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Economic discoveries from an unlikely source

By Janet Harron

When considering the greatest philosopher of the 20th century, some might opt for Ludwig Wittgenstein. Others would argue for the pre-eminence of Bertrand Russell or Martin Heidegger. A relative few however might be aware that according to Time Magazine, one of the finest philosophic thinkers of the 20th century was Father Bernard J.F. Lonergan, a Canadian Jesuit priest who died in 1984.

Dr. Michael Shute, an associate professor in Memorial’s religious studies department, has written two books on Lonergan’s economic philosophy and will be one of the 13 authors showcased at the Faculty of Arts’ annual Author! Author! celebration on Feb. 16, 2011.

According to Dr. Shute, Lonergan’s theories on economics go a long way to explaining the current post-global economic meltdown malaise, and offer a solution to avoiding future crises.

“I have no doubt that Lonergan’s theory of macro dynamic economics is one of the great overlooked intellectual discoveries of the 20th century,” said Dr. Shute. “In teaching a social justice course for the last 18 years, I have found that issues most frequently boil down to questions about money: the lack of it or its unfair distribution.“

As a Jesuit priest and historian, Lonergan was similarly troubled by the unfair distribution of wealth and was particularly affected by the social problems caused by the Great Depression of the 1930s. He subsequently began to make a study of macroeconomics, which resulted in a fundamental discovery – the differentiation of two distinct economic circuits.

Lonergan distinguishes between the basic circuit of work, the function of which is to produce the goods and services that enter into the standard of living, and the surplus circuit of work whose function is to supply the goods and services that are used to produce the basic circuit of work.
Dr. Shute offers the example of blueberry picking to differentiate between the two circuits.

“Picking the berries themselves is a basic circuit of work – making baskets to collect additional berries is a surplus circuit of work,” said Dr. Shute. “When baskets are in use for picking they are part of the basic circuit but when the baskets wear out, the action of replacing them by making new baskets counts as a surplus circuit of work.”

It is the fundamental distinction between these two economic circuits that Lonergan argues is necessary for economic analysis – essentially one has to know what circuit of work a set of actions belongs to in order to make an informed decision about where the economy is going.

“All of the developments of human intelligence that contribute to the development of the contemporary global economy, including money, markets and the developments of human intelligence are beholden to and conditioned by the underlying reality of the two distinct circuits of work,” said Dr. Shute.

As a result of his work on the rhythm of economic circuits, Lonergan argued that money or finance should facilitate production (and not the other way around) in order to improve life for everyone.

Later, through his subsequent discovery of the pure economic cycle (identifying capitalist, materialist and cultural phases), Lonergan also theoretically proved that it is possible to have growth without recession and that financial meltdowns are not inevitable but simply a failure to adjust.

“The stock market isn’t a true measure of the economy,” said Dr. Shute. “If you don’t know how it (the economy) works, you can’t fix it.”