Global Economics: What's Our Next Move?¹This article is a version of what previously appeared in the Tennessee Register, November 25, 2011, p. 14. Edits were minor and non-substantive.

It has become the talk of the town, or rather the cry and sorrow of towns around the globe, crying out for help because of ongoing damage to cultures and eco-systems. One doesn’t need to be an economist to see that establishment economics is fundamentally dysfunctional, cannot be correct and is a cause of many of our difficulties. Within economics, there is an emerging interest in exploring heterodox theories. However, a multiplicity of theories does not solve the problem. We need a correct understanding of real economic variables.

Astonishingly, the present economic mess has its roots in errors that were identified more than seventy years ago - the achievement of a Canadian, Bernard Lonergan (1904-1984). His writings of the last century, including his works on economics, have been made available through the University of Toronto Press. But so far they have not yet caught the attention of mainstream economists.

There is, however, a small but growing group of scholars and other individuals who are working at understanding Lonergan’s economics. Philip McShane, a friend and colleague of Lonergan during their careers, has been studying Lonergan’s work for several decades and in the late 1990’s edited a text containing most of Lonergan’s key results in economics: Bernard Lonergan, For a New Political Economy (Ed. Philip McShane), Collected Works of Bernard Lonergan, Vol. 21, University of Toronto Press, 1998.

Thanks to Lonergan’s results, it is now evident that in any economy there are two flows of money concomitant with new goods and services. One flow buys into society what can be called consumer goods; the other flow buys what can be called capital goods. The success of the economy requires that measurements of these be built, systematically and statistically, into economic practice, so that credit be intelligently given to factors in the economy, especially to innovative factors.

However, this is not at present possible, since the measurements are not done. Indeed, why would they be done, when establishment theory hypothesizes a non-explanatory one-flow model? Further, the original meaning of “credit” - “giving credit for insightful contributions to well-being” - has been battered to death in the past sixty years. Institutions of financial operations have emerged which separate the flow and creation of money from its fundamental meanings of promise and credit. As McShane explains, “the result is a commoditization of money which, detached from needed industrial flows, has a massively destructive effect on production, purchases, and well-being. In particular, the related secondhand trade symbolized by Wall St. - not part of the productive process - has been taken nevertheless to be an indicator of economic success.” So it is that in our efforts to bring forth “our welfare and our good,” we are mainly in the hands of detached Wall St. gamblers.

In the short-term, various movements point to these economic follies. What is needed, however, is a stirring in public interest that goes beyond just having the sense that something is terribly wrong. Demonstrations are to no avail, unless they lead to an effective re-assessment of financial operations as well as a displacement of second-hand trading from center-stage. Under public pressure, government and somewhat enlightened economists and bankers must merge in a push against those living financially obscenely well, off the gross error of the commoditization of money.

In the long-term, however, more will be needed. The basis for the science of economics was discovered by Lonergan, but establishment economics remains equivalent to alchemy and phlogiston theory prior to the periodic table. Mainstream economics has not yet realized that at the root of present economic difficulties is the simple error of not facing the empirical significance of the two flows, of not making an effort to arrive at their measures and related measures of two flows of taxes, of imports and exports, etc.

What then is our next move? A good start would be to understand economics correctly. As McShane points out, “without that scientific effort, governments – again not intrinsic to the two flows – continue to intervene in haphazard fashions related to party politics and elections.  Patchwork solutions will be put in place but only appear to work, and establishment economics and gamesters of finance will continue to feast on our hearts.”

My hope in writing this short article is to help draw attention to Lonergan’s economics as well as McShane’s numerous leads.²Since 2011 - when this article was originally published - some of McShane’s books on economics have gone into second and third editions. See http://www.philipmcshane.org/. We need some few brave souls, economists, financiers, politicians, willing to risk looking into Lonergan’s work which, in fact, contains elements of an intelligent charitable solution to our present economic difficulties.

Terrance Quinn, Ph.D., Professor Emeritus, Mathematical Sciences, Middle Tennessee State University, terrance.quinn@mtsu.edu.