WORLDVIEWS

Worldviews 11 (2007) 203-225

www.brill.nl/wo

Economic Development and the Common Good: Lonergan and Cobb on the Need for a New Paradigm
Paul Hoyt-OConnor
Center for Religion, Ethics and Culture, College of the Holy Cross, One College Street, Worcester, MA 01610, USA phoyt@holycross.edu

Abstract John B. Cobb, Jr and his associates oer a critique of prevailing economic theory and practice in the hopes of contributing to the reformation of both by examining the meaning and relevance of the common good in the economic sphere. This paper examines Cobbs critique of economic theory and practice and his contribution toward an understanding of economic life that would do greater justice to environmental and communal sustainability. It also examines the contours of the new paradigm for economic theory and practice that he and Herman E. Daly propose. While that paradigm stands in need of greater elaboration, their work suggests a line of further development, one that anticipates Bernard Lonergans macroeconomic dynamics. The latter, I argue, accounts for Cobbs concerns and criticisms and provides a basis for the formulation of moral precepts that promote economic progress in ways consonant with a fuller vision of human ourishing. Keywords John B. Cobb, Jr, Bernard Lonergan, common good, economic development, economic theory

Introduction When it issued its pastoral letter on the US economy nearly two decades ago, the National Conference of Catholic Bishops breathed new life into the common good tradition (NCCB/USCC 1986). Their lead inspired theologians, philosophers, and political theorists to consider the meaning of the common good and its contemporary relevance. (See Dupr 1993;
Koninklijke Brill NV, Leiden, 2007 DOI: 10.1163/156853507X204932

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Hollenbach 1989; Rourke 1996.) Continuing their reection upon economic and political life, the US Catholic Bishops rearmed more recently that adequate responses to the problems facing American society at the cusp of the new millennium demand renewed inquiry and reection into common good (NCCB/USCC 1999). As they did in their rst pastoral letter on the US economy, the bishops suggest that a sustained reection upon the common good would aid in specifying the conversions needed to live faithfully in an increasingly complex world. At their best, their pastoral responses strive to surmount shortcomings of individualist and collectivist conceptions of society, to challenge prevailing economic theory and practice, and to invite the faithful to participate in more just and reverent ways of life. The struggle to take stock of the transformations of modern economic conditions and to formulate faithful responses to them has not been limited to Catholic theologians, however. Thinkers across a broad spectrum of Christian denominations have turned their attention toward the emergent global economy, its eects upon the environment, and its implications for social life. In the words of the World Council of Churches, the true worship of God requires Christians to promote just, participatory, and sustainable communities and the integrity of creation.1 The notion of the common good has also assisted that Council in the formulations of the pastoral responses that would guide Christians in resolving the ongoing tensions in how they ought to make a living while making a life for themselves and their neighbors. These tensions arise partly because the common good tradition arms the value of economic activity and, at the same time, maintains that the human good transcends the merely protable. While that larger good can only be imperfectly embodied in this life, still the trajectory of an economic order in particular and social life in general is to be judged in the light of that good. At its best then, the common good tradition has a reformist thrust. As it respects economic life and its proper place in the fabric of human societies, that tradition seeks to transform social practices in ways consonant with cultural, personal, religious, and transcendent values.
At its Nairobi Assembly, the World Council of Churches formulated the end of the true worship of God to be just, participatory, and sustainable communities. Cognizant of its implicit anthropocentric connotations, the Council proclaimed that the end was the integrity of creation at its Vancouver Assembly in 1982.
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Making the most of the traditional notion of the common good under modern conditions, though, involves investigating the complex frameworks of cooperation of concrete, historical communities and incorporating the ndings of contemporary social science and historical scholarship. In particular, it entails rethinking the relation of the economy to natural and social ecologies in ways that do justice to the dynamic character of economic arrangements and of social life and, thus, assisting those who sincerely strive to live justly and faithfully. A practical philosophy or theological ethics would seek to issue precepts in order to guide human responses to that dynamic reality. Such accounts would also specify the ways in which individuals and communities have failed to abide by those precepts and set themselves upon a path of disrepair and ruin. John B. Cobb, Jr is a theologian who has devoted much of his time and energy to examining conventional economics. He once remarked, theology is too important to be left to the theologians (Cobb 1994: 23), and the same might be said of economics and economists. Motivated by an abiding concern for the integrity of creation and community, Cobb and his associates oer a critique of prevailing economic theory and practice in the hopes of contributing to the reformation of both by examining the meaning and relevance of the common good in the economic sphere. In the space allotted, I wish to examine Cobbs critique of economic theory and practice, his contribution toward an understanding of economic life that would do greater justice to environmental and communal sustainability, as well as the contours of the new paradigm for economic theory and practice that he and Herman E. Daly propose. While I maintain that their paradigm stands in need of greater elaboration, their work suggests a line of further development, one that anticipates Bernard Lonergans macroeconomic dynamics. The latter, I will argue, accounts for Cobbs concerns and criticisms and provides a basis for the formulation of moral precepts that promote economic progress in ways consonant with a fuller vision of human ourishing.

Cobbs Account of the Economy and the Common Good In the opening pages of Sustaining the Common Good, Cobb describes how human beings have always trodden somewhat heavily upon this earth. From ancient times, settled agriculture contributed to the desertication

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of former breadbaskets, and the techniques of scorching and burning are even now hastening deforestation. The acceleration of the ruin of the created order, Cobb believes, has its sources largely in the economic theory that justies it. With genuine urgency then, he presses his case against current economic theory and practice because of the increasing scale and scope of the pending environmental and social disasters engendered by them. He traces the source of these problems to the unwarranted faith of theoreticians and policy makers in the power of economic growth and its promise to save humankind from the very problems it generates. That faith Cobb likens to an idolatry he terms economism (Cobb 1994: 27-29), and his critique of it seeks to lay bare how current economic arrangements are unsustainable. The unprecedented scale of the problems facing humankind is due to rapid globalization, and Cobb nds that the increasingly globally integrated economy is in part fueled by identifying economic development with increases in the sheer volume of goods and services produced and sold. The proponents of economic globalization see it as the best means to make goods and services available to those peoples formerly denied them, but who are now included in the trade among ever more specialized economies. Governments of lesser-developed nations have largely embraced globalization, and identied their own economic development with increasing levels of domestic consumption and production, while political leaders of the developed nations see it as a means of indenitely extending the reach of their own economies. Cobb traces such misplaced hopes for global prosperity to the ways in which conventional economic theory and practice have fallen prey to fallacies of misplaced concreteness. He especially criticizes two fallacies: the identication of economic development with economic growth as measured by a nations gross domestic product (GDP), and the construal of human nature as Homo economicus. Cobb devotes considerable attention to the multiple ways in which the gross domestic product (GDP), the aggregate of payments made for goods and services domestically produced, is a poor measure of economic development. First, he nds fault with how the costs of doing business are calculated and thus prices determined. As a rst approximation, GDP measures what he terms through-puts (Cobb 1994: 8, 96). The costs of the inputs of non-renewable resources are accounted for by discount-

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ing them, assuming all the while that technological advances will uncover appropriate substitutes when needed. The pollutants and industrial wastes that are outputs of the productive process are in turn costs that are externalized. Because the prices of commodities do not include the costs of depleting non-renewable resources and impairing the health of natural ecologies, they do not accurately reect the full costs of production, and thus, total GDP fails to reect accurately the progress or deterioration of a communitys standard of living. Secondly, as a gross measure, GDP also includes payments made because of worsening environmental and social conditions (Cobb 1994: 95-97). Defensive expenditures refer to those payments precipitated by the problems accompanying economic growth, including increased expenditures for sanitation and toxic-waste removal, social services and psychiatric care, police and military forces, and prison construction and weapons production. Thus, the aggregate GDP can increase though the social situation is deteriorating. Thirdly, GDP also fails to account for valuable work for which no payment is made (Cobb 1994: 97-98). For instance, work in the home or subsistence farming, both traditionally performed by women, are left of out of account and are accordingly under-appreciated. When greater numbers of women have entered the workforce, rising GDP reects the incomes they now receive as well as increased household allocations for childcare, housecleaning services, and prepared meals. Overall, household incomes may have increased but, Cobb cautions, the social situation of families may not have improved as much as the rising numbers would suggest. The confusion of rising GDP with economic development is abetted by a defective philosophical anthropology and sociology. Liberal and neoliberal economic theory construes human being as Homo economicus, thus regarding human beings as inherently self-interested and as so many individuals-in-markets. Motivated by their self-regarding desires which are insatiable in principle, individuals contract freely with others in order to maximize their consumption of goods. Human rationality is accordingly demonstrated in calculating what is advantageous, and human liberty typically consists in being free from any constraints not voluntarily assumed. This understanding of human beings, on Cobbs account, inexorably leads to a tragedy of the commons since it fails to do justice to human society and to those shared goods enjoyed within it. For as individuals are wrested from networks of social relationships and divorced from their communal

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traditions, they become so many rootless cosmopolitans. Just as economic growth can exhaust natural ecologies without counting the cost, so it can deplete social ecologies upon which economies actually depend. When encouraging self-interested behavior, markets erode the social conditions of their own sustainability by rendering social relations and commitments precarious and fragile. In opposition to economism, Cobb proposes the alternative of earthism. In the rst instance, earthism would seek to dene more adequately economic development in terms other than rising aggregate GDP because it faces squarely the inherent limits of the planets nite environment. Thus, Cobb and Daly distinguish economic growth from economic development. By growth they mean the quantitative expansion in the scale of the physical dimensions of the economic system, and by development they mean the qualitative change of a physically nongrowing economic system in dynamic equilibrium with the environment (Daly and Cobb 1989: 71), and, as such, sustainable economic development does not threaten to exceed the limits of nite creation. Being quantitative, aggregate or per capita GDP fails to measure such qualitative advance. Taking the case of non-renewable fossil fuels, for example, it is possible to imagine that their more ecient use may lower overall GDP, if less fuel is demanded overall. In its stead, Cobb and his associates propose an index of sustainable economic welfare2 (Daly and Cobb 1989: 401-55; Cobb 1994: 54, 96-99), which accounts for, among other things, resource conservation and pollution prevention, a communitys savings rate and the proportionality of incomes among that communitys constituent groups. He argues that genuine economic progress is promoted by preserving the integrity of natural and social ecologies and thereby fostering the conditions under which sustainable communities and economies are possible. Earthism also conceives of human beings as persons-in-community. Since individual identities are shaped in and through networks of social relations, the good of individuals is achieved by promoting the good of their communities. Their common goods are not achieved by obtaining economic goods simply, for societies are not subservient to markets. On his account, economic development promotes coherent, exible, locally

The Index of Sustainable Economic Welfare is the work of Cobb, Daly, and Cliord W. Cobb.

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organized regional economies that are subject to democratic control. The liberty realized in such economies is not equivalent to the freedom celebrated in neo-liberal economic theory, but rather is a liberty characterized by responsible self-government and genuine interdependence. Cobb does not wish to suggest, however, that local communities are capable by themselves of achieving their own good. Local communities have all too often been guilty of provincial attitudes and discriminatory practices, and the cultivation of smaller communities would not thereby remove sin from the human situation. Moreover, local communities often cannot themselves solve their own problems, and they accordingly require the assistance of larger units with the means to do so. For these reasons among others, Cobb envisions that genuine human development would consist in the promotion of communities of communities of communities (Daly and Cobb 1989: 177-80). In accord with the principle of subsidiarity, higher units and more encompassing organizations stand in support of the local communities and the human ourishing enjoyed in them (Cobb 1994: 123-25). Moreover, Cobb warns that human communities must also escape the anthropocentrism that has engendered so much environmental devastation. Thus, his advocacy of localism has a universalist thrust. The communion he envisions transcends human solidarity simply, embracing the entire planetary community whose redemption would be revealed in a new creation. Though he believes that ultimate devotion is due to God alone, an overarching concern for life on this planet is salutary if not also required in order to overcome the self-regarding but shortsighted practices of human individuals and groups.

Cobb on the Need for a New Paradigm In these ways, Cobb criticizes prevailing economic theory and practice in light of broader ecological and communal concerns. He and his associates wish neither to belittle economists nor to denigrate their work, however. They applaud the commitment economists commonly demonstrate to advancing our understanding of markets and the processes of production and exchange. Indeed, it is their conviction that market economies foster human creativity and liberty and are thus more disposed to democratic control. Consequently, they hold that economic theory does not need to start over, but that it needs to be reconstructed on the basis of a paradigm

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that both claries the excellence of its past work and sets it in a larger context (Daly and Cobb 1989: 19). Among the insights that they particularly appreciate are those comprising price theory, though they recognize that the concept of price has limited validity. A new paradigm would also, Cobb and his associates hope, reorient theory and practice so that both are framed by earthist rather than economistic suppositions. This paradigm would have the monumental task of displacing a viewpoint that has had a long and sure hold on the discipline. As a social science, economics has been shaped historically by its high regard for classical mechanics and its methods and by the aspiration that its own disciplined study might one day enjoy a similar status. By developing a theory of general equilibria, for example, Lon Walras sought to do for economics what Isaac Newton and Pierre-Simon Laplace had done for astronomy and mechanics (Walras 1954: 47-48). The powers of prediction and control that such a science promised proved to be quite alluring. Rather than heeding Alfred Marshalls advice that the Mecca of the economist lies in economic biology rather than in economic dynamics (Marshall 1925: 14), economists, Cobb and Daly maintain, have instead analyzed markets in terms of the operation of the price mechanism, so much so that Milton Friedman wrote of himself and other economists that we curtsy to Marshall, but we walk with Walras (Friedman 1949: 489). Cobb and Daly propose instead to walk with Marshall by taking evolutionary biology as a model for a new paradigm of economic theory. As the emergence and survival of biological forms are to be understood in terms of the environmental conditions that are subsequently transformed by the interactions among species, so, Cobb and Daly suggest, the developments of economies are to be understood. They strive to explain dynamic economic reality by grasping the interrelationships between patterns of production, commerce, and nance and their underlying social and natural ecologies. In that way then, they provide alternative formulations of markets, full-cost prices, and indices of economic welfare. Those formulations are ones framed, moreover, in light of a more adequate account of the human person and the human good. Cobb and Daly describe many of the elements that a new paradigm would have to include, and they contribute to its formulation. As they state, a new paradigm would consist in an interpretative framework that duly appreciates the contributions of past inquiry by specifying the condi-

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tions for their validity and application and, thus, setting those achievements in a larger context. While Cobb and Daly do not fully articulate the terms and relations that would comprise such an interpretative framework, they do anticipate some of its features. First, it appears that the basic terms and relations of that interpretative framework will be ones other than those typically employed in accounts of the operation of markets. In their view, macroeconomic analyses of the markets in terms of the operation of aggregate supply and demand functions, while important in explaining the determination of prices, give overwhelming priority to the allocative function of markets.3 On the basis of the laws of supply and demand, resources are eciently employed in order to exploit rst one and then another sphere of protable activity, and thus markets are understood to be those mechanisms by which inputs and products are optimally allocated and distributed. That analysis of markets, however, neglects to explain how the optimal scale of an economy itself is to be determined. It is Cobb and Dalys contention that a particular economy approaches its optimal scale only if it respects the nitude of the resources upon which it depends and the carrying capacities of the environment and society in which it is embedded. That scale is a determination lying beyond the power of the pricing mechanism to make, however. Indeed, the operation of that mechanism takes the scale of activity as a given, for the coordination of aggregate decisions of demand and of supply is eected irrespective of the relative dimension and scale of market activity. Secondly, the determination of optimal scale is central also to a more adequate account of economic development. For if economic growth diverges from its optimal scale, it operates at cross-purposes with genuine economic development. Instead, the qualitative change characterizing economic development consists in part at least in the scale of a particular economy converging upon its optimum, and thus that determination is crucial in distinguishing growth from development. Thirdly, by making these and other distinctions, Cobb and his associates seek to contribute

3) See Daly and Cobb 1989: 144-46. Cobb and Dalys criticism here is leveled at macroeconomic analyses. Microeconomic analyses do attend to questions of scale in their study of optimum levels of production for particular rms and industries. Thus, they argue that the paradigm that they envisage would eect a more thoroughgoing integration between these two branches of economic analysis.

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toward a normative account of economic development that would guide individuals and their communities in making responsible decisions regarding the size and scope of their economic activities. The contributions and anticipations of Cobb and Daly do not constitute a full articulation of the new paradigm that they envision, however. What is needed but not yet spelled out by them are precisely the terms of the framework that would explain the movements of economic reality as a whole. Such a paradigm would provide the desired frame of reference that species the sets of conditions under which previously veried correlations apply and accounts for the additional elements that they would introduce, along with the revisions of assumptions and suppositions that their introduction requires. In light of its fuller explanatory account of economic process, that interpretive framework would thus duly appreciate normative achievements by situating them within a larger context. It would also redress long-neglected issues and guide a more responsible constitution of market economies. Though Cobb and his associates anticipate but do not fully provide it, the suggested paradigm is more fully articulated in Bernard Lonergans macroeconomic dynamics.

Lonergans Contribution toward a New Paradigm of Economic Analysis The economic crises of the 1930s moved Bernard Lonergan to study economics, and he was convinced that an adequate diagnosis of that deep depression rested upon an analysis that went beyond the pricing system. Such an analysis would reveal, Lonergan maintained, a set of schemes distinct though not separate from the price mechanism which spontaneously coordinates a vast and ever shifting manifold of otherwise independent choices from demand and of decisions from supply. It is distinct from the price mechanism, for it determines the channels within which the price mechanism works (Lonergan 1999: 17). By grasping the intelligibility of those prior schemes that condition the operation of the pricing system, Lonergan sought to understand exchange economies in ways consonant with his account of the historical unfolding of the human good.

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A Normative Analysis Lonergan, too, set out to provide a normative account of evolving economic reality. His analysis is normative rstly in that it seeks to grasp the immanent intelligibility or lawfulness of economic process. Because production, trade, and investment are not static entities but coordinated sets of activities that are performed over a series of intervals, the basic variables of his analysis are rates, or so much every so often, and accelerations, or so much more or less every so often, of productive, commercial, and nancial activities. In terms of those variables, Lonergan sought to understand the interdependence among rates of production and payments as well the linked sequences of their accelerations characterizing economic progress and decline. Lonergans analysis is normative in another sense. By explaining evolving economic reality in terms of such variables, his analysis also aims to guide economic practice. The immanent lawfulness of dynamic economies discovered by his analysis provides, he argued, a basis for issuing precepts that would guide the free and democratic constitution of economic life. (See Lonergan 1999: xxxvii-xxxix.) Human beings order their lives and their economies intelligently inasmuch as they are responsive to the exigencies of dynamic exchange economies. Lonergan thought that intelligent and responsible economic practice was attainable only by going beyond descriptive classications to an explanatory account of economic process as a whole. While this is not the place for a thoroughgoing account of Lonergans analysis of the productive process and monetary circulation, still, several of its features will need to be discussed in order to identify the points at which the issues raised by Cobb and his associates intersect with the analysis that Lonergan provided. Lonergans Analysis of the Productive Process Lonergan dened the productive process as that aggregate of activities proceeding from the potentialities of nature and terminating in a standard of living (Lonergan 1999: 20), and in so doing, he distinguished that process from the human and non-human potentialities from which it emerges as well as from the durable goods of past production which are no longer in process but whose use has either entered into a societys standard

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of living or become part of the productive process itself. Drawing these distinctions between natural potentialities, the productive process, and a societys standard of living, Lonergan in no way wished to suggest that these three are separate and unrelated to one another. Rather, he distinguished them precisely in order to grasp their interrelationships and thus understood the productive process in terms of his account of emergent probability. (See Lonergan 1992: 487.) As Patrick Byrne has recently argued, Lonergan conceived an economy as a nested series of schemes of recurrence or, in other words, an ecology which rests upon natural ecologies and supports in turn other social and cultural schemes (Byrne 2003: 7-11; Lonergan 1999: 3-4, 92-93). Arising from human insights and decisions, economic schemes are largely patterns of human cooperation that seek to solve the problem of regularly providing the material conditions of a communitys ongoing way of life (Lonergan 1999: 28). Lonergans analysis, then, begins with distinguishing the basic stage of production and a series of surplus stages of production (Lonergan 1999: 30-32). The basic stage of production consists of rates of activities performed, for instance, every time bread is baked or cloth is woven and sewn. Ovens, looms and the activities involved in their production are not produced for every loaf of bread or piece of clothing made. Rather, those producer goods are used to produce an indeterminate series of loaves and clothes, and in this example, the use of ovens and looms belongs to the lowest surplus stage. Additionally, the machine tools and the activities involved in their production, tools that will in turn be used to produce ovens and looms, belong to still higher surplus stages of production. Furthermore, these stages of production are functionally related to one another. Each stage of production consists partly in maintaining the current rates of production comprising the next lowest stage and that of the basic stage of production in supporting a communitys current standard of living. Each higher stage of production may also accelerate the next lowest stage, widening and deepening the enterprises engaged within it. While an economy seeks to produce and distribute the goods and services comprising a communitys standard of living, the productive process should not be understood apart from the natural and social ecologies presupposed by it. Emerging from them, the productive process ceases to function if its underlying conditions are depleted. Consequently, underlying human and non-human potentialities need to be respected if that pro-

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ductive process is to remain viable for the longer term. As a dynamic integration of those potentialities, though, an economy could not very well leave those underlying potentialities untouched. Indeed, they may be transformed, since ows of surplus goods and services may in turn complement those potentialities in such ways that what was formerly deemed utterly impractical may subsequently be regarded as eminently feasible. A developing economy, then, is characterized by an increasing complexity that makes the most of what is available to it. In a complementary analysis, Jane Jacobs attends to the increasing complexity and sophistication of natural and economic ecologies that recombine and reconvert energy so that they may continue to fuel themselves (Jacobs 2000: 65.; see Byrne 2003: 17-21). Thus for Jacobs as for Lonergan, mechanistic depictions fall short of explaining dynamic environmental and economic systems. Rates of Payments and the Condition for Dynamic Equilibrium Lonergan did not rest content with an analysis of the productive process. Since in exchange economies, production is always production for sale, payments are made with the recurrence of productive routines. Classifying them in light of his analysis of the productive process, he specied several aggregate rates of payments and their circulatory interdependence. He identied a basic and a surplus circuit in which the outlays of basic and surplus supply are destined to become the income expended on basic and surplus products, respectively, and those basic and surplus expenditures become in turn receipts from which outlays are subsequently made. Secondly, he identied cross-over ows of payments between these two circuits; for the ows of surplus outlays that become the incomes of those contributing to surplus production will in turn largely be spent on basic products, while a sizable portion of basic outlays is destined to purchase surplus products in order to maintain, if not increase, the rates of basic production. As Joseph Schumpeter had earlier supposed, an analysis of the dynamic structure of production and exchange demands reconceiving the nature of macroeconomic equilibria, and on Lonergans account, equilibrium consists principally in the balancing of the cross-over rates of payments between the basic and surplus circuits. When an exchange economy is in a stationary state, its macroequilibrium is preserved so long as the cross-over rates of payments remain constant over a series of intervals. When an exchange economy is expanding, however, its rates of payments

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are accelerating across the board and accordingly, it is in dynamic equilibrium only when changes in the rates of one of the cross-overs are matched by corresponding changes in the other, so that the changing rates of crossover payments remain balanced throughout a series of intervals. Otherwise, one circuit would expand at the expense of the other: either a higher standard of living is enjoyed at the expense of future development or many are deprived of the fruits of developments which have already taken place. The Pure Cycle In his economic analysis, Lonergan sought especially to specify the conditions for the dynamic equilibrium of developing economies. On his view, economic development begins with the introduction of innovations. That development is profound to the extent that the implementation of better methods, equipment, and organization takes place within the higher reaches of surplus production, yielding a longer-term acceleration of economic activity. The natural end of such an expansion of surplus production is a major expansion of basic production, but the widening and deepening of basic production and an elevated standard of living takes place only after a notable time-lag. Lonergan termed this wave-like expansionary movement of the productive process the pure cycle, distinguishing it from the familiar trade cycle and its periods of prosperity and recession. (See Lonergan 1999: 75-80.) With the consequent diversity and complexity of activity arising from integral economic development, productive, commercial, and nancial operations are performed on a new basis. While not merely a monetary phenomenon, this pure cycle does indeed have monetary conditions for its successful completion. Schumpeter and others had previously adverted to the phenomenon of uctuating entrepreneurial prots in their respective analyses of business cycles. Lonergan conceived such rates of returns as pure surplus income and understood its function to lie in supporting the self-development of the productive process that occurs during a major surplus expansion. Because the function of pure surplus income is to enhance a societys productive capacity and, ultimately, to elevate its standard of living, he also referred to pure surplus income as a social dividend (Lonergan 1999: 133, n. 186). It emerges in the initial phase of a major surplus expansion, but once a long-

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term acceleration of surplus production tapers o and basic production stands ready to undergo a long-term acceleration of its own, rates of pure surplus income should begin to revert to zero. That is, when the development of surplus production is no longer the going concern, individuals and communities should devote their monetary resources toward investing in basic production and elevating their standard of living. Lonergan held that the dynamic equilibrium of an expanding economy, that is the balancing of the cross-over rates of payments through its various phases, depends most especially upon decisions made with respect to rst increasing and then eventually decreasing rates of pure surplus income. For that reason, he referred to pure surplus income as the nerve center of free economies (Lonergan 1999: 147). So long as individuals and communities grasp the signicance of the cyclical uctuations in the rates of pure surplus income and respond accordingly, expansions of exchange economies need not experience periods of negative acceleration or those contractions typical of recessions and depressions. Expansions of exchange economies can take the form instead of the normative pure cycle. It is the grasp of the normative intelligibility grounding such a possibility which provides a basis for the formulation of precepts that would guide human beings in responding appropriately to its demands and in bringing about its successful completion. In this way, Lonergans analysis is situated squarely within the long-standing tradition of political economy as a branch of practical philosophy that seeks to understand productive, commercial, and nancial processes in order to promote the democratic control of modern exchange economies. Evading the Requirements of the Pure Cycle In Lonergans view, the pure cycle has yet to be successfully navigated and its normative requirements fully met. Those failures have their sources in various forms of bias or ights from understanding and responsibility. (See Lonergan 1992: 241-31, 244-59; Byrne 2003: 13-14.) In addition to specifying the immanent norms and exigencies of economic processes, Lonergan also analyzed the distortions that arise when those requirements are not met. It is especially the mistaken expectation that increasing rates of pure surplus income can be obtained in and out of season that encourage decisions which convert a major surplus expansion into a boom and a major basic expansion into a slump and, thus, set the conditions for the

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emergence of the more familiar business cycle. Additionally, he analyzed the palliatives that economies have chanced upon whereby they attempt to avoid the recessions maladaptations would otherwise bring. For example, economies seeking favorable balances of foreign payments, Lonergan warned, risk cultivating still more intractable problems. It would be mistaken, however, to think that international trade is inherently ruinous for Lonergan. It is possible on his account to envision how economies may benet from trading relationships. In an analysis complementary to Lonergans, for instance, Jacobs argues that the trade among urban economies is the concrete process by which the innovations of one economy are shared with and improved upon by others.4 By such cross-fertilization, as it were, cities respective networks of producers and their suppliers are increasingly widened, deepened, and diversied as the fruits of innovations are more widely communicated and human societies learn from one another how to do more with less. When pure surplus income generated by the implementation of new ideas is devoted toward not augmenting consumption but enhancing the productive capacities of all, it may be genuinely called a global dividend (Lonergan 1998: xxvii). Far from respecting the normative requirements of the pure cycle, current trade policies and strategies most often seek to evade them. As a means of securing substitutes for pure surplus income or of repaying foreign debts, favorable balances of trade give rise to the deleterious eects that Cobb and others rightfully criticize. Lonergan, though, traces the unsustainability of trade practices in terms of the intelligibility immanent to economies themselves. Sustained favorable and unfavorable balances of foreign payments are inimical to integral economic development, tending to encourage export-production and overspecialization while making domestic economies more vulnerable to market disruptions. Far from becoming vigorous and innovative, such economies are increasingly fragile and subject to the vicissitudes of distant markets. Rather than the conditions for economic progress, such developments, on Lonergans account, set the conditions for longer-term stagnation and decline.

4)

In her analyses, Jacobs places priority upon the processes of import-replacement rather than export-production whereby economies appropriate new ideas and innovative modes of work, tailoring them to local conditions. See Jacobs 1970: 145-79; Jacobs 1985: 135-55.

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Thus, a Lonergan-inspired analysis of economic globalization would be framed in terms principally of an immanent critique of macroeconomic theory and practice. That analysis, as we have seen, begins with an account of the immanent lawfulness of evolving economic reality that reveals the normative requirements of integral economic development. For Lonergan, one-sided developments and unsustainable practices beg their own correction, but one could well expect that the hard lessons to be learned through such reversals will not be suered easily. Because the analysis situates within a larger context some of the concerns raised by Cobb and his associates, let us consider how Lonergans analysis addresses the suppositions that Cobb argues lie at the heart of prevailing economic theory and practice.

Recontextualizing Cobbs Criticisms and Concerns As we have seen, Cobb and his associates criticize the conception of human nature as Homo economicus, whose pursuit for individual advantages erodes the cooperation and trust necessary for longer-term projects upon which economies depend. Lonergan, too, found these notions of human desire and reason too truncated and the corresponding notion of the good overly restricted. For the guiding principles of action owing from the desire for prot are poorly adapted to the requirements of the various phases of the pure cycle. On Lonergans account, problems arise in part because the very term prot is overly ambiguous. On the one hand, prots may refer to the excess of receipts over outlays, the constant normal prot that enterprises might even enjoy in the stationary state, a state in which rates of production and exchange are constant over a series of intervals. Prots in the strong sense, though, are the returns obtained during periods of economic expansion in which rates of production and exchange are accelerating. Lonergan understood these prots in terms of rates of pure surplus income and correlated their uctuations with the wave-like movements of the pure cycle. In terms of his analysis, the precepts of thrift and enterprise are perhaps appropriate when surplus production is expanding. The pursuit of prots becomes counterproductive, though, when the basic sector is poised to undergo a long-term acceleration of its own. At that point, the rates of pure surplus income ought rst to increase more slowly and then to decline eventually, reverting to zero when a basic expansion is fully underway.

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Intelligent and responsible decisions seek not to maximize returns in and out of season but to promote the integrity of productive, commercial, and nancial schemes since prots themselves depend upon the proper functioning of those more fundamental schemes. The good of these schemes, once again, is not reducible to individual satisfactions but lies in part in the order that makes their regular recurrence possible. Thus, Lonergans analysis is normative since it investigates well-functioning economic ecologies as concrete goods of order. (See Lonergan 1972: 48-50; Lonergan 1992: 619-21.) As Lonergans economic analysis reorients human desire from maximizing prots toward appreciating the value of the economic order, so too his analysis nds ourishing economies to consist in more than increased rates of consumption and production. For Lonergan as for Cobb, increasing levels of consumption and production may not be synonymous with growing economic well-being. Rising levels of aggregate or per capita GDP need not signal genuine economic progress, in Lonergans view. Economic development is the fruit of longer-term accelerations of production and exchange made possible through the implementation of technological or social innovations. Thus communities transform their way of producing goods and services and of providing themselves with the material conditions for their way of life. Gross or per capita GDP, however, may have its sources not in the implementation of new ideas but by extending the range of older ideas, and thus, increases in the levels of production and consumption may be due to growth in the sheer levels of inputs utilized and not in the development of the ways economic ecologies make the most of the potentialities available to it.5 For example, the tremendous levels of economic growth and productive output of the economic tigers of East Asia, like the former Soviet Union under Nikita Khrushchev, it seems, were generated largely from increased levels of inputs, not by greater eciencies that transform the previously existing relations between resources and the goods and services produced from them (Krugman 1997: 186-87). Economic growth under such conditions is not sustainable indenitely since natural resources are in
5) The distinction between the increase in productive output due to corresponding increase in inputs and that stemming from a change of input/output ratios is one that is commonly drawn by economists. See for example Krugman 1997: 167-87.

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nite supply. Increased levels of consumption and production due to such increasing industrialization enlarge only the scale and scope of current production methods and do not necessarily reect their transformation. No less importantly, rising GDP does not distinguish integral economic development from the accelerations of production and sales characterizing booms. For Lonergan, such periods are second-order distortions of the pure cycle, resulting from failures to meet its normative requirements. Booms may arise when individuals fail to devote increases in their income toward investing in the longer-term acceleration of surplus production. When portions of pure surplus income are spent instead upon basic goods and services, basic price levels are likely to rise and basic producers are likely to receive windfall prots. To the extent that prots remain undierentiated and Homo economicus a model of intelligent behavior, however, individuals are likely to interpret rising basic prices to mean that more and more of every kind of basic good is demanded, and they are likely to interpret the rising prots of basic producers as signaling that basic production ought to expand to meet the need. Thus a major surplus expansion is converted into a boom, a phase characterized by increasing rates of consumption to be sure, but one that cuts short longer-term development. For this reason, too, Lonergan proposed distinguishing the basic and surplus components of GDP in order to discern more adequately what is truly going forward when rates of production and sales are accelerating. (See Lonergan 1999: 70-71, n. 87.) Accordingly, Lonergan would agree that indices such as aggregate or per capita GDP are neither adequate measures of economic welfare nor do those gures indicate suciently how the productive process is changing. In order to apprehend the movements of the economy and to discern appropriate responses to them, Lonergan attended to how the ratios of rates of surplus production to overall rates of production, and of rates of surplus income to rates of total income, change throughout the phases of the pure cycle. More dierentiated indices such as these are needed in order to explain the expansionary movements of an economy and to specify precisely in what ways economies are growing. Otherwise, one cannot distinguish between normative developments and such second-order distortions. Lonergans conception of the developments stemming from a successful negotiation of the pure cycle also touches upon the questions of optimal

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scale and optimal use of natural resources. Rather than arising from increases in the sheer volume of resources, economic expansions are characterized by revisions in the ratios of goods produced from the resources utilized as well as by transformations in the ways production is carried forward. As economic ecologies develop, new niches emerge so that increasingly little is wasted. In this way, an economy becomes less dependent on those resources upon which it had become overly reliant in the past, as other potentialities previously neglected now assume a more central role. While those potentialities include most immediately non-human, material resources, Lonergan had human potentialities especially in mind. Economic development is characterized by making the most of non-human and human resources alike. Thus, economies are that much better positioned to develop the extent to which they are ready and willing to embrace the gifts and contributions of all those who fall within their sweep. In that way, Lonergan conceived economic development as but an instance of human development in general.

Toward a New Paradigm As we saw above, Cobb and Daly argue that a new paradigm of economic analysis is needed to explain economic development as the qualitative change of a physically non-growing economic system in dynamic equilibrium with the environment. They are hesitant, though, to refer to their envisioned paradigm as economic dynamics. They would rather follow Marshalls lead in calling for an economic theory modeled upon evolutionary biology. Lonergan would agree that more than the methods and techniques of classical mechanics and statistical science are required in order to make sense of evolving economic reality. Explaining economic development entails grasping productive, commercial, and nancial schemes as so many systems on the move, and it involves understanding the emergence of increasing complexity that is irreducible to the laws of preceding stages. To do so, his analysis presents a new economic paradigm whose basic terms and relations are other than those framing traditional analyses of the pricing mechanism. It does not invalidate the previous veried correlations between supply and demand but understands them in terms of the dynamic contexts in which they emerged and how the operation of the pricing

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mechanism itself changes over time. Understanding an economy as dynamic in this way, Lonergans analysis seeks to determine in more adequate fashion the meaning of qualitative change as well as dynamic equilibrium and its fullling conditions. Thus, his macroeconomic dynamics would make possible what Cobb and Daly envision, namely a new paradigm that gives due appreciation to the excellences of the past while situating them in a larger context. Furthermore, Cobbs and Dalys proposed model of evolutionary biology may ultimately have shortcomings of its own. It is true that the preserved record of biological species is replete with examples of short-lived oddities and developmental dead-ends. One-sided distortions of exchange economies more often than not, however, have their sources not in the natural functioning of human beings but fundamentally in their waywardness and ignorance. Thus, an explanatory account of the dynamic unfolding of exchange economies and of the systems of production, commerce, and nance embodied in them at any one time requires analyses of dialectical as well as developmental trends, thus discerning genuine achievements from notable failures and distinguishing economic progress from decline. It would be erroneous to claim that economists have given no thought to economic development and decline. Rather, they are struggling to ascend from descriptive apprehensions of development and of decline to an explanatory account of both. While it is true that touted economic successes are often mixed blessings, since human motivations are rarely pure and human knowledge not entirely complete, still developmental and dialectical understanding must not be conated. Neither is progress to be taken as the cause of decline, so that one arms, in the words of Clement Juglar, that the only cause of a depression is prosperity (Schumpeter 1954: 1124). Nor is accelerated collapse to be taken as a utopian overture, so that one celebrates ever-deepening crises as portending a more glorious future. Macroeconomic dynamics rather seeks to distinguish the dynamic of economic progress characterized by cumulative achievement from the dynamic of economic decline characterized by cumulative disintegration. In so doing, a new paradigm would specify a normative pattern of economic developments as well as the mistaken expectations leading to economic contraction and collapse. In this way, then, Lonergan strove to understand human beings and their social good concretely and historically. That is, by their intentional

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operations, human beings not only constitute their world but also set the conditions for their subsequent development. The constitution of their world and the transmission of its meaning and value shapes for better or for worse the characters of succeeding generations and the world that they and their children will inhabit. Understanding the trajectory of the historical unfolding of the human good entails grasping the dierentials of its progressive realization, its one-sided distortions and, out of the resultant manifold of events, the transformation and redemption of human beings and their communities. In particular, Lonergan understood the constitution of exchange economies in light of his understanding of the structure of the human good and its dialectical unfolding. Toward this end, he hoped that his Macroeconomic Dynamics might contribute to a critical science of economics that would guide the intelligent, reasonable and responsible constitution of economies. Thus, Lonergans work in macroeconomic dynamics supplies in large measure a fuller articulation of the new paradigm anticipated by Cobb and his associates and sets that paradigm in a larger explanatory context. In so doing, Lonergan, like Cobb, was mindful of the educative eect an adequate economic analysis might have for the democratic constitution of our economies. By specifying the normative pattern of economic developments and the conditions of dynamic equilibria, he sought to provide a basis from which precepts may be derived that would guide individuals and their communities. He recognized, though, that that task was not the work of one but of many drawn from a diverse set of disciplines. As Lonergan wrote:
From economic theorists we have to demand, along with as many other types of analysis as they please, a new and specic type that reveals how moral precepts have both a place in economic process and so an eective application to it. From moral theorists we have to demand, along with their other various forms of wisdom and prudence, specically economic precepts that arise out of economic process itself and promote its proper functioning. (Lonergan 1999: 105)

Lonergan was convinced that such guidance was needed if economies were to develop in ways that enhance the lives and the good of human beings. It is the kind of analysis that adequate accounts of the common good under dynamic conditions so desperately require. Like Cobb and his associates, Lonergan believed that analysis is pivotal if individuals and communities are to be free to make informed decisions regarding their economic

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development. That development does not result automatically from an impersonal and invisible mechanism. Rather, it is the fruit of intelligent and responsible choices whereby economies are ordered in light of higher values. In that sense, Lonergans normative analysis would assist in directing the democratic constitution of communities and economies and fostering that solidarity, informed by the religious and personal as well as social values hoped for no less by him than by Cobb, in their reections upon economic development and the human good.

References
Byrne, Patrick H. 2003. Ecology, Economy and Redemption as Dynamic: The Contributions of Jane Jacobs and Bernard Lonergan. Worldviews: Environment, Culture, Religion 7(1-2): 5-26.

Cobb, John B. Jr. 1999. The Earthist Challenge to Economism. New York: St. Martins Press. . 1994. Sustaining the Common Good: A Christian Perspective on the Global Economy. Cleveland: Pilgrim. Daly, Herman E. and John B. Cobb, Jr. 1989. For the Common Good: Redirecting the Economy toward Community, the Environment, and a Sustainable Future. Boston: Beacon. Dupr, Louis. 1993. The Common Good and the Open Society. Review of Politics 55: 687-712. Friedman, Milton. 1949. The Marshallian Demand Curve. Journal of Political Economy 57: 463-95. Hollenbach, David. 1989. The Common Good Revisited. Theological Studies 50: 70-94. Jacobs, Jane. 2000. The Nature of Economies. New York: Modern Library. . 1985. Cities and the Wealth of Nations: Principles of Economic Life. New York: Vintage. . 1970. The Economy of Cities. New York: Vintage. Krugman, Paul 1997. Pop Internationalism. Cambridge, MA: MIT Press. Lonergan, Bernard J.F. 1999. Collected Works of Bernard Lonergan, Volume 15: Macroeconomic Dynamics: An Essay in Circulation Analysis. Ed. Frederick G. Lawrence, Patrick H. Byrne and Charles Heing, Jr. Toronto: University of Toronto Press. . 1998: Collected Works of Bernard Lonergan, Volume 21: For a New Economy. Ed. Philip J. McShane. Toronto: University of Toronto Press. . 1992. Collected Works of Bernard Lonergan Volume 3: Insight: An Essay in Human Understanding. Ed. Frederick E. Crowe and Robert M. Doran. Toronto: University of Toronto Press. . 1972. Method in Theology. New York: Seabury Press. Marshall, Alfred. 1925. Principles of Economics, 8th ed. London: Macmillan. NCCB/USCC. 1999. In All Things Charity: A Pastoral Challenge for the New Millennium. Origins 29(26) (9 December). . 1986. Economic Justice for All: Catholic Social Teaching and the US Economy. Origins 16 (3 June). Rourke, Thomas R. 1996. Michael Novak and Yves Simon on the Common Good and Capitalism. Review of Politics 58: 229-58. Schumpeter, Joseph A. 1954. History of Economic Analysis. New York: Oxford University Press. Walras, Lon. 1954. Elements of Pure Economics. Trans. William Ja. Homewood, IL: Irwin. (Original French denitive edition: 1926.)

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