …”pure surplus income” are well known. Entrepreneurs are quite aware that there are times of prosperity in which even a fool can make a profit and other mysterious times in which the brilliant and the prudent may be driven to the wall……….Thus pure surplus income may be identified best by calling it net aggregate savings and viewing them as functionally related to the rate of new fixed investment [CWL 15 152-53]

There’s the good of order.  The good of order is very well represented negatively by an economic depression.  In an economic depression there is no lack of material, there is no lack of capital, there is no lack of people willing to work, and there is no lack of people willing to buy, but things don’t run, they don’t work.  You can prime the pump, and you get a single burst of water going round, but it doesn’t keep going round as when the economic system is functioning properly. You can keep priming and repriming and build up an enormous national debt, and things still aren’t clicking. … What is lacking is a good of order.  And what is this good of order? It is the dovetailing of one thing with another that you have when the economic system is functioning properly.  A makes shoes, B wants shoes and makes something else, and the whole thing clicks together and it works.  The difficulties, of course, why the thing periodically does not work, the reasons for that are more complex.  But there is a good of order. … Again, you have the good of order in a family, a family as an institution. … There is a good of order of the polity, the state. These objective schemes of recurrence – you have a good breakfast this morning, you have a good breakfast the next morning, and you keep on having a good breakfast every morning; you have a job to do that interests you today, and you’ll have it tomorrow and so on. … and the good of order is when the whole thing clicks together.  It is good in the intelligible sense.  It is the object of an insight.  (CWL 5, 378-379;  Please read these and following pages in CWL 5 in full.)

Thus it is that in the history of human societies there are halcyon periods of easy peace and tranquility  that alternate with times of crisis and trouble.  In the periods of relaxed tension, the good of order has come to terms with the intersubjective groups.  It commands their esteem by its palpable benefits; it has explained its intricate demands in some approximate yet sufficient fashion; it has adapted to its own requirements the play of imagination, the resonance of sentiment, the strength of habit, the ease of familiarity, the impetus of enthusiasm, the power of agreement and consent.  Then a man’s interest is in happy coincidence with his work; his country is also his homeland; its ways are the obviously right ways; its glory and peril are his own. [CWL 3, 216/241]

… the double-circuited and credit-centered economy is as naturally demanding as any motor engine. [CWL 21, xxvii]

the analysis pins down the velocities of money in the demand (sales) functions to functions of velocities  in the supply (production) functions. … the turnover on one side (the production side) generates income by initial payments and on the other side (the sale side) takes in the expenditure of final payments. [CWL 21, 172]

All such payments form a class by themselves.  They stand in a network that is congruent with the technical network of the productive process. …above all, their connection with production is immediate: they … are, so to speak, the immanent manifestation of the productive process as a process of value. [CWL 21, 114]

In brief Lonergan is looking for an explanation in which the terms are defined by the relations in which they stand, that is, by a process of implicit definition.  This technique (implicit definition) has been used to great effect by David Hilbert in his Foundations of Geometry in which, for example, the meaning of a point and a straight line is fixed by the relation that two, and only two points, determine a line.  “The significance of implicit definition is its complete generality.  The omission of nominal definition is the omission of a restriction to objects which, in the first instance, one happens to be thinking about.  The exclusive use of explanatory or postulational elements concentrates attention upon the set of relationships in which the whole scientific significance is contained.”  [Michael Gibbons, Economic Theorizing in Lonergan and Keynes 313]

That account (of the monetary distributions properly called basic and surplus incomes, though in everyday commonsense parlance commonly called wages and profits) springs from a characterization of possible types of productive rhythms which lead to the specification of the adequate human adaptation to the demands of the process, and also to a determination of inadequate strategies of adaptation such as variations of interest rates, varieties of taxation and monetary policy. [McShane, 1980, 125]

The need for a change to a scientific perspective: otherwise, as I have witnessed, discussion of the relevance of circulation analysis floats towards the floods of erudite commonsense chat. [McShane, 1995, 95-96]

Next, understanding is about principles.  A principle is defined as what is first in some order.  Therefore, it belongs to understanding to grasp the solution of that problem that is first in the order proposed by wisdom.  Since this order is such that solving the first means that the others are expeditiously solved, the understanding should be such as virtually to contain in itself the answers to the rest of the questions. [CWL 12, 23]

Lonergan’s critique (shows that) by using the technique of implicit definition, the emphasis shifts from trying to define the relevant variables to searching heuristically for the maximum extent of interconnections and interdependence; and that the variables discovered in this way might not resemble very much the objects (or the aggregates) which, in the first instance, one was thinking about. [Gibbons, 1987]

More positively, the channels account for 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. [CWL15, 17]

Lonergan was grateful for the way Schumpeter had shown slumps and crises were related to contraction of plant and equipment, and that there were ‘a hundred theories’ on why – so that in Schumpeter’s estimation there really existed no solid explanation.  Lonergan claimed: ‘I have an explanation on that.’  In addition he said he was grateful to Schumpeter for elucidating the virtualities of Francois Quesnay’s (1694-1774) tableau economique (MD:ECA 53).  Lonergan appreciated the way the tableau(1) allowed the theorist (a) to correlate many things all at once, and not just one at a time, piecemeal; (b) to assign numbers arithmetically to the variables involved; (2) permitted insight into phantasm instead of mere speculation detached from the facts. See Joseph A. Schumpeter, History of Economic Analysis222-23, 241-43. Lonergan’s own use of his five-point diagram indicates just how seriously he took the need for adequate diagrams.  See ‘Appendix History of the diagram, 1944-1998’ below, pp 177-202 [CWL 15, Editors’ Introduction, ftnt 86, liii]

The set of such correlations constitutes the mechanical structure, a pattern of laws that stand to economic activity as the laws of mechanics to buildings and machines. [CWL 21, 43]

There are sets of phenomena, notably the favorable and unfavorable balances of foreign trade, deficit government spending, and the payment of public debts by taxation, that are analogous to the phenomena of the cycle.  It is proposed to deal with them under the general title of ‘superposed circuits.’  [CWL 15, 162-63]

In our general account of the monetary circulation, two circuits, a basic and a surplus, were distinguished.  They were interconnected with a crossover.  But they involved no regular flow through the Redistributive Function. … There is, however, no impossibility of the Redistributive Function becoming a point through which a circuit regularly passes …  On the other hand, such a circuit both presupposes and is distinct from the basic and surplus circuits already considered.  Hence the name of superposed circuits, and also the mode of treatment.  [CWL 15, 162-63]

No doubt the additions or subtractions (of the superposed circuits) modify these rates (in the fundamental operative circuits already considered, and) reinforce or counteract the tendencies of whatever phase may be in progress.  Our purpose in representing them as (superposed circuits) is not at all to deny such interaction but rather to gain a viewpoint from which such interaction may be studied.  The viewpoint adopted is that of the circuit. CWL 15, 162-63

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]

Part Two (of CWL 21): Fragments… belongs almost entirely in what I call the Einsteinian context of Part Three, in contrast to the Newtonian achievement of Part One, (but Part Two) is still somewhat transitional in system and expression. So, for example, to take the central character in the drama, pure surplus income is there named systematic profits. [CWL 21, 325]

The difference between an absolute and a relative consists in this, that an absolute reality possesses its entire meaning within itself, whereas a relative reality has its complete meaning only by comparison to something else. [CWL 12, 697]

The challenge is “understanding economic process in terms of explanatory functions.” [McShane 1995, 17]

An ‘accountant’s unity’ …  is a category used in (conventional) accounting.  For Lonergan, (conventional) accounting generally denotes an enterprise within common sense which uses descriptive, as contrasted with explanatory terms (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 is not an adequate index for the normative, explanatory analysis of the productive process. [CWL 15, page 26, ftnt. 26]

if we want to have a comprehensive grasp of everything in a unified whole, we shall have to construct a diagram in which are symbolically represented all the various elements of the question along with all the connections between them.  [McShane, 2014, 151] (quoting CWL 7, 151)

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 dummy must be constant in exchange value, so that equal quantities continue to exchange, in the general case, for equal quantities of goods and services.  The alternative to constant value in the dummy is the alternative of inflation and deflation.  Of these famous twins, inflation swindles those with cash to enrich those with property or debts, while deflation swindles those with property or debts to enrich those with cash; in addition to the swindle each of these twins has his own way of torturing the dynamic flows; deflation gives producers a steady stream of losses; inflation yields a steady stream of gains to give production a drug-like stimulus. [CWL 21, 37-38]

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 functional interrelations in which they stand. [CWL 21, 112]

A good or service is composed of factors of production: qi=ΣΣqijk [CWL 15, 30]

The lagged technical accelerator: kn[f’n(t-a)-Bn] = f”n-1(t) – An-1 [CWL 15, 37]

Σsij  = Σvirij   [CWL 21, 169-70]

G = c”O” – i’O’ = 0 is the condition of equilibrium  [CWL 15, 54]

It is a common saying that savings equals investment.  On the present showing it would be more accurate to say that the crossovers should balance, that a sustained lack of balance portends ruin, … [CWL 15, 70]

operative payments have been defined as standing in a network congruent with the network of the productive process; it follows that we have to deal with quantities of money congruent with the values emerging in the productive process (turnover dollar magnitudes), and with the velocities (turnover frequencies) of money congruent with the velocities of the productive process.  [CWL 21, 135]

(Lonergan) believed he had an explanation for what … he described as a ‘situation – sometimes thought mysterious – in which consumer prices continuously inflate, new enterprise is evaded, unemployment becomes chronic, and despite the inflation the value of stocks declines’ [CWL 15, Editors’ Introduction xli] quoting [CWL 15, 175]

As the table makes clear, a variation in G’ is much more significant that a variation in G”.  … Inversely, when G” is 90% and G’ is really 10% but estimated to be 20% by over-zealous depreciation charges and by depressed wages, then a normative proportion of 9 is given a monetary distribution corresponding to a proportion of 4.5.  The result is an overproduction or an insufficient purchasing power or a maldistribution (or whatever it is safe to call it, for superficial economists fancy the thing cannot exist) that generously slices off about half of existing economic activity. We say ‘about half’ for the proportion 4.5 is a relative term: secondary activity may increase, and then the proportion is four-and-a-half times something greater than what it was nine times greater; on the other hand, as eventually will be the case, secondary activity may decrease, and then the proportion becomes 4.5 times something smaller than before [CWL 21, 55 (for full explanation of “about half” see ftnt. 2)]

A range of difficulties can occur to you at this stage, especially if you are versed in the strategies of Keynesians or Friedman, or share common clouded notions: that investments equal savings; that interest rates call the play; that retained earnings are key; that gold grounds confidence; that government is the mother of progress. [McShane, 1995, 67]

For besides statistical predictions, there exist the fully accurate predictions that are exemplified by astronomy and that rest on the existence of schemes of recurrence.  Moreover, the intelligent manner of making these predictions is to analyze the schemes into their component classical laws.  Copernicus corrected Ptolemy’s imaginative scheme; Kepler corrected the circles of Copernicus; but it was Newton who worked out the underlying laws and Laplace who revealed the periodicity of the planetary system.  From that discovery of laws the great movement of thought, named modern science, received its most powerful confirmation.  It did so because it ended, at least for two centuries, the more common human tendency to speak, not of precise laws, but of the common run of events or the ordinary course of Nature. [CWL 3, 112/135]

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]

… 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]

a mathematical equation may be said to be the most adequate expression of purely intelligible relations among explanatory terms in certain instances. [CWL 15, 179-80]

The discussion moves on a more general plane to terminate in a more general conclusion.  [CWL 21, 8]

Thus, masses might be defined as the correlatives implicit in Newton’s law of inverse squares.[2]  Then there would be a pattern of relationships constituted by the verified equation; the pattern of relationships would fix the meaning of the pair of coefficients, m1, m2; and the meaning so determined would be the meaning of the name, mass.  In like manner, heat might be defined implicitly by the first law of thermodynamics and the electric and magnetic field intensities, E and H, might be regarded as vector quantities defined by Maxwell’s equations of the electromagnetic field.[3] [CWl 3, 80/102-03]

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]

(there is to be discerned a threefold process in 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) … The maintaining of a standard of living is attributed to a basic process (distinct process 1), an ongoing sequence of instances of so much every so often.  The maintenance and acceleration (distinct process 2) of this basic process is brought about by a sequence of surplus stages, in which each lower stage is maintained and accelerated by the next higher.  Finally, transactions that do no more than transfer titles to ownership are concentrated in a redistributive function, whence may be derived changes in the stock of money (distinct process 3) dictated by the acceleration (positive or negative) in the basic and surplus stages of the process. … So there is to be discerned a threefold process in 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, 53-54]

For economic developments are finite, and so no economic development will accelerate indefinitely.  They operate against an increasing resistance, to justify Juglar’s celebrated pronouncement: “the only cause of depression is prosperity.” (as quoted in Schumpeter, History1124)

The excellence of the exchange solution becomes even more evident when contrasted with the defects of a bureaucratic solution.  The bureaucrat … (gives the people) what he thinks is good for them, and he gives it in the measure he finds possible or convenient; nor can he do otherwise, for the brains of a bureaucrat are not equal to the task of thinking of everything; only the brains of all men together can even approximate to that. … when a limited liability company has served its day, it goes to bankruptcy court; but when bureaucrats take over power, they intend to stay. … when the pressure of terrorism is needed to oil the wheels of enterprise, then the immediate effect is either an explosion or else servile degeneracy. … the exchange solution is a dynamic equilibrium resting on the equilibria of markets. … every product of the exchange economy must mate through exchange with some other product, and the ratio in which the two mate is the exchange value.  The generality of this equilibrium makes it indifferent to endless complexity and endless change; for it stands on a level above all particular products and all particular modes of production.  While these multiply and vary indefinitely, the general equilibrium of the exchange process continues to answer with precision the complex question, Who, among millions of persons, does what, among millions of tasks, in return for which, among millions of rewards?  Nor is the dynamic solution unaccompanied by a continuous stimulus to better efforts and more delicate ingenuity.  For the uniformity of prices means that the least efficient of those actually producing will at least subsist, while every step above the minimum efficiency yields a proportionately greater return.[4][CWL 21, 34-35]

one may legitimately project a division of expenditure into the division of income, and it is in this manner that we arrive at the concept of pure surplus income. [CWL 15, 144]

Thus we define the financial problem as the problem of working out and applying the view that money is public bookkeeping.[5]  The grounds for this position may be summarized as follows. … Money is an instrument invented by man to make possible a large and intricate exchange process.  While there is no simple and even perhaps no ascertainable correlation between the quantity of money and the volume of exchange activity,[6]it remains true that variations in the volume, if not to result in inflation or deflation, postulate some variations in the quantity.  Now in the long run these variations in quantity can be had only by the introduction of a money of account, [CWL 21, 104]

A generalization will … find a new basis both for finance and for foreign trade. [CWL 21, 36-37]

A series of ecologies (in which abstract relationships are complemented by concrete probabilities) can form chains of sequential dependence, with prior ecologies grounding the probability of the emergence of the next….Human communities devise their own schemes of recurrence: the commonly understood and commonly accepted ways and means of cooperating.  Among them are the firms that keep producing goods and rendering services and no less the households that purchase the goods produced and the services rendered.  Such is the economy, which is a structure resting on the ecologies of nature and underpinning social and cultural structures. [CWL 15, 3-4]

The significance of the table is that it makes possible a distinction between different types of cycle. … The contention of the present analysis is that there is a pure cycle at the root of the trade cycle.  By a pure cycle is meant a movement across the table with no implication of a movement up or down the table.  Thus the succession of surplus expansion, basic expansion, proportionate expansion, repeated as often as you please, would give a pure cycle. Of itself, it would not involve any contraction. … [CWL 15, 115]

The monetary order is conditioned by, and correlated to, the rhythms of production adequate to the end.  Only later in the analysis can one arrive at an adequate account of the monetary distributions commonly called wages and profits.   [McShane, 1980, 125]

It is not just the absence of functional distinctions, … it is the entire mentality, the fixity of the descriptive and and modeling mentality as opposed to the explanatory and normative perspective at which we aim. [McShane, 1995, 62]

From the viewpoint of explanation, the planets move in approximately elliptical orbits with the sun at their focus.

From the viewpoint of ordinary description, the earth is at rest and the sun rises and sets. [CWL 3, 295/319-20]

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]

A general operation upon the supply of money seems to be a rather roundabout and inept procedure to correct an error in distribution. [CWL15, 143]

The ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant. … all too often, periods of heavy borrowing can take place in a bubble and last for a surprisingly long time. … Encouragingly, history does point to warning signs that policy makers can look at to assess risk – if only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, “This time is different.” [Rogoff and Reinhart, 292]

The old political economists were champions of democracy; and if the content of their thought has been found inadequate, its democratic form is as valid today as ever.  That form consisted in the discovery of an economic mechanism and in the deduction of rules to guide men in the use of the economic machine, a rule of laissez faire for governments and a rule of thrift and enterprise for individuals … but it is still insufficiently grasped that new and more satisfactory rules have to be devised. Without them human liberty will perish. For either men learn rules to guide them individually in the use of the economic machine, or else they surrender their liberty to be ruled along with the machine and a central planning board …the one issue is the locus of control.  Is it to be absolutist from above downwards?  Is it to be democratic only in the measure in which economic science succeeds in uttering not counsel to rulers but precepts to mankind, not specific remedies and plans to increase the power of bureaucracies, but universal laws which men themselves administrate in the personal conduct of their lives. [CWL 15, Editors’ Introduction, lxxi]

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]

A rigidly egalitarian system belongs to a perfectly egalitarian world; (but) a world in which men are, in fact, unequal must find a different system.  What system? If the idealism is sentiment without intelligence, it is as likely as not to mate with the underground cynicism of the revolutionaries to foist upon us a dictatorship of the proletariat in which the proletariat does not dictate, a dictatorship of the Herrenvolk in which the Volk obeys the Fuhrer. But if that idealism can be brought too learn the discipline of logic and of scientific reflection, then it will impose a generalization of the exchange economy.  To determine the nature of such a generalization is the aim of this inquiry; but at once this is at least evident.  The vast forces of human benevolence can no longer be left to tumble down the Niagara of fine sentiments and noble dreams.  They have to be assigned a function and harnessed within the exchange system, for in no other way can that system shake off its fictitious fetters to move consistently towards its maximum. [CWL 21, 36]

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 the enlightenment of … enlightened self-interest’ cannot be identified merely with the Enlightenment’s project of steering public opinion from unenlightened to enlightened self-interest.  Instead, Lonergan envisaged a vast 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 but precepts to mankind, not specific remedies and plans to increase the power of bureaucracies, but universal laws which men themselves administrate in the personal conduct of their lives.’ [CWL 15, Editors’ Introduction, lxxi]

We are seeking a realistic dynamic view that will hold to the concrete facts and possibilities of economic purpose and progress, that will not slip down the blind alley of general price analysis, that does not regard profits, losses, and interest rates as “the traffic lights of a free enterprise economy.”6 Paul Krugman, Peddling Prosperity, Norton, N.Y., 1994, 36 [McShane, 1995, xix]

But please do not slip into that cloudy zone of some economists, the reward of waiting, turning interest and its fluctuations into mysteries of expectations or animal spirits or monetary policy. [McShane, 1995, 55]

You can prime the pump, and you get a single burst of water going round, but it doesn’t keep going round as when the economic system is functioning properly. You can keep priming and repriming and build up an enormous national debt, and things still aren’t clicking. … What is lacking is a good of order. (CWL 5, 378-379]; Please read these and following pages in CWL 5 in full.)

Whenever the scientist (economist) is seeking to determine some indeterminate function, he is relating things to one another.  And that is just what common sense does not do.  It understands things in their relations to us.  [CWL 10, 140]

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.  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]

And what is a technique?  A technician is one who knows how to take the square roots but does not understand the algebra that accounts for the method.  Similarly, all the applications of science can be worked into a set of rules like the rules for taking square roots.  The scientist will know why they work, but the technician need not.  All the technician has to do is learn the rules; he does not have to understand.  So in a technical society there is a divorce between the people who understand what it is all about and those who, without any understanding, do the material operations, what they have been told to do, what has been dined into them in a technical education. [CWL 10, 129]

… conjugate forms are defined implicitly by their explanatory and empirically verified relations to one another.  Still, such relations are general laws; they hold in any number of instances; they admit application to the concrete only through the addition of further determinations, and such further determinations pertain to a non-systematic manifold. There is, then, a primary relativity (1. Point-to-point vs. point-to-line; 2. P’Q’ = p’a’Q’ + p”a”Q”; 3. Π”Κ” = π”α”Κ”+π”α”Κ”) that is contained in the general law; it is inseparable from its base in the conjugate form which implicitly it defines; and to reach the concrete relation that holds at a given place and time, it is not enough to think about the general law; one has to add further determinations that are contingent from the very fact that they have to be obtained from a non-systematic manifold. [CWL 3, 492/516]

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. [CWL 21, 6-7]

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]

The entire tradition slipped past Lonergan’s simple move [McShane 2017, viii]

…forms are grasped by mind in images. (Aristotle)  [CWL 3, 677/699-700]

what is expenditure to Jones is income to Smith.

(is identical with)

P’Q’                           (             =                     )             p’a’Q’ + p”a”Q”

(   is defined by    )

can be read from left to right or right to left

The first difficulty is psychological.  The static phase is a sombre world for men brought up on the strong drink of expansion. They have to be cured of their appetite for making more and more money that they may have more money to invest and so make more money and have more money to invest.  They have to be fitted out with a mentality that will aim at and with a going concern and a standard of living.  It is not so easy to effect this change, for as the Wise Man saith, the number of fools is infinite. [CWL 21, 97-98]

generalization operates from a more profound point of view and discovers a deeper unity in many particulars.

The method of circulation analysis resembles more the method of arithmetic than the method of botany.  It involves a minimum of description and classification, a maximum of interconnections and functional relations. [CWL 21, 111]

until the position of the strong1is undermined by the general and prolonged contracting, the requirement2for the rate of losses continues, and with it the depression. … On the other hand, increasing contraction and liquidation tends to reduce the requirement for a rate of losses: with the surplus stage3already operating at a minimum3b, any further reduction of the basic stage means that a zero dQ”/Q” is greater than a negative dQ’/Q’; this postulates4an increasing rate of savings, and under the circumstances, this increase of required savings (since actual savings already are too great) is a reduction of losses.5  Thus the greater the contraction, the less the rate of losses required; again, the greater the contraction, the weaker the position of the initially invulnerable6; in the limit the rate of losses will disappear, and a distorted equilibrium7give place to a true equilibrium.8 Meanwhile, obsolescence will have mounted, and so as orders for replacements begin to increase they will be accompanied by surplus purchases that are new fixed investment; vbegins to increase, and the proportionate expansion of the revival is underway. [CWL 15, 155-56]

“the flow of income in a functional analysis … requires somewhat more attention: it is the corner of the analysis which holds the key to the sublation both of Keynes’ problems of consumption, savings and investments, and of Kalecki’s dictum that the workers spend what they get and the capitalists get what they spend. [McShane, 1980, 120]

We are interested in how the money functions, and that has already been given sufficient meaning by our reflections on classes of payments.  The money will function in meeting the flow of basic production or in meeting the flow of surplus production.  [McShane, 1995, 58]

The movement of Lonergan’s analysis might be described as a paradigmatic descent from a concrete heuristic of the productive process determined by the end of that process. [McShane 1980, 125]

Let us begin by recalling the structure of classical empirical method.  It operates as a pair of scissors.  Its upper blade consists in a heuristic structure: thus, the nature to be known will be expressed by some function; this function will satisfy differential equations that can be reached from quite general considerations; moreover, the function will satisfy a canon of invariance and, in the case of full abstraction from observers, a canon of equivalence as well.  The upper blade, then, is a set of generalities demanding specific determination, and such determination comes from the lower blade of working hypotheses, precise measurements, empirical correlations, deductions of their implications, experiments to test the deduced conclusions, revisions of hypotheses, and so da capo. [CWL 3, 577]

This would be the beginnings of a new economics of measurable flows, one that would yield norms of financing, of profit in both normal and innovative economies, etc., etc. [McShane, 1995, v]

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 … 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]

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. [CWL 3, 650/672-73]

[1]Haphazard means marked by lack of plan, order, or direction (Webster)

[2]F = gm1m2/d2

[3]ΔX E = (-1/c)H’

Δ X H = (+1/c)E’

Δ ŸH = 0

Δ ŸE = 0

[4]CWL 21, 34-35

[5] Which is not to be identified with corporate or conventional National Income accounting

[6] Because of the rapidity of turnover, as contrasted with the efficiency of the use of money in transactions