[From Rick Marken (2010.01.23.1240)]
Martin Lewitt (2010.01.23.1728 MST)--
What is being described as "confirmation bias" may merely humility before
the difficulty in extracting cause and effect from a complex nonlinear
system where the time histories are too short for statistical significance
and controlled experiments are not possible.
My point was simply that economists seem to pay more attention to what
the consequences of policies _should be_ (based on their theories)
than on what actually happens (the data). This has nothing to do with
cause and effect of even understanding anything about how an economy
really works. It's just a matter of seeing what actually happens after
various policy changes. And if what happens is not what is supposed to
happen (or what is desired) then I would suggest that a change in
policy is probably in order. As in the case of E. coli, these policy
changes may not end up making things better either; so you change
again. But sticking with policies when things are getting worse seems
like the wrong approach. For example, ater Clinton got his tax
increase the economy started to improve in many ways: the deficit was
reduced (eventually going into surplus), growth was robust,
unemployment was low, real income was increasing. So there was really
no reason to change that policy. When Bush came in he reduced taxes,
after which the economy started to decline in many ways: the surplus
turned almost immediately into deficit (this happen before 9/11),
wages became stagnant, poverty increased, and growth was anemic. I
think that, based on this evidence, Bush's tax policy should have been
changed, but it wasn't.
A focus on "goals" and "results" ignores the importance of the means.
The means for producing economic results, such as low unemployment,
are economic policies. But, as we know from control theory, in order
to achieve results it is necessary to be willing to vary the means if
necessary. So, for example, we have to be willing to vary tax policies
as necessary in order to produce intended results. Raising taxes, as
Clinton did, may not always improve things and lowering them, as Bush
did, may not always make things worse. But when things are going south
after implementing a policy there should be a willingness to augment
the policy.
When you don't know how to vary the means in order to produce an
intended result (such as full employment) an effective approach is
what we call E. coli control; to see how it works, look at my
"Selection of consequences" demo at
Selection of Consequences.
In PCT models of behavior the means used to control lower level
results are themselves results controlled by even higher level
systems. This creates a problem in economics if the means are
controlled relative to a fixed reference. If, for example, a higher
level goal, such as having "small government' , leads to having a
fixed goal for "low taxes" then any attempts to increase tax rate, in
order to produce lower level results, like lower unemployment, will be
a disturbance and resisted. And the lower level result just drifts.
� It is not at all clear that western materialistic democracy out performs
terrorism as a means of social organization.
I don't think the choice is between democracy and terrorism. I think
this is a very extremist way to look at it. It suggests very strong
control for particular means (policies) and any variation from these
means is seen as terrorism or communism or dictatorship. What I was
advocating was a willingness to change policy when the data indicated
that, under current policy, macroeconomic variables were moving in the
wrong direction. And we have clearly been moving is a very wrong
direction since Clinton left office. Things are getting better now but
I think we went so far away from nominal without a course change that
it's going to take quite some time until things get better. Of course,
it's possible that they may never get better now; we may be too far
off the cliff and if the people whose policies got us here end up
getting back in charge -- people who seem unwilling to be flexible
about trying policies that may help make things better -- I'm afraid
we will end up (if we aren't there now) as the richest 3rd world
country in the world.
Best
Rick
···
--
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com