Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Wednesday, 12 January 2011
Lonergan economics bibliography
Paul Hoyt-O'Connor, Bernard Lonergan's Macroeconomic Dynamics. Edwin Mellen Press, 2004.
Saturday, 16 October 2010
Lonergan's economics and laissez-faire
“Lonergan found seriously wanting, as universally valid advice, the policy of laissez-faire for government (conventionally linked with the names of Marshall and Walras, even though this may never have been the explicit intention of either) and thrift and enterprise for individuals. For Lonergan this policy was based on assumptions of equilibrium theory that did not integrate a grasp of diverse and highly contingent equilibria appropriate to different phases of an expanding economy. Thus, the presupposition of the automatic movement of the market toward equilibrium tended concretely to result in liberal capitalism’s exploitation and oppression of the workers that Marshall, too, wanted to resolve through economic intelligence. As Lonergan stressed repeatedly, thrift and enterprise are the correct behaviour when an economy is undergoing the vast widening and deepening of capital formation. As soon as capital formation levels off, and a new phase of widening and deepening the standard of living ought to begin, raising workers’ wages and extension of their credit balances, for instance, might be more responsible courses of action than thrift and enterprise.” [Frederick G. Lawrence, Patrick H. Byrne, Charles C. Helfing, Jr., “Editor’s Introduction,” Bernard Lonergan, Macroeconomic Dynamics: An Essay in Circulation Analysis, Collected Works of Bernard Lonergan 15 (Toronto: University of Toronto Press, 1999) xlvii-xlviii.]
So: not blanket laissez-faire, but: the concrete players in the economy are the individuals; strategic advice is given by the practical economist; the government's role is to lay down the rules of the game, and to make sure they are obeyed.
The advice recommended: thrift and enterprise during a surplus expansion; benevolence during a basic expansion. An anti-egalitarian distribution of income during a surplus expansion to ensure that the savings rate increases; an egalitarian shift during a basic expansion to ensure that the expansion takes place or continues to take place.
Again: maximization of profit cannot be the ruling mantra. The anti-egalitarian distribution is valid only for the surplus expansion, and the pure surplus income of the rich is meant not for their own comfort and pleasure, but for reinvestment. This distribution has to come to an end, in favour of a more egalitarian distribution, otherwise the basic expansion will not take off or continue.
Thursday, 14 October 2010
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.]
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.]
Saturday, 11 September 2010
Economics slowly by slowly
Phil McShane said he was trying out a new approach. In the past, he had tried to present the whole of Lonergan's economics, and he had failed to make any impression. Now he was trying to go step by step. The "Grade XII Class" was one such effort. The 8 articles in Divyadaan: Journal of Philosophy and Education was another effort in the same line, introducing the notions of basic and surplus circuits, promising, credit, money, and the goal of the economy with the help of examples of simple businesses.
My impression is that this new strategy is helpful. Though it is quite impossible to assume that I have really understood, still, it is a good start. I found that, against the background of my reading of the articles in Divyadaan, other reading began opening up: Michael Shute's Lonergan's Discovery of the Science of Economics; McShane's own Sane Economics and Fusionism; Anderson and McShane's Beyond Establishment Economics: No Thank You, Mankiw.
So "economics slowly by slowly" seems to be working... Though I think it is possible sometimes to go too slowly; then a little speed might help. A variation of approaches, then. McShane himself admits the need to break up elementary presentation with the long term view.
My impression is that this new strategy is helpful. Though it is quite impossible to assume that I have really understood, still, it is a good start. I found that, against the background of my reading of the articles in Divyadaan, other reading began opening up: Michael Shute's Lonergan's Discovery of the Science of Economics; McShane's own Sane Economics and Fusionism; Anderson and McShane's Beyond Establishment Economics: No Thank You, Mankiw.
So "economics slowly by slowly" seems to be working... Though I think it is possible sometimes to go too slowly; then a little speed might help. A variation of approaches, then. McShane himself admits the need to break up elementary presentation with the long term view.
"Towards a New Economic Order": Day Three
The third day of the McShane Workshop began with an attempt to image global economics along the lines of global hydrodynamics. In 1897 we had Howard Lace's 800 page book on hydrostatics, which remained in use for over half a century. In 1997 we had Lighthill's four volumes of a 1000 pages each on the history of hydrodynamics. Perhaps in 2097 we will have a book on global economics, Phil suggested.
The next two sessions were dedicated mostly to questions: about the mechanism of price rises when there is excess money and the quantity of consumer goods remains static; the 'idealism' of Lonergan's exclusion of centralist controls and expectations that the economy will one day be controlled by the good sense of people, given that there will be a culture in which his 'diagram' has become a molecular image, something that people carry in their bones; the role of politics (no role, Phil answered, just as today politicians would never dare to pontificate on hydrodynamics); the role of religion (great role in shaping the hope of a fair and just society); the role of the common man and woman (tree-hugging; making a noise; spreading the word; nudging economists or friends of economists).
In the concluding session, Ms Dakshayani, Denver D'Silva (a student) and I shared our impressions of the workshop, while Fr Savio D'Souza, the Rector, proposed a vote of thanks.
Ms Dakshayani, who is a graduate of Jawarharlal Nehru University Delhi, and has a research degree from the Tata Institute of Social Sciences, Mumbai, and is now a researcher at Shelter Don Bosco R&D, questioned the idea that the Indian economy was static; it was quite dynamic, she noted. (Perhaps this was not quite what Phil had been saying. What he said was that Lonergan was moving economics from being a static theory to a dynamic one.) She also asked how Lonergan's theory differed from the classical capitalist laissez-faire. Again, she asked for a fuller understanding of leisure; this was important, especially in a context where unemployment was a major problem. Finally, she said that the idea of promise presented during the talks was too individualistic. In the Indian context, one would have to talk about commitment, duty, responsibility, as, for example, in the joint family. Promise, she said, cannot be reduced to a business term. The cultural context must be taken into account.
I myself noted that this was the very first time that Divyadaan had taken up economics as a topic for discussion; it went very well with the suggestion of the 26th General Chapter of the Salesians that the vow of poverty included an educative dimension: enabling youth, especially those on the margins, to take their rightful place in society and in the transformation of society. Secondly, the connections that had been made with KTHM College, St Xavier's Mumbai, the local press, and Shelter Don Bosco R&D were precious. Thirdly, while Phil had given us a taste of a different type of economics, it was up to us - or some of us at least - to study further, and to make up our minds about it. At the very least, we could become members of SGEME. And then, since the majority of us were going to be teachers and educators, there was the task of being educators who enabled Minding, who allowed Whatting, rather than educators who suppressed Minding and Whatting. (And it had been great to see young students and novices asking excellent questions.) Finally, Lonergan's work is built on faith and hope: faith that understanding the economy correctly is vitally important for sane action, even if we have not quite arrived at that correct understanding; hope that a first step has been taken, and that we are moving in the right direction when we ask: What is happening in the economy?
The next two sessions were dedicated mostly to questions: about the mechanism of price rises when there is excess money and the quantity of consumer goods remains static; the 'idealism' of Lonergan's exclusion of centralist controls and expectations that the economy will one day be controlled by the good sense of people, given that there will be a culture in which his 'diagram' has become a molecular image, something that people carry in their bones; the role of politics (no role, Phil answered, just as today politicians would never dare to pontificate on hydrodynamics); the role of religion (great role in shaping the hope of a fair and just society); the role of the common man and woman (tree-hugging; making a noise; spreading the word; nudging economists or friends of economists).
In the concluding session, Ms Dakshayani, Denver D'Silva (a student) and I shared our impressions of the workshop, while Fr Savio D'Souza, the Rector, proposed a vote of thanks.
Ms Dakshayani, who is a graduate of Jawarharlal Nehru University Delhi, and has a research degree from the Tata Institute of Social Sciences, Mumbai, and is now a researcher at Shelter Don Bosco R&D, questioned the idea that the Indian economy was static; it was quite dynamic, she noted. (Perhaps this was not quite what Phil had been saying. What he said was that Lonergan was moving economics from being a static theory to a dynamic one.) She also asked how Lonergan's theory differed from the classical capitalist laissez-faire. Again, she asked for a fuller understanding of leisure; this was important, especially in a context where unemployment was a major problem. Finally, she said that the idea of promise presented during the talks was too individualistic. In the Indian context, one would have to talk about commitment, duty, responsibility, as, for example, in the joint family. Promise, she said, cannot be reduced to a business term. The cultural context must be taken into account.
I myself noted that this was the very first time that Divyadaan had taken up economics as a topic for discussion; it went very well with the suggestion of the 26th General Chapter of the Salesians that the vow of poverty included an educative dimension: enabling youth, especially those on the margins, to take their rightful place in society and in the transformation of society. Secondly, the connections that had been made with KTHM College, St Xavier's Mumbai, the local press, and Shelter Don Bosco R&D were precious. Thirdly, while Phil had given us a taste of a different type of economics, it was up to us - or some of us at least - to study further, and to make up our minds about it. At the very least, we could become members of SGEME. And then, since the majority of us were going to be teachers and educators, there was the task of being educators who enabled Minding, who allowed Whatting, rather than educators who suppressed Minding and Whatting. (And it had been great to see young students and novices asking excellent questions.) Finally, Lonergan's work is built on faith and hope: faith that understanding the economy correctly is vitally important for sane action, even if we have not quite arrived at that correct understanding; hope that a first step has been taken, and that we are moving in the right direction when we ask: What is happening in the economy?
Friday, 10 September 2010
"Towards a New Economic Order": Day Two
Day Two of the McShane Workshop got off to a start at 0930 this morning, with a few particpants missing and a few new ones added - chiefly a couple of professors from the Department of Economics of KTHM College, and a parishioner with a background in business studies and management and his friend.
Phil began by talking about the new culture of the future. Just as we know when a person is driving badly, and we want to tell him that he should change gears, so in the future we will know when the economy is being driven badly, and there will be a widespread agreement about this, together with knowledge about what must be done.
The topics of the day were the Rhythms of Innovation, and Promises, Notes and Credit. The famous diagram which Phil began introducing yesterday moved to completion, with basic and surplus circuits, demand functions and supply functions on both levels, and the redistributive function in the middle.
Taking his example from the little barber shops that he had noticed along the Nashik streets, Phil introduced the idea of pure surplus income. An American comes in for a haircut. The usual cost of the haircut is Rs 25; but the American pays $ 5. The excess over Rs 25 is pure surplus income for the barber. Why pure? Because it is not needed for anything: for basic expenditures, or for surplus expenditures. The barber can do what he wants with it. He can donate it to a temple, or to a charitable organization, or use it for his family. In later years Lonergan called this pure surplus income also by the name social dividend, since it can be used for the benefit of humanity. If there is any money left after all the basic and surplus expenditures are met, it is pure surplus income. Pure surplus income is not necessary as long as the economy is stable.
What about the notion of profit, someone asked. Phil had been avoiding the word all through. He pointed out that profit tends to include both the surplus demand function (D'') and pure surplus income. That makes it a vague term. He also said that in traditional economics there was no criterion for determining pure surplus income and robbery (making profits by underpaying workers, or by over-pricing the goods).
Phil went on to introduce Innovation with the help of his famous Irish island and the invention of the horse-drawn plough: the banker giving credit to the inventor; the time taken for production of ploughs and the effects on the economy; the rise in wages on the surplus circuit; the problem created if these wages are immediately pumped into the basic circuit; the possibility of redistribution in terms of savings and re-investment; the eventual slowing down of the surplus surge; the need to allow then a basic surge; and so on.
The significance of the distinction between basic and surplus circuits became slowly clear, especially in comparison with diagrams from standard textbooks of economics which simply tend to lump together basic as well as surplus businesses.
Towards the end of the day, along with questions about innovations and technology displacing workers, Phil remarked that for Lonergan, the goal of the economy was, strangely, unemployment. This might be a difficult idea to digest, because we are surrounded by a mythology of work. But human beings really need to aim at a life in which there is place for leisure and contemplation. With adequate technology - including biomimicry and nanotechnology - we should be able to bring forth a sufficiency of consumer goods so as to permit leisure for all. The economy might thus slope up into a preparation for eternity!
But perhaps the most interesting part of the day was the awakening Whats: some students and SDB novices raising interesting and intelligent questions on the floor, little groups of questioners in between sessions, Dr Agnelo Menezes thinking of getting St Xavier's Mumbai to invite Phil for another Workshop. Something seems to be stirring. Seeds of hope!
Phil began by talking about the new culture of the future. Just as we know when a person is driving badly, and we want to tell him that he should change gears, so in the future we will know when the economy is being driven badly, and there will be a widespread agreement about this, together with knowledge about what must be done.
The topics of the day were the Rhythms of Innovation, and Promises, Notes and Credit. The famous diagram which Phil began introducing yesterday moved to completion, with basic and surplus circuits, demand functions and supply functions on both levels, and the redistributive function in the middle.
Taking his example from the little barber shops that he had noticed along the Nashik streets, Phil introduced the idea of pure surplus income. An American comes in for a haircut. The usual cost of the haircut is Rs 25; but the American pays $ 5. The excess over Rs 25 is pure surplus income for the barber. Why pure? Because it is not needed for anything: for basic expenditures, or for surplus expenditures. The barber can do what he wants with it. He can donate it to a temple, or to a charitable organization, or use it for his family. In later years Lonergan called this pure surplus income also by the name social dividend, since it can be used for the benefit of humanity. If there is any money left after all the basic and surplus expenditures are met, it is pure surplus income. Pure surplus income is not necessary as long as the economy is stable.
What about the notion of profit, someone asked. Phil had been avoiding the word all through. He pointed out that profit tends to include both the surplus demand function (D'') and pure surplus income. That makes it a vague term. He also said that in traditional economics there was no criterion for determining pure surplus income and robbery (making profits by underpaying workers, or by over-pricing the goods).
Phil went on to introduce Innovation with the help of his famous Irish island and the invention of the horse-drawn plough: the banker giving credit to the inventor; the time taken for production of ploughs and the effects on the economy; the rise in wages on the surplus circuit; the problem created if these wages are immediately pumped into the basic circuit; the possibility of redistribution in terms of savings and re-investment; the eventual slowing down of the surplus surge; the need to allow then a basic surge; and so on.
The significance of the distinction between basic and surplus circuits became slowly clear, especially in comparison with diagrams from standard textbooks of economics which simply tend to lump together basic as well as surplus businesses.
Towards the end of the day, along with questions about innovations and technology displacing workers, Phil remarked that for Lonergan, the goal of the economy was, strangely, unemployment. This might be a difficult idea to digest, because we are surrounded by a mythology of work. But human beings really need to aim at a life in which there is place for leisure and contemplation. With adequate technology - including biomimicry and nanotechnology - we should be able to bring forth a sufficiency of consumer goods so as to permit leisure for all. The economy might thus slope up into a preparation for eternity!
But perhaps the most interesting part of the day was the awakening Whats: some students and SDB novices raising interesting and intelligent questions on the floor, little groups of questioners in between sessions, Dr Agnelo Menezes thinking of getting St Xavier's Mumbai to invite Phil for another Workshop. Something seems to be stirring. Seeds of hope!
Thursday, 9 September 2010
"Towards a New Economic Order", Divyadaan, Nashik, Day One
The Workshop by Philip McShane "Towards a New Economic Order" began this morning at Divyadaan, Nashik.
The inaugural session involved a prayer-song in Hindi, the lighting of the lamp, and then an introduction to and welcome to the chief resource person and some of those who would interact with him: Dr Agnelo Menezes of St Xavier's College, Mumbai; Dr D.R. Bachhav, Head of the Department of Economics, KTHM College, Nashik, and myself.
I introduced Phil as well as the workshop (see my earlier blog entry for the text of my speech), after which Dr Menezes and Dr Bachhav gave their expectations of the workshop.
Dr Menezes said that he begged to disagree with the widespread idea that the Indian economy was doing well; it was not, he said; there were a very large number of people - 95% - who were not benefitting from the liberalization and the so-called surge. He summarized the problems in terms of 3 'ins': insecurity, informality (the informal or unorganized sector), and inequality.
Dr Bachhav said that the policies and plans of the government were magnificent; the problem was implementation. The agricultural sector, for example, was suffering very much.
McShane said that this was a "magnificently gloomy picture" of the Indian economy, and a wonderful start to the workshop.
He spent the next session introducing the audience to their Whats, inviting them to be Whats. The other three sessions of the day were dedicated to analysing a small business - McShane's father's bakery business. The basic circuit of demand function and supply; the need to set aside money for repair, maintenance and replacement; the recognition of a surplus circuit with its own demand function and supply. Practically the whole day was spent on this diagram, and attempting to compare it with the standard diagrams found in elementary textbooks of economics, which tended to fuse the two circuits, talking only, for example, of households and businesses and the flows of labour and money.
Dr Menezes said that he was delighted to hear this kind of analysis, and said that his college was actually making students study the local economy and analyse it carefully.
I myself asked about the traditional diagrams: what was wrong with them? What consequences followed from their failure to distinguish basic and surplus circuits?
Many of the participants - the majority of them innocent of any economics - felt that what McShane was presenting was quite agreeable, and a matter of common sense. For a layperson in the field of economics, it is probably difficult to understand why such a fundamental distinction is not drawn by most economists.
One point that became clear to me was that the four elements of the diagram did not represent concrete households or businesses, but rather demand and supply functions.
Tomorrow's sessions will complete the diagram by introducing the topics of banking and innovation, though the topic of innovation had inevitably come up during the day.
The inaugural session involved a prayer-song in Hindi, the lighting of the lamp, and then an introduction to and welcome to the chief resource person and some of those who would interact with him: Dr Agnelo Menezes of St Xavier's College, Mumbai; Dr D.R. Bachhav, Head of the Department of Economics, KTHM College, Nashik, and myself.
I introduced Phil as well as the workshop (see my earlier blog entry for the text of my speech), after which Dr Menezes and Dr Bachhav gave their expectations of the workshop.
Dr Menezes said that he begged to disagree with the widespread idea that the Indian economy was doing well; it was not, he said; there were a very large number of people - 95% - who were not benefitting from the liberalization and the so-called surge. He summarized the problems in terms of 3 'ins': insecurity, informality (the informal or unorganized sector), and inequality.
Dr Bachhav said that the policies and plans of the government were magnificent; the problem was implementation. The agricultural sector, for example, was suffering very much.
McShane said that this was a "magnificently gloomy picture" of the Indian economy, and a wonderful start to the workshop.
He spent the next session introducing the audience to their Whats, inviting them to be Whats. The other three sessions of the day were dedicated to analysing a small business - McShane's father's bakery business. The basic circuit of demand function and supply; the need to set aside money for repair, maintenance and replacement; the recognition of a surplus circuit with its own demand function and supply. Practically the whole day was spent on this diagram, and attempting to compare it with the standard diagrams found in elementary textbooks of economics, which tended to fuse the two circuits, talking only, for example, of households and businesses and the flows of labour and money.
Dr Menezes said that he was delighted to hear this kind of analysis, and said that his college was actually making students study the local economy and analyse it carefully.
I myself asked about the traditional diagrams: what was wrong with them? What consequences followed from their failure to distinguish basic and surplus circuits?
Many of the participants - the majority of them innocent of any economics - felt that what McShane was presenting was quite agreeable, and a matter of common sense. For a layperson in the field of economics, it is probably difficult to understand why such a fundamental distinction is not drawn by most economists.
One point that became clear to me was that the four elements of the diagram did not represent concrete households or businesses, but rather demand and supply functions.
Tomorrow's sessions will complete the diagram by introducing the topics of banking and innovation, though the topic of innovation had inevitably come up during the day.
Wednesday, 8 September 2010
Schumpeter: from statics to dynamics in economics
Schumpeter spoke of the fundamental need for economic theory to ‘cross the Rubicon’. ‘By “crossing the Rubicon,” I mean this: however important those occasional excursions into sequence analysis may have been, they left the main body of economic theory on the “static” bank of the river; the thing to do is not to supplement static theory by the booty brought back from these excursions but to replace it by a system of general economic dynamics into which statics would enter as a special case.’ [J. Schumpeter, History of Economic Analysis (New York: OUP, 1954) 1160. P. McShane, Introduction, For a New Political Economy, CWL 21, xxv.]
Tuesday, 7 September 2010
McShane interacting with the SYBPh class
Phil McShane came to my first class (Philosophy of Knowing) this morning and had an informal interaction with the students.
Someone asked him how he came to Lonergan. He said he had been given the text of Insight to read even before it was published. Later, Lonergan had come over to Dublin to give 5 lectures, and Phil had been in charge of seeing to his room and so on. That was when he first met Lonergan. He remembered that Lonergan had a book open on his desk: it was an Agatha Christie detective novel!
Lonergan, he said, loved jokes, and Phil and he would exchange a joke whenever they met. Phil told us the one about the Irish wake. After a little whisky, one of the mourners decided to go in and pray at the coffin. He went in, but the whisky had been strong, and he went quite past the coffin and landed at the harmonium (there was, it seems, usually a harmonium in the 'priests' room' which was also used to lay the body). Well, the man knelt down, prayed at the harmonium, and then went back to his friends. "What a lovely set of teeth the dead man had," he said. Lonergan loved to repeat this Irish joke later on.
Another student asked about the new book Phil was planning to write, on Physics, Economics and History. That gave Phil a chance to speak about how he came to Lonergan's economics.
He had his background in mathematics (Dublin) and philosophy (Oxford). At Heythrop he was able to meet Fr Louis Watts, the priest who had introduced Lonergan to economics during his Heythrop days. In 1968, Phil received a postcard from Lonergan: "Find me an economist who can read my manuscript." A day later he received another postcard saying much the same thing. Lonergan had written the essay in 1944. He had spent 10 years reflecting on the matter. He had given it to Eric Kierans, later minister for finance in the Trudeau cabinet in Canada; Kierans did not get round to reading it. Phil said he himself had spent 20 years trying to read the manuscript; finally it had begun making sense. But he was still on the lookout for an economist; he was hoping that the Nashik conference would inspire someone to either find one or become the one.
Economics today is in the position of Ptolemaic astronomy with its epicycles: they could make certain predictions with that kind of thing, but it would be impossible to send someone to the moon on that basis. But humankind changes very slowly. Ptolemaic astronomy reigned for a thousand years. Economics has been around for 200 years. Perhaps it will begin changing now. Lonergan's aim was to transform economics into a proper science.
Someone asked him how he came to Lonergan. He said he had been given the text of Insight to read even before it was published. Later, Lonergan had come over to Dublin to give 5 lectures, and Phil had been in charge of seeing to his room and so on. That was when he first met Lonergan. He remembered that Lonergan had a book open on his desk: it was an Agatha Christie detective novel!
Lonergan, he said, loved jokes, and Phil and he would exchange a joke whenever they met. Phil told us the one about the Irish wake. After a little whisky, one of the mourners decided to go in and pray at the coffin. He went in, but the whisky had been strong, and he went quite past the coffin and landed at the harmonium (there was, it seems, usually a harmonium in the 'priests' room' which was also used to lay the body). Well, the man knelt down, prayed at the harmonium, and then went back to his friends. "What a lovely set of teeth the dead man had," he said. Lonergan loved to repeat this Irish joke later on.
Another student asked about the new book Phil was planning to write, on Physics, Economics and History. That gave Phil a chance to speak about how he came to Lonergan's economics.
He had his background in mathematics (Dublin) and philosophy (Oxford). At Heythrop he was able to meet Fr Louis Watts, the priest who had introduced Lonergan to economics during his Heythrop days. In 1968, Phil received a postcard from Lonergan: "Find me an economist who can read my manuscript." A day later he received another postcard saying much the same thing. Lonergan had written the essay in 1944. He had spent 10 years reflecting on the matter. He had given it to Eric Kierans, later minister for finance in the Trudeau cabinet in Canada; Kierans did not get round to reading it. Phil said he himself had spent 20 years trying to read the manuscript; finally it had begun making sense. But he was still on the lookout for an economist; he was hoping that the Nashik conference would inspire someone to either find one or become the one.
Economics today is in the position of Ptolemaic astronomy with its epicycles: they could make certain predictions with that kind of thing, but it would be impossible to send someone to the moon on that basis. But humankind changes very slowly. Ptolemaic astronomy reigned for a thousand years. Economics has been around for 200 years. Perhaps it will begin changing now. Lonergan's aim was to transform economics into a proper science.
Monday, 6 September 2010
Lonergan on Basic and Surplus Goods & Services
"The key to appreciating Bernard Lonergan's economic theory is to understand how he sharpens the orthodox distinctions between producer goods, consumer goods, and capital and then goes on to fully exploit the distinction he draws. [Orthodox economists also draw these distinctions, but their distinctions are not precise, and they are not basic to their analysis as they are for Lonergan.] The particular distinction Lonergan draws is one of the fundamental building blocks of his theory." [McShane and Anderson 23.]
"[O]rthodox economists think unclearly of producer goods as used in the production of consumer goods. An example is the use of sheet metal in automobiles. Sheet metal, for them, is a producer good that is used to make consumer goods, ie automobiles. For Lonergan, however, what determines whether a good is classified as basic or surplus is its use when it is sold as a finished product." Thus a table saw bought by a home handyman is a basic good; the same saw bought by a carpenter is a surplus good. [McShane and Anderson 25.]
"[O]rthodox economists think unclearly of producer goods as used in the production of consumer goods. An example is the use of sheet metal in automobiles. Sheet metal, for them, is a producer good that is used to make consumer goods, ie automobiles. For Lonergan, however, what determines whether a good is classified as basic or surplus is its use when it is sold as a finished product." Thus a table saw bought by a home handyman is a basic good; the same saw bought by a carpenter is a surplus good. [McShane and Anderson 25.]
Money is not the centre of an economy
"Orthodox economists would have us believe that money makes the world go round. The more money you make the better. the higher a corporation's profits the better. The bigger a country's GDP per capita the better. The greater the NASDAQ Index the better. Lonergan, by contrast, holds a different view. In his opinion, money & finance should not be considered the centre-piece of an economy. Rather, money & finance should meet the needs of the production. Production should not be manipulated to meet the needs of finance." (McShane and Anderson, Beyond Establishment Economics: No Thank You Mankiw [Halifax: Axial Press, 2002] 28.)
Saturday, 4 September 2010
New book by McShane: physics, economics, history
Just went through - went through is the right word, I went through it without really pausing, slowing down, attempting to digest - McShane's proposal for a new book, with the title Bernard Lonergan's View of Physics, Economics and History: A Heuristic Gauging Structure for Human Ecological Survival. McShane received a rather encouraging reply from his prospective publishers just as he was setting out for the airport to come to India, and so forwarded the mail to me, with a request for a printout, and an invitation to read on if I could. I did. Impressive.
Impressive first of all because, while there is much Philtalk, there is much less of it than is usual. On the whole the proposal reads beautifully, and does communicate without too much unexpected (Joycean) jargon.
What is Phil trying to do? "To break through to a heuristic of history" by drawing on and then expanding Lonergan's writings. The expanding will involve creative integration from the two sciences that were Lonergan's greatest interest: physics and economics, the one a natural science and the other a human science.
More specifically, the project intends to follow Lonergan's advice to select "the conspicuously successful science of our time" - which is physics, and to use it to lift up the conspicuously unsuccessful science - which Phil identifies with economics. And all this, in the service of working out "an integral heuristic of history." Thus: "The writings of O'Raifeartaigh are key here: can I lift O'Raifeartaigh's work, both in physics and in the heuristics of dialectic, to a level where I can identify, heuristically and effectively, a future dynamics of both physics and economics that I discern in the history of macro-hydrodynamics[,] a history which powerfully nudges us to conceive of a beginning of ecologically-responsible economic dynamics?"
Economics as a non-science is, I think, one of the claims made by Lonergan and pushed by McShane in many of his works, including the recent issue of Divyadaan: Journal of Philosophy and Education 21/2: Do You Want a Sane Economy? edited by him.
He wants to do for economics (and for history), I think, what Lochlainn O'Raifeartaigh did for gauge theory in physics, with his The Dawing of Gauge Theory and other works.
What is impressive are Phil's credentials: his original training was in theoretical physics; he went on to take a D.Phil. in Oxford; his interest in economics began in 1968 when Lonergan requested him to "find [him] an economist"; and his publication record is "excellent" in the words of the two editors of the current proposal.
But, but: what on earth is a heuristic of history? This is related to Lonergan's search for an integral heuristic structure, "a symbolic indication of the total range of possible experience". The sought after heuristic of history is "a key sub-structure of that search". In Lonergan's words, the problem of general history "is the real catch". The problem is fundamentally solved "by a functional specialist theoretic of the merging - through sloping up from isolated research - horizons of disciplines." "The core of the present project is the tackling empirically of that issue of sloping, in both history as lived and as written, in the disciplines of physics and economics and their ecological technologies."
And: why search for a heuristic of history? Hints: liberation from "contemporary myths of maturity of humanity or of science or industrialization"; reaching "a coherent and humble heuristic that is remote from contemporary disorientations regarding physics, economics and ecology"; a meshing of economic and ecological concerns in Lonergan's writings on history and economics that "anticipate elements of the openness of present leading ecologists, reaching out to a post-industrial culture of leisure, self-attention, and creative post-industrial and nano-innovation of such dimensions as would warrant the global implementation of Lonergan's pragmatics of long-term cyclic economic innovations"; "a beginning of ecologically-responsible economic dynamics".
Impressive first of all because, while there is much Philtalk, there is much less of it than is usual. On the whole the proposal reads beautifully, and does communicate without too much unexpected (Joycean) jargon.
What is Phil trying to do? "To break through to a heuristic of history" by drawing on and then expanding Lonergan's writings. The expanding will involve creative integration from the two sciences that were Lonergan's greatest interest: physics and economics, the one a natural science and the other a human science.
More specifically, the project intends to follow Lonergan's advice to select "the conspicuously successful science of our time" - which is physics, and to use it to lift up the conspicuously unsuccessful science - which Phil identifies with economics. And all this, in the service of working out "an integral heuristic of history." Thus: "The writings of O'Raifeartaigh are key here: can I lift O'Raifeartaigh's work, both in physics and in the heuristics of dialectic, to a level where I can identify, heuristically and effectively, a future dynamics of both physics and economics that I discern in the history of macro-hydrodynamics[,] a history which powerfully nudges us to conceive of a beginning of ecologically-responsible economic dynamics?"
Economics as a non-science is, I think, one of the claims made by Lonergan and pushed by McShane in many of his works, including the recent issue of Divyadaan: Journal of Philosophy and Education 21/2: Do You Want a Sane Economy? edited by him.
He wants to do for economics (and for history), I think, what Lochlainn O'Raifeartaigh did for gauge theory in physics, with his The Dawing of Gauge Theory and other works.
What is impressive are Phil's credentials: his original training was in theoretical physics; he went on to take a D.Phil. in Oxford; his interest in economics began in 1968 when Lonergan requested him to "find [him] an economist"; and his publication record is "excellent" in the words of the two editors of the current proposal.
But, but: what on earth is a heuristic of history? This is related to Lonergan's search for an integral heuristic structure, "a symbolic indication of the total range of possible experience". The sought after heuristic of history is "a key sub-structure of that search". In Lonergan's words, the problem of general history "is the real catch". The problem is fundamentally solved "by a functional specialist theoretic of the merging - through sloping up from isolated research - horizons of disciplines." "The core of the present project is the tackling empirically of that issue of sloping, in both history as lived and as written, in the disciplines of physics and economics and their ecological technologies."
And: why search for a heuristic of history? Hints: liberation from "contemporary myths of maturity of humanity or of science or industrialization"; reaching "a coherent and humble heuristic that is remote from contemporary disorientations regarding physics, economics and ecology"; a meshing of economic and ecological concerns in Lonergan's writings on history and economics that "anticipate elements of the openness of present leading ecologists, reaching out to a post-industrial culture of leisure, self-attention, and creative post-industrial and nano-innovation of such dimensions as would warrant the global implementation of Lonergan's pragmatics of long-term cyclic economic innovations"; "a beginning of ecologically-responsible economic dynamics".
Friday, 3 September 2010
A thousand gardens
Wonderful and intriguing sentence from Lonergan, with special echoes for a land in which Gandhi dreamed of a village republic:
“Nor is it impossible that further developments in science should make small units self-sufficient on an ultramodern standard of living to eliminate commerce and industry, to transform agriculture into a superchemistry, to clear away finance and even money, to make economic solidarity a memory, and power over nature the only difference between high civilization and primitive gardening.” (For a New Political Economy, CWL 21:20)
Introducing the Economics Workshop
Gave a brief presentation of "Do You Want a Sane Economy" (Divyadaan: Journal of Philosophy and Education 21/2 [2010]) to the Divyadaan students last evening, as an introduction to the forthcoming Workshop "Towards a New Economic Order" by Philip McShane (9-11 September 2010).
As I write, Phil must have boarded his flight for Mumbai... He arrives early morning, 5 September. Should be here 6 September. A press conference is being planned for 1630 hrs, 7 September. Mr Deokar, Editor of Sakala, has taken a great interest in the matter, together with Mr Francis Waghmare.
The leading ideas:
1. Distinguish basic and surplus circuits: the basic circuit concerns consumer goods; the surplus circuit concerns producer or capital goods.
2. What is fundamental in the economy is production, not money. Money, while essential, has a redistributive function.
3. The aim of the economy is not therefore "making money." It is an improved standard of living for all.
4. Money is a promise, a note. The betrayal of this promise seems to be at the bottom of the current economic crisis.
5. The failure to understand the workings of the economy - and therefore the crisis - is the true fault. Economics has not yet become a genuine science. Most economists and textbooks concentrate on money. They should recognize that production is basic. They have to identify the real variable. Then economics would become a science.
The 8 articles in Divyadaan attempt to introduce the real variables of economics in a very simple way, often appealing to simple businesses that do not involve money, somewhat in the manner that Wittgenstein's language-games at the beginning of his Philosophical Investigations. Thus McShane introduces the notion of credit; Brown the related idea of keeping promises; Shute the economic variables; O'Leary brings in money, and talks about what happens when the basic and surplus circuits are not balanced; and Zanardi the goal of the economy as making sense rather than making money. McShane rounds up with the call for genuine understanding, true theory.
As I write, Phil must have boarded his flight for Mumbai... He arrives early morning, 5 September. Should be here 6 September. A press conference is being planned for 1630 hrs, 7 September. Mr Deokar, Editor of Sakala, has taken a great interest in the matter, together with Mr Francis Waghmare.
The leading ideas:
1. Distinguish basic and surplus circuits: the basic circuit concerns consumer goods; the surplus circuit concerns producer or capital goods.
2. What is fundamental in the economy is production, not money. Money, while essential, has a redistributive function.
3. The aim of the economy is not therefore "making money." It is an improved standard of living for all.
4. Money is a promise, a note. The betrayal of this promise seems to be at the bottom of the current economic crisis.
5. The failure to understand the workings of the economy - and therefore the crisis - is the true fault. Economics has not yet become a genuine science. Most economists and textbooks concentrate on money. They should recognize that production is basic. They have to identify the real variable. Then economics would become a science.
The 8 articles in Divyadaan attempt to introduce the real variables of economics in a very simple way, often appealing to simple businesses that do not involve money, somewhat in the manner that Wittgenstein's language-games at the beginning of his Philosophical Investigations. Thus McShane introduces the notion of credit; Brown the related idea of keeping promises; Shute the economic variables; O'Leary brings in money, and talks about what happens when the basic and surplus circuits are not balanced; and Zanardi the goal of the economy as making sense rather than making money. McShane rounds up with the call for genuine understanding, true theory.
Thursday, 19 August 2010
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.
Sunday, 15 August 2010
Work and leisure
A very interesting remark: the goal of economic development is leisure, not full employment.
"For Lonergan an increased rate of leisure, not full employment, was a more desired outcome for economic development." Lonergan got this view from Christopher Dawson. For Dawson, in the ideal case, technological innovation accelerated the rate of production of material goods; this led to increase in division of labour; and this eventually allowed for more leisure, initially for some social classes, but eventually for all. More leisure leads to cultural advances.
An unfinished goal of Lonergan's essay For a New Political Economy was to understand how economic rhythms provided a base for the advance of culture.
(See M. Shute, Lonergan's Discovery of the Science of Economics, 2010, 49.)
"For Lonergan an increased rate of leisure, not full employment, was a more desired outcome for economic development." Lonergan got this view from Christopher Dawson. For Dawson, in the ideal case, technological innovation accelerated the rate of production of material goods; this led to increase in division of labour; and this eventually allowed for more leisure, initially for some social classes, but eventually for all. More leisure leads to cultural advances.
An unfinished goal of Lonergan's essay For a New Political Economy was to understand how economic rhythms provided a base for the advance of culture.
(See M. Shute, Lonergan's Discovery of the Science of Economics, 2010, 49.)
Saturday, 26 December 2009
Nehru and Gandhi on economics
I have begun editing the first issue of the Divyadaan Journal for 2010, and yesterday I was working on Howard and Swanger's chapter 2, which is on Jawarharlal Nehru's peculiar relationship to Gandhi. I find myself amazed at the way Howard and Swanger are interpreting Gandhi: here is an interpretation that rings true, and that I for one have never seen.
Howard points out that Nehru never really understood Gandhi. Nehru was a Fabian socialist; he was a 'modern'; Gandhi was pre-modern. Gandhi believed in dharma, in an organic society, and his ideas make sense only within this kind of a world view. Gandhi considered modern technological society as adharma; and he was, says Howard, profoundly right. His views and his analyses are being slowly confirmed by many thinkers today.
There is, of course, the ticklish issue of Gandhi's upholding of the varnadharma, the caste system in its varna essentials at least. Howard deals with this in his chapter 1 (published in DJPE 20/3 of 2009), and he has an interesting take on it, making Gandhi intelligible if not completely defensible.
But the ideological divide between Nehru and Gandhi is interesting, it is sharp, and it had enormous consequences. We are reaping the consequences of Nehruvian socialism. True, everyone is looking at India these days, and marvelling at our progress; even Pope Benedict XVI alludes obliquely to this when he speaks of countries that have managed to pull themselves out of poverty. But not Howard: Howard maintains a healthy skeptical distance from such facile praise of India's progress. He is, in that sense, profoundly Gandhian. For Gandhi - echoed in this by Paul VI in Populorum Progressio - there is no development that is not moral.
Where is Howard heading? I am not sure. But I am surely waiting eagerly for the forthcoming chapters of his book, Gandhi and the Future, which we are serializing in Divyadaan: Journal of Philosophy and Education.
Howard points out that Nehru never really understood Gandhi. Nehru was a Fabian socialist; he was a 'modern'; Gandhi was pre-modern. Gandhi believed in dharma, in an organic society, and his ideas make sense only within this kind of a world view. Gandhi considered modern technological society as adharma; and he was, says Howard, profoundly right. His views and his analyses are being slowly confirmed by many thinkers today.
There is, of course, the ticklish issue of Gandhi's upholding of the varnadharma, the caste system in its varna essentials at least. Howard deals with this in his chapter 1 (published in DJPE 20/3 of 2009), and he has an interesting take on it, making Gandhi intelligible if not completely defensible.
But the ideological divide between Nehru and Gandhi is interesting, it is sharp, and it had enormous consequences. We are reaping the consequences of Nehruvian socialism. True, everyone is looking at India these days, and marvelling at our progress; even Pope Benedict XVI alludes obliquely to this when he speaks of countries that have managed to pull themselves out of poverty. But not Howard: Howard maintains a healthy skeptical distance from such facile praise of India's progress. He is, in that sense, profoundly Gandhian. For Gandhi - echoed in this by Paul VI in Populorum Progressio - there is no development that is not moral.
Where is Howard heading? I am not sure. But I am surely waiting eagerly for the forthcoming chapters of his book, Gandhi and the Future, which we are serializing in Divyadaan: Journal of Philosophy and Education.
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