The redistribution function, RF

[John Raymaker]

Lowell, Hugh, in CWL 15, 21, the RF, as I understand it, is a function that mediates between the basic and surplus circuits, between consumer demand and basic and surplus firms. Do you agree, or do you have a different interpretation of the RF?

John

[Hugh Williams]

Good question, John ...

yes that is how I understand it in 'pure theory'

the challenge is to expand on how and by whom this re-distributive mediation function is actually 'implemented' ...

and it seems to me that the notion actually has an analogical function in the theory depending upon how and at what scale it is being applied ...

so it is in this sense that I see local government through taxes and policy playing a re-distributive function

in our own particular jurisdiction on an issue such as 'pay-equity'. This would be where the benefits of a so-called surplus expansion are now to be

distributed throughout the basic economy through improved direct wages ... (most often long overdue ...)

but then again on the global-international scene you have the 'demand' that the 'global north' which has benefited from

another type of surplus expansion by means of what is said to be colonialist and imperialist economic activities is being 

directly called upon to redistribute immense wealth from a surplus expansion to the global south especially given the costs now associated and incurred with climate change ...

it is here that Lonergan's theory can outline this peaceable possibility for such a redistribution 

because of what would be hoped to be widespread economic education and reeducation ...

but then again is there not a somewhat utopian-idealist feel to this unless we through careful and difficult historical analysis

attend to the real complexities and messiness and class-struggle dimensions that are in my experience bound to accompany such 'redistribution' ...

... thus the need for what I'm calling serious dialogue with Marxism ...

Hugh

ps. what I find is unique to Lonergan is his attention to the real creation of wealth through what DeNeve calls entrepreneurial investment as well as to the re-distributive function.

But we have to be prepared to acknowledge that certain socialist economies may now also be attentive to this 'need' but are committed to doing so in a way that

does not jeopardize the real social-justice and now ecological gains from 'revolutionary' re-structuring ...

On 2025-07-05 12:38 p.m., 'John Raymaker' via Lonergan_L wrote:

Lowell, Hugh, in CWL 15, 21, the RF, as I understand it, is a function that mediates between the basic and surplus circuits, between consumer demand and basic and surplus firms. Do you agree, or do you have a different interpretation of the RF?

John

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[Pierre Whalon]

Hi all,

John and I in our book « Attentive, Intelligent, Rational, Responsible » offered the concept of a decentralized autonomous organization, such as manages smart contracts on blockchains, to manage investments in a surplus expansion according to popularly determined expected outcomes in the rise of standard of living, as surplus expansion leads to basic expansion. The members of the DAO would be elected, and they would oversee the unfolding of the investment as a cluster of smart contracts. The contracts can be modified only by vote of the DAO. See pp. 277-280.

This is an example of the redistributive function at work. DAOs are not foolproof by any means, but they are democratic and economically wiser than present conditions. Lonergan’s call for economics education for all would have to be heeded, finally, as well...

Pierre

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[Lowell Cochrane]

Depends what you mean by mediate!  His intention, I think, is first to account for the non-productive pool of assets/money in the economy which can, in time, re-enter the production circuits or not: a drain or a boost to real production, and if the latter, then a way for accelerating surplus circuit to transfer acceleration back to the basic circuit. I don't think he is particularly clear or consistent on all that constitutes R and the mechanism but which it can move from non-productive to productive. And because it is a catch-all, it is an aspect that needs more refinement.  But the general idea of it being some sort of transmission system in order to deal with "time" in an economy seems intuitively promising.

But my own understanding is under development too.

Lowell

On Sat, Jul 5, 2025 at 11:38 AM 'John Raymaker' via Lonergan_L <loner...@googlegroups.com> wrote:

Lowell, Hugh, in CWL 15, 21, the RF, as I understand it, is a function that mediates between the basic and surplus circuits, between consumer demand and basic and surplus firms. Do you agree, or do you have a different interpretation of the RF?

John

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-Lowell

[Lowell Cochrane]

Hi Hugh,

Given your interest in how modern marxist states handle redistribution, this article that looks at the Basque economy (with its large scale cooperative movements) might be enlightening and a "third way" as so many marxist state (as such) rely on autocracy and centralization, which are counter to what LB envisioned as the way to implement a pure cycle.  Not that he was right, but he gave some compelling reasons! I was looking at the article because it is evident in my project that any useful simulation requires a real or invented economy with realistic data to run through the simulation.  So the tool is not "creating a two circuit economy), rather it is funding the two-circuit pattern in actual economies, revealing the pattern and the breakdown of patterns.  It is highly highly unlikely that this will lead to a practical tool that can analyze a real economy in all its complexities and accidents, but I am trying to implement an input module that allows a user to set initial conditions from which simple data and cycles can emerge, and upon which the "democratic council" function can act to move it towards a pure cycle. Of course, I am way out of my league here, but aren't we all...

https://link.springer.com/article/10.1007/s12232-021-00380-2

Best,

Lowell

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-Lowell

[Lowell Cochrane]

Working again with AI to try to nail down "R"'s function in the economy. This section in response to a series of questions felt fruitful: 

Two Senses of "Mediation"

1. Mechanical Mediation (What scholars often claim)

Some scholars describe R as if it's a necessary intermediary - as if savings must pass through R to become investment. But this doesn't align with Lonergan's diagram or his distinction between operative and non-operative flows.

2. Temporal Mediation (What I think Lonergan intended)

R "mediates" in the sense that it can temporarily hold money between its productive uses. It's not that money must go through R, but that R provides a holding space when:

• Timing is off between savings and investment opportunities
• Assets need to change hands before productive redeployment
• Liquidity needs buffering between phases

The Nature of R's Accumulation

Based on the evidence, money accumulates in R for both structural and moral reasons:

Structural Reasons (Neutral/Necessary):

• Timing mismatches: Savings accumulated before investment opportunities appear
• Phase transitions: During shift from surplus to basic expansion, some assets must be liquidated
• Liquidity buffering: Some speculative activity provides market liquidity
• Normal financial operations: Insurance, some banking reserves, etc.

Moral/Cognitive Failures (Problematic):

• Ignorance: Not understanding when pure surplus income is declining
• Greed: Trying to maintain profit rates beyond their natural cycle
• Speculation fever: "Speculation breeds speculation" dynamics
• Fear: Hoarding during uncertainty rather than investing

The Key Insight: R as Both/And

I believe Lonergan saw R as having a dual character:

1. Legitimate Function: A modest R provides necessary temporal flexibility
2. Pathological Excess: When R grows too large, it becomes a drain on production

This explains why Lonergan writes (as quoted by Oslington) that failures are due to "ignorance" more than "greed". People don't understand:

• When to shift from accumulation to distribution
• How speculation can starve productive circuits
• The natural rhythms of the pure cycle

How R Actually "Mediates"

R mediates between circuits not by being a necessary conduit, but by:

1. Absorbing excess liquidity when neither circuit can productively use it
2. Releasing liquidity when circuits need it (ideally)
3. Providing price discovery through asset markets (when functioning well)
4. Enabling ownership transfers that eventually redirect capital

The Democratic Challenge

The democratic council's role is to distinguish between:

• Necessary R: The minimum needed for temporal flexibility (~5-10% of money supply?)
• Excess R: Speculation beyond social utility (~20%+ becomes dangerous?)

They would need to:

1. Monitor R levels relative to productive needs
2. Create incentives for timely redeployment from R
3. Regulate excessive speculation
4. Force liquidation when R threatens productive circuits

And for the keeners, this section felt useful in regards to my questions about the functional distinction between crossovers and the redistributive function:

The Core Confusion: Two Different Mechanisms?

Looking at your implementation and the various interpretations:

1. Crossovers (G' and G")

• G' (savings): E' → O" - Basic consumers save, funding surplus investment
• G" (returns): E" → R' - Surplus circuit returns profits/wages to basic circuit
• These are direct productive flows between circuits

2. Redistribution Function (R)

• A separate pool where money accumulates
• Involves "transfers of ownership" without production
• Money can flow in from both circuits and out to both circuits

The Functional Question

Here's what I think is happening, based on piecing together the evidence:

They are NOT the same thing, but they can COMPETE for the same money.

Consider this flow sequence:

1. Normal Crossover: E' → O" (savings directly fund investment)
2. Diverted to R: E' → R (savings go to speculation instead)
3. Later Return: R → O" (speculation money eventually funds investment)

In this view:

• Crossovers = Direct, productive transfers between circuits
• Redistribution = A detour through non-productive ownership transfers

Why This Matters Functionally

The key insight is that savings has two possible paths:

1. Productive Path: E' → O" (the healthy G' crossover)
2. Speculative Path: E' → R → ??? (diverted to redistribution)

This explains why Hoyt O'Connor might see R as "savings and investment" - because R can intercept what would otherwise be crossover flows. But they're functionally different:

• Crossovers: Maintain the temporal coordination between circuits
• Redistribution: Temporarily breaks that coordination

The Subset Question

I believe the relationship is:

• Crossovers are NOT a subset of R
• Rather, R is an alternative destination that competes with crossovers
• Some "savings" that should crossover get diverted to R
• Some "returns" from R might supplement normal crossovers

Evidence from Your Implementation

Your code actually gets this right:

typescript
// G' - Basic to Surplus (savings)
const dailySavings = newState.basic.nodes.expenditure * (newState.crossovers.g_prime / 30);

// Add to surplus outlay (investment funds)
newState.surplus.nodes.outlay += dailySavings * 0.9;  // Most goes to productive use

// Small portion to redistribution (financial speculation)
newState.redistribution.balance += dailySavings * 0.1;  // Some leaks to speculation

This shows savings being split between productive crossover and speculative redistribution.

The Functional Distinction

Crossovers (G', G"):

• Serve the normative proportion DI'/DI" = (G"T")/(G'T')
• Maintain circuit balance
• Are necessary for healthy growth
• Have clear origins and destinations

Redistribution (R):

• Serves no productive function
• Can disrupt circuit balance
• Represents economic pathology when excessive
• Has multiple, unclear flows

My Interpretation

The confusion arises because Lonergan uses similar notation (s'I', s"I") for flows into R, which makes them look like savings. But functionally:

1. True savings that become investment = G' crossover
2. Diverted savings that become speculation = flows into R
3. R can return money to either circuit when assets are liquidated

So when O'Connor sees R as "savings and investment," he's partially right - R contains diverted savings that might eventually become investment. But R is fundamentally different from the direct crossovers because it involves a non-productive intermediation.

The democratic council's job would be to:

• Encourage healthy crossovers (G', G")
• Discourage excessive flows into R
• Manage R's return flows to support whichever circuit needs liquidity

 

On Sat, Jul 5, 2025 at 11:38 AM 'John Raymaker' via Lonergan_L <loner...@googlegroups.com> wrote:

Lowell, Hugh, in CWL 15, 21, the RF, as I understand it, is a function that mediates between the basic and surplus circuits, between consumer demand and basic and surplus firms. Do you agree, or do you have a different interpretation of the RF?

John

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-Lowell

[Hugh Williams]

Pierre,

This response is helpful and very much on point for a central element of the 'theory' ...

I've gone over Appendix G very carefully and find the DAO concept intriguing and somewhat novel ...

novel for me at least, not knowing much about 'blockchains" etc..

It strikes me as being related, at least under the Lonerganian world view, to the cooperative model of economic organization 

(with a considerable overlay of computer communication technology)

which Lonergan's theory usually ends up pointing to when and where questions of actual implementation begin to arise in earnest.

I have the strong sense that 'implementation' now is up to 'us' ...

thanks

Hugh

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[PIERRE WHALON]

It is totally up to us.

Pierre

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