The Principle of Concomitance: The Foundation of Equilibrium and Continuity

Concomitance is, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane, [Fusion 1, page 4 ftnt 10]

Recall that the subtitle of CWL 15 is “An Essay in Circulation Analysis”.  It is by virtue of concomitance that continuity and equilibrium are achieved so as to constitute an orderly process of circulations.

 My other extravagance 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’ of counterpulsing, locally and globally? (CWL 21, 326 Editor’s Introduction to the Index.)

 Webster, 2003 provides a definition of “concomitance” and “concomitant”:

  • Concomitance: n ACCOMPANIMENT; esp :a conjunction that is regular and is marked by correlative variation of  accompanying elements
  • Concomitant: adj. accompanying esp. in a subordinate or incidental way

Equilibrium is a notion of balance of opposing or competing elements.  Continuity is a notion of serially-conditioned elements of a circulation keeping a constant pace in succeeding intervals.  Concomitance is a notion of correlative quantity flows and money flows, or money flows with other moneyflows, at an equal velocity.  Flows are phenomena of quantity moving at a velocity; i.e. in Calculus, flows are expressed the differential form representing the movement of so much or so many per interval.  Scientific macroeconomics is a science relating interdependent velocitous flows.

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 dynamic (accelerative) network of functional, mutually conditioning, and interdependent relationships of these rates to one another.  [CWL 15  26-27  ftnt 27]

All science begins from particular correlations, but the key discovery is the interdependence of the whole.… While it is true that a tableau or diagram cannot establish the uniqueness of a system or rigorously ground its universal relevance, it remains that the diagram (of the interconnections of a few precise aggregates) has compensating features that Quesnay’s system of simultaneous equations may imply but does not manifest. … There is the tremendous simplification (a diagram) effects the aims and limitations of macroeconomics make the use of a diagram particularly helpful, …  For its basic terms are defined by their functional relations[CWL 15, 53 and 177]

(In the creative transition from statics to dynamics) 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]

The condition of equilibrium is satisfied by a balance of flows.  The condition of continuity is satisfied by a constant serial velocity.  Concomitance – accompaniment of properly porportionate quantities at an equal velocity – satisfies the requirements for serial continuity of flows and for balance between oppositional or competing flows.  So, the concept of concomitance is implicitly foundational to the concepts of equilibrium and continuity.  Concomitance is the phenomenon underlying both equilibrium and continuity.  While equilibrium and continuity are primal principles of an orderly process of flows within a circuit and between mutually dependent circuits, the concept of concomitance of flows is the bedrock upon which equilibrium and continuity rest.

Concomitance, equilibrium, and continuity are principles; they are first in the order of Macroeconomic Field Theory.  Lonergan gives meanings of the utterance “principle”.

  • Principle: that which is first in some order.  Thus a point is the principle of a line, ‘one’ is the principle of numeration, a cause is the principle of its effect …(CWL 11, 503)
  • A principle is that which is first in some order, and principles can be found in many different orders.   Thus in various disciplines there is the usual distinction between common principles, founded on the formality of being and common to every science, and proper principles, founded on the grasp of the essence of the object of that discipline and therefore proper only to that particular discipline.  Hence in all disciplines there is a further distinction between the way of discovery and the way of teaching: the way of discovery begins from what are prior with respect to us so as through common principles to arrive at what are prior in themselves and the principles proper to that discipline; the way of teaching, however, begins from what are prior in themselves so as to order and explain by means of proper principles what are prior with respect to us. (CWL 11, 637)

As the notion of symmetry is the beginning idea in some scientific investigations, so the notions of equilibrium, continuity and concomitance are primal principles in the scientific analysis of circulations.  Let us bring the Principle of Concomitance to the fore.  Let us recognize concomitance as a bedrock principle of the abstract explanatory theory of the concrete economic process.  Again,

Concomitance is, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane, [Fusion 1, page 4 ftnt 10]

In macroeconomics, the utterance “concomitance” – traveling together – contains the notions of a) the correlation of the velocities of product flows with proportionate velocities of payments, b) payments in a circulational series keeping pace, c) payments between interacting circuits being equal and keeping pace, and d)  kinetic production conforming to normative, rhythmic functional production of goods and services.

In CWLs 15 and 21,  four complementary passages deal explicitly with the criticality of the concomitance of functional flows implicitly-defined by and conditioned by one another.  1) The first passage is explicit about intracircuit concomitance of outlays and expenditures and of incomes with outlays and expenditures; 2) the second addresses a) the internal and external conditioning of outlays and expenditures keeping apace within, and critically, between circuits, and b) the conditioning constituted (in the hierarchical productive order) by productive rhythms of goods and services; 3) the third is about unstable combinations of flows and unstable sequences of rates in a threefold process; 4) the fourth emphasizes the requirement of the concomitant variation of dummy money with the real flow of goods and services.  To understand the occurence vs. the absence of concomitance is to understandthe conditions of desirable movements as well as the causes of breakdowns,” and “the long-standing recurrence of crises in the modern expanding economy.”  Here are the four important passages:

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

On such a methodological model (i.e. implicit definition according to functional relation)…Classes of payments quickly become rates of payment standing in the mutual conditioning of a circulation; to this mutual and, so to speak, internal conditioning there is added the external conditioning that arises out of transfers of money from one circulation to another; in turn this twofold conditioning in the monetary order is correlated with the conditioning constituted (in the hierarchical productive order) by productive rhythms of goods and services; … There results a closely knit frame of reference that can envisage any total movement of an economy as a function of variations in rates of payment, and that can define the conditions of desirable movements as well as deduce the causes of breakdowns. … [CWL 21, 111]

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]

(We) state the necessary and sufficient condition of constancy or variation in the exchange value of the dummy.  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]

Lonergan speaks also about the need for concomitance, equilibrium and continuity to avoid smashing the organism.”  The economic process is an organic whole.  The process can proceed only within the limits of equilibrium of the various phases, and continuity is the maintenance of organization within these limits. To step outside them is to bring about a general breakdown, i.e. to “smash the organism”.

An initial and provisional theorem of continuity was enounced in a preceding chapter (§24).  Now it may be indicated in its full generality. ¶ The analysis has revealed that the economic system is a pattern of aggregate dynamic relationships arranged in different kinds of velocity and accelerator rhythms. In the real order there are the primary and secondary rhythms, with the former accelerated by the latter.  In the monetary order there are the rhythms of excess release from the redistributional area to the primary and secondary rhythms; and again, the former accelerate the latter. ¶ Now the general theorem of continuity is that this complex machine has a nature that must be respected.  Absolutely, there is no necessarily right value for the monetary accelerators DT’, DT”, DC’, DC”; again, absolutely, there is no necessarily right values for the six multipliers C’, C”, T’, T”, G’, G”.  But what is true is this: as soon as a few of these are determined, the rest become determined within narrower limits, for all form part of an organic whole; to violate this organic interconnection is simply to smash the organism, to create the paradoxical situation of starvation in the midst of plenty, of workers eager for work and capable of finding none, of investors looking for opportunities to invest and being given no outlet, and of everyone’s inability to do what he wishes to do being the cause of everyone’s inability to remedy the situation.  Such is disorganization.  Continuity, on the other hand, is the maintenance of organization, the stability of the sets and patterns of dynamic relationships that constitute economic well-being in a society. ¶ While the provisional theorem of continuity (§24) did regard the static phase, it is important to observe that the general theorem regards any phase.  There is a general historical movement of ideas, opportunities, and decisions integrating into that major rhythm in which transformations are followed by exploitations only to bring forth new and deeper transformations.  Within this broad historical scheme of things, the role of any age, and still more of any country, is but a small thing: the past was settled by our forebears, and the future will be in the hands of posterity; only the present is ours, and it is only within the limits that we make of the present what we wish.  Our starting pint is already determinate: we have to face things as they are; we may never lose sight of them or attempt to reckon without them.  But not only is there ever a broad and unalterable datum of things as they are; there are also the limitations which this datum imposes on things as we are going to make them.  ¶ The theorem of continuity is the abstract and formal aspect of such limitations in the economic order.  At the moment the exchange process is static or expanding or contracting.  We may like it so or we may wish it different.  But in any case there is some determinate range of values of the multipliers and of the monetary accelerators – of C’, C”, T’, T”, G’, G”, of DC’, DC”, DT’, DT” – that corresponds with such a decision.  Moreover there has to be an internal coherence between these values, and to violate this coherence is to rout economic organization.  Just as the movements of the controls of an airplane must be coordinated and all coordinations are not possible at all instants, so also he economic machine as its controls, which can be moved only in concert and only in a limited number of ways at any given time.  ¶ Such is the general theorem of continuity.  In the abstract and in a general way, it affirms that the economic process can proceed only within the limits of equilibrium of the various phases.  To step outside them is to bring about a general breakdown. (CWL 21 73-5)

Again,

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]

Also and somewhat parenthetically, it is worthwhile to remind the reader here of Byrne’s insistence that an intellectual openness on the part of the macroeconomist is critical.

If one’s intellectual climate inclines one, as the modern intellectual climate does, to assume that it is unscientific to speak of a “natural goal,” and to hold that contingent fact can yield no knowledge of ethical criteria, one will not seek either the general theoretical ideas Lonergan has set forth in his essay, nor the great many further practical ideas which will help the willing subject know how to responsibly dispose of his or her income.  The success of Lonergan’s analysis will depend in great measure upon intellectual openness to his worldview. [Byrne, Patrick, “Economic Transformations: The Role of Conversions and Culture in the Transformation of Economics”; in [Lamb, 1981]

We print three versions of the same Diagram of Rates of Flow, AKA the Diagram of Interdependent Velocities.  The second and third versions simply suggest that the serious reader should, at least in imagination, keep in mind certain precepts during his/her analysis.  Scroll through and beyond the versions:

 

 

 

 

  • In field-theoretic macroeconomics, concomitance is the principle and the condition underlying a) continuity within a circuit, b) continuity and equilibrium between circuits, and c) control of inflation
  • Dynamic equilibrium is explained and constituted by concomitant balance or accompaniment of interacting circulations
    • Concomitance of payments between interdependent circuits is the condition of one circuit not inflating or deflating the activity and pricing in the other circuit
    • Concomitance of tax revenues and government expenditures so as to avoid debt is an important condition of avoiding inflation in the longer term.
  • Concomitance of functional flows is in some instances intrinsic and automatic in the economic process, and in other instances must be effected by participants.
  • Monetary supply and demand in an actual exchange are intrinsically and automatically concomitant
  • Concomitance, effected by participants, of flows of goods and money in continuously proportionate amounts is the phenomenon underlying the constancy of money’s exchange value.
  • The Fed’s concomitantly and proportionately expanding the fiat money supply in stable proportion to the actual increase of production of goods and services constitutes the “justification” of new money
  • In general, lack of particular concomitances yielded by the immanent intelligibility of the process results in disequilibrated phenomena such as inflation and deflation, credit default, booms and slumps, housing bubbles, equity bubbles, and Ponzi schemes
  • Concomitance of bidirectional flows of the pairs of horizontal and vertical arrows of the Diagram of Rates of Flow is a general condition and norm of financing activities in a stable economy.

A first objection to the principle and applicability of concomitance might be that an automatic deposit of compensation on Thursday is not strictly concomitant with the purchase by the recipient of groceries the following Wednesday, nor with the final receipt by the farming unit of enterprise that produced the groceries.  So, instead of a simultaneity of O-I and E-R, there is a delay.  However, first, we are dealing in aggregate flows large enough to be semi-continuous; and, second, all interest payments are assignable to current particular functionings of the process.  Credit bridges a gap in time, but the interest payments associated with that credit are assignable to the production or sale financed by the credit.  Interest payments circulate as do any other payments.  In the groceries example, there would be

  • interest received by the worker for his/her interest-bearing deposit
  • interest received by the bank for its reserves at the Fed or for its loan of the money deposited
  • interest paid by the primary producer for rental of money to finance the gap between payments made and payments received between the initialtion of production and final receipt
  • interest paid by the middleman-grocer to finance the inventories
  • interest coverage contained in the selling price of the farmer and the selling price of the grocer.

Classes of interest payments and receipts permeate the entire process as current functional flows circulating just as do other payments and receipts.

A second objection to the principle might be the purchase of the groceries ( as well as a lot of other stuff) by credit-card of more than was earned.  John Q. Public irresponsibly runs up a lot of debt on his credit card.  But this loan to monetary demand (E’ and E”) is understood and explained simply in macroeconomics as an intrinsically inflationary and “unjustified” divergence from the norms of the concomitant equality in the “horizontal” flows between the real circuits and the Redistributive Function.  That is, it is explained as a divergence rather than just postulated without explanation.

So, the economic process is suffused with a normative requirement of concomitance.  Concomitance is the holiness of the system. It is primal and foundational in macroeconomic theory.  It is an ever-present holy ground for the principle and achievement of continuity and equilibrium.

There arise problems in the economic process, not because the Principle of Concomitance is invalid, but rather because the Principal is not honored.  Money is diverted from the operative circuits to idleness in the Redistributive Function; an obligee goes bust; the crossovers do not balance; disproportionate flows of goods and money cause inflation or deflation; and these violations swindle the participants and torture the normative relations.

… the dummy (money) 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]

Concomitance is the bedrock upon which the principles of equilibrium and continuity stand.  And this may be the reason for McShane to say:

Concomitance is, I would claim, the key word in Lonergan’s economic thinking. [Philip McShane, [Fusion 1, page 4 ftnt 10]

My other extravagance 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’ of counterpulsing, locally and globally? (CWL 21, 326 Editor’s Introduction to the Index.)  See also in the Index entries for ‘concomitance’ and ‘absurdity of eliminating cycles.’

And so, Lonergan says:

Need the moral be repeated?  There exist two circuits, each with its own final market.  The equilibrium of the economic process is conditioned by the balance of the two circuits: each must be allowed the possibility of continuity, of basic outlay yielding an equal basic income and surplus outlay yielding an equal surplus income, of basic and surplus income yielding equal basic and surplus expenditure, and of these grounding equivalent basic and surplus outlay.  But what cannot be tolerated, much less sustained, is for one circuit to be drained by the other. That is the essence of dynamic disequilibrium. [CWL 15, 175]

This complete explanation yields a normative theory and a set of laws, the normative theory and laws which men themselves administrate in the personal conduct of their lives.  Also, the normative theory explains both dynamic equilibrium and dynamic disequilibria. It defines the objective situation with which man has to deal, and it defines the psychological attitude that has to be adopted if man is to deal successfully with economic problems.  (reference?)