Author: Bernard Lonergan
Publisher: University of Toronto Press, Toronto, Canada; 336 pp.
Reviewer: Eileen de Neeve, President, Thomas More Institute, Montreal, Quebec, Canada
January 25, 1999
For A New Political Economy is the first of two volumes to be published on the economic thought of Bernard Lonergan in the Collected Works Edition. The publication of the two early economics essays and shorter fragments in this volume makes an important and little-known facet of Lonergan's thought available to the public. Although economic analysis is notoriously opaque to the uninitiated, through the juxtaposition of the two approaches in the two essays of Part One and Part Three, together with the additional fragments or notes in Part Two, Lonergan's macrodynamic theory is made a good deal more accessible to the general reader. For this we can thank the general editors and the editor of this volume, Philip McShane. The presentation of Part One is more descriptive in style, and the context of the discussion is more broadly social. In Part Two a narrative style is used in the writings which aim to develop and clarify various ideas associated with Lonergan's presentation of how an economic system works. Part Three represents the more formal and succinct explanatory style often used by Lonergan in the mature statements of his ideas. Because Lonergan uses symbols in talking about complex economic relationships, it would have been a help to have a reference list of symbols to use while reading the essays. However, symbols are clearly explained in the text, and readers can make their own reference lists.
The essays in this first volume were written in the early 1940s. Seeking an explanation of the economic collapse of the Great Depression, Lonergan had mastered the important debates of the 1930s among economists of the Austrian, British and Swedish schools. These debates died down as war approached, with Keynes becoming the most influential economist, at least in the English-speaking world until after the war. In these essays Lonergan adds significantly to the debates. Readers will find that the essays are linked to the ideas in Keynes' General Theory as well as to the descriptive dynamic theories of Schumpeter, Hayek and others who sought to explain the booms and busts of business cycles.
In Part One Lonergan situates economics within the sciences, explaining that science is the result of both observation of data and "the constructive activity of mind." Furthermore, science progresses through a process of increasing generalization. He criticizes twentieth century economics for failing to do this. Instead economic science developed the special areas of "statistics, history, and a more refined analysis of psychological motivation. . ." For Lonergan the starting point is multifaceted human activity, which is the basis of all culture. "Yet conditioning all culture and inextricably confused with it, there is the economic factor . . . .Thus the material fabric of culture's living home is economic, and underlying this superstructure there stands as foundation the purely economic field concerned with nourishment, shelter, clothing, utilities, services, and amusement."
Lonergan's essential distinction in economic activity is between making products that are consumed directly (consumer goods) and making those that are used again in production (producer goods). And because there are periods when innovations and/or population growth predominate, the output of producer goods can be expected to grow apace. Furthermore, the output of consumer goods dependent on them will grow only after a lag--the time it takes to put in place the increase or improvement in production facilities. Lonergan proposes as a theoretical model a pure cycle in which first the output of producer goods grows more and then the growth of consumer goods is more important. As Lonergan puts it in Part I, "This cycle never implies retrogression, a drop in the existing rates . . . as a whole. It leaves them constant or it increases them. But this is not to deny economic decline, but merely to attribute it to blunders in universal management."
Lonergan discusses the excellence of the market exchange system, especially in contrast with the "bureaucratic solution" of state-run economies. But he also sees the market system's defects which arise because people of "unequal in ability and opportunity" can command only a low standard of living in the market. While rejecting "humanitarian idealism" as a way of solving the problem, Lonergan looks towards a more general economic system in which "the vast forces of human benevolence. . . are assigned a function and harnessed within the exchange system. . ."
For Lonergan money is a convenience through which the exchange economy "can attain a vastly greater magnitude and intricacy." And finance is a necessity which brings together people with money and people with ideas about how to use it to produce goods and services. Understanding the role of profit variations is crucial if people are to make choices which insure good economic management. Thus, maxims such as "maximize profit" or "thrift and enterprise" are necessary but insufficient to enable economic agents to move successfully through inevitably changing historical situations.
Part III of For A New Political Economy is a concise statement of Lonergan's general pure cycle model of macrodynamics, which he offers as a way of achieving the economic good of societies. If you like, his model offers moral precepts to economists. The technical details of production over time (chapter 15, section 7bis) as well as the variations in income, profits, and the consumer price level (chapter 18) are worked out and presented symbolically. The connected web of money flows--in payments for goods and services being produced, in incomes earned, and in choices about saving and investment--is woven together in chapter 16, which ends with the illustration of this web in Lonergan's diagram of Transfers between Monetary Functions.
In our globalizing national economies, which have now produced a single currency for Europe, Lonergan's brief but fascinating discussions of imbalances in international trade or payments, and of government deficits are of particular interest. Both topics are discussed in chapter 19. Lonergan explains international trade and government tax and expenditure payments as circuits which are "superposed" on the economy of a country. They interact with the dynamics of a society's production and market systems. This interaction must be understood and managed by people, in their capacity as economic agents, in a way that avoids economic breakdowns, eases transitions, and resolves the confrontation of society's gainers and losers.
This book is important not only for economists but also for readers concerned about social justice, about understanding the world economy, and about the links between the world of finance and the world in which goods and services are produced. And Lonergan's prose style together with the editors' loving care make it a beautiful book. Finally, For A New Political Economy is an essential introduction to Lonergan's later work on Economics soon to be published in volume 15 of the Collected Works.