Lonergan on economics: For a New Political Economy

After having gone through chapters 5-8 of Shute, I felt I had to get some matters clear, especially regarding the trade cycle, so I began dipping into Lonergan himself, For a New Political Economy. Delighted that I am able to more or less keep up with him, and he is certainly much clearer than his interpreters, at least, that is my first impression. But then having read the interpretations is already to be factored into the 'clarity' and 'ease' with which the original is opening up....

I wrote something to Viplav Kambli about a piece on inflation that he sent me yesterday - advice on how to invest at a time when inflation cuts into fixed deposits. He wrote back briefly, and I wrote back trying to outline how Lonergan might understand inflation as not primarily an economic phenomenon, but as a phenomenon linked to the production process. I realized in the course of writing that there is much more that I have to become clear about.

I have to keep in mind, first of all, Lonergan's use of the method of approximation. The pure cycle, with its 3 or 4 phases (capitalist, materialist, cultural, stationary) is a first approximation. The trade cycle is the beginning of a second approximation: what happens when pure surplus income is misunderstood by capitalists, or by governments, or by labour and labour unions. In his economics manuscripts, Lonergan does not go into the third step of the approximation, the step of healing or redemption: that is reserved for his later work, and is necessarily theological in his perspective.

But it is a nice feeling when, going through FNPE, the famous baseball diamond diagram becomes clearer....

One of the questions that I have to tackle: why the theorem of continuity? I think Lonergan says that this theorem is valid, as elaborated in chapter 5, only in the static phase. In chapter 6 he generalizes it. But: what is the point of this theorem?

Another question: why the normative proportion? And what is the significance of the consequences drawn? “It follows that the profit motive is subject to decreasing returns.” [FNPE 54.]

At any rate, Lonergan clearly critiques the profit motive of capitalism: it works very well in the capitalist phase; it works less and less well in the materialist phase when surplus ratio is decreasing; it has no leverage at all in the static phase when S is zero; and it works less well in each successive stage of economic development. [FNPE 56.]

Shute's new book, Lonergan's Discovery of the Science of Economics

The University of Toronto Press has sent me Michael Shute's Lonergan's Discovery of the Science of Economics (2010) for review. It could not have come at a better time, when we are preparing for McShane's Workshop on Economics here at Divyadaan. 

Shute divides up his potential audience into economists, all other academics, and Lonergan scholars. He writes primarily for Lonergan scholars with the hope of interesting them in Lonergan’s economics. [17-19] He succeeds admirably in his task. I want to say without mincing words: this is the best introduction to Lonergan’s economics that I have ever found - though that 'I' has to be qualified by presumed inclusion in Shute's third group. 

But that again must be modified somewhat, because I happen to come to Shute’s book after a more than cursory reading of DJPE 21/2, and perhaps that reading has its own contribution to the fact that I find Shute’s book so readily intelligible. In fact, Shute himself remarks acutely: attempted introductions to Lonergan’s economics are simply far too complex. Their problem is that they follow too closely Lonergan’s own dense presentations and ordering of topics. What is needed is to explain one business at a time. [16.] But that is precisely what DJPE 21/2 does; and, I must add, Shute’s essay in that volume stands out as a model of approachability.