Welcome to Bernard Lonergan’s Macroeconomic Field Theory, also called Functional Macroeconomic Dynamics.
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]
Our purpose is to help you understand the economic process as a current, purely dynamic system of interdependent functionings, whose immanent intelligibility constitutes a purely-relational, modern macroeconomic field theory independent of human psychology.
As scientific and explanatory, this analysis elevates discussion of the objective economic process from psychopolitics to explanatory science.
Observation of the concrete economic process suggests a connection of excessive capital spending fueled by excessive credit to disequilibrated booms and subsequent, systematically-necessary, corrective slumps. This correlation requires formal explanation. Application of the technique of implicit definition to aggregate functional flows will provide precise analytic distinctions and a set of mutually definitive basic terms upon which to build an explanatory superstructure. The superstructure will be a coherent set of functional relations constituting a theory which is fully explanatory of both equilibria and disequilibria. Thus, the interdependent macroeconomic functionings, or functions, as implicitly defined by their functional relations to one another, can be represented in a set of mathematical expressions which explain the economic process completely.
Discovery of the systematics of Functional Macroeconomic Dynamics was achieved by Bernard Lonergan and formulated in his two books, Macroeconomic Dynamics; an Essay in Circulation Analysis and For a New Political Economy, both available from the University of Toronto Press.
Unless one respects and appreciates a) Lonergan’s intellectual formation in mathematics, science, and scientific method, b) his empirical method and goal of complete explanation, and c) the historical context of his Macroeconomic Field Theory, one will likely fail to understand and respect the revolutionary nature of his accomplishment. Lonergan entered the field of economics from the fields of mathematics and science and, guided by the heuristics and methods of empirical science, – especially the scientific heuristics and methods of physics and chemistry – he set out to discover and formulate the objective dynamics of production, exchange, and finance; i.e. he sought to explain how the economic process actually works. In Lonergan’s words:
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]
The human participants in the economic process must understand and adapt to the norms and precepts of the objective process. As agents, they must not steer the objective process astray. For an analogy repeated frequently herein:
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]
The overall dynamic process of production, exchange, and finance, with its constituent interconnected and interdependent functional velocities, possesses an immanent intelligibility. To grasp that intelligibility at an adequate level of abstraction, Lonergan sidestepped the non-explanatory, commonsense terms and relations of National Income Accounting and went straight to the dynamics of interdependent, mutually conditioning, functional flows. This dynamics explains how the dynamic circulations of money meet the velocitous and accelerative flows of products; it advances economics from accountants’ compilations and statistical descriptions to explanatory science.
Lonergan – like Newton, non-Euclidean geometers, and Einstein – sought scientific generality in order to completely explain any and all economic configurations and cycles. Consider in the following excerpt the phrases “greater generality” and “deeper unity”:
(Newton turned) to a field of greater generality, the laws of motion, and (found) a deeper unity in the apparent disparateness of Kepler’s ellipse and Galilei’s time squared. … Similarly the non-Euclidean geometers and Einstein went beyond Euclid and Newton. [CWL 21, 6-7]
In the history of science, consider the advancement from Brahe’s gathering of data to Laplace’s application of Newton’s mechanics to an exhaustive explanation of the periodicity of the planets, comets and tides.
I recall expressing my wonder….that “Lonergan had gone, in economics, from Tycho Brahe to Laplace.” [Philip McShane, www.philipmcshane.com, Fusion 9, 1]
Generalization, by the discovery of a deeper unity in the physics of motion, is exemplified by Newton and Einstein. Analogously, consider the mindset employed by Lonergan to achieve sublation by generalization in the field of macroeconomic dynamics.
Generalization comes with Newton, who attacked the general theory of motion, laid down its pure theory, identified Kepler’s and Galileo’s laws by inventing the calculus, and so found himself in a position to account for any corporeal motion known. 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. … Similarly the non-Euclidean geometers and Einstein went beyond Euclid and Newton. … 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]
The general and unified immanent intelligibility of the interdependent economic functionings will yield norms and precepts for the economic community. The single precept, “Save and invest,” is not applicable in all phases of the economic process; rather the applicable precept will change in degree and nature depending upon the current particular configuration or phase in the sequence of phases of the dynamic process of expansion. As indicated, Lonergan sought, and discovered, 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. Gustav Kirchhoff’s laws of the electric circuit do not incorporate the psychology of the human who operates the levers or switches; so, Lonergan, the scientist, strove to discover the purely relational, purely functional laws of the circuits of the objective economic process.
The economic process has laws of its own which human agents must respect and to which they must adapt. If these laws are not understood by academics, politicians, and journalists, their criticism of one another and of agents can be no more than haphazard; and the critics will render themselves mere mythmakers.
As is the case with all hypotheses, verification of Functional Macroeconomic Dynamics is necessary. To that end, this website offers analysis of historical data which demonstrates that the equations of functional macroeconomics are isomorphic with the patterns of the data, explain events, and offer precepts for intelligent management to legislative, fiscal, and monetary authorities.
Finally, to achieve the goal of aiding the reader to understand, this website guides students through various topics germane to functional macroeconomics. The treatments are supplemental to, and not substitutes for, Lonergan’s original texts. All persons – especially academics, politicians, and journalists – should read those primary sources carefully – perhaps several times each – before forming any opinions, and before coming to this website for possible elaboration and clarification.
Again, welcome to all!