Anatomy of Economic Activity There are Two Main Flows

Abstract

I draw attention to an economic theory discovered in the 1930’s by the Canadian scholar Bernard Lonergan (1904-1984). At the time, Lonergan was unable to find an economist to read his manuscripts. Eventually, however, his results were published in For a New Political Economy (Lonergan 1998); and Macroeconomic Dynamics: An Essay in Circulation Analysis (Lonergan, 1999), volumes 21 and 15 of the Collected Works of Bernard Lonergan. Volume 21 contains almost all of Lonergan’s typewritten work on economics prior to and including the 1944 Essay in Circulation Analysis. Lonergan’s theory, however, remains largely unknown to both orthodox and heterodox economics. Within the contemporary ethos, economic models typically are remote from actual economic activities in cities, towns and people’s lives. Lonergan’s theory, by contrast, begins with economic activities. It builds on a key observation that there are not just “firms and households” but two functionally distinct types of firm. Businesses can and often do function in both ways, depending on transactions. Orthodox economics has been causing great damage to world cultures and ecosystems. Attempts to merely adjust mainstream models have proven ineffective. Within heterodox economics there has been a growing interest in finding a viable alternative. This paper gives a brief introduction to the alternative provided by Bernard Lonergan’s two-flow theory. It is a theory that will ground the possibility of effective and humane strategies for local and global economies. Elements of this paper were originally presented at the International Confederation of Associations for Pluralism in Economics (ICAPE), January 4th, 2018, Drexel University in Philadelphia.