[From Kenny Kitzke (2009.09.24.1200EDT)]
In a message dated 9/24/2009 11:09:07 A.M. Eastern Daylight Time, powers_w@FRONTIER.NET writes:
KK: I am of the opinion that the hope of developing an accurate model for how the economy of the USA (or any nation for that matter) works is wishful thinking. As valuable as PCT and closed loop analysis is, it will be like chasing the wind and is an improbable or impossible dream.
[From Bill Powers (2009.09.24.0636 MDT)]
Kenny Kitzke (2009.23.2100EDT) –
BP: I think there’s something more than meets the eye here. Why would you be so adamantly against even trying to develop an economic model? It sounds to me as if you fear not that it might fail, but that it might succeed. If a successful economic model were to be created (by anybody, not just PCTers), it would be the first one, and because of that would probably show that a lot of lines of thinking about economies were simply wrong, or on the wrong track. I can see that as a reason why someone who has strong beliefs about economic systems might not want to risk seeing a model that works as the real economy works. But you don’t strike me as a person who would be against a successful scientific project just because it might make us change our minds about something. You’ve always said you’re open to any new ideas. So why this energetic attempt to get us to drop the economic modeling effort? I won’t try to guess, but it’s a question that needs an answer.
Please, of all people, why are you speculating about my higher level reasons for my adamant behavior against spending time on your proposed model. And, you even imply a hidden agenda. I have been very clear about my reason. I think it is a waste of time. But, if you want to pursue it, I wish you well.
I have spent a reasonable amount of time studying how a capitalistic economic system works. I have even tested various aspects of how people can contribute to better and superior results working within that system, the real system; not in a contrived model of it. I even have data on the results. They are very encouraging to me and those who have achieved them. To suggest that I, or anyone, needs your proposed model to figure out how the system works is absurd.
Your wonderful theory of human behavior, and the models you have created to explain why people do what they do, have been a treasure to me. But, the vast majority of people who study human behavior have ignored your theory and your model. Even if you were to come up with a more accurate model of an economic system, what makes you think you will have any more impact than you have had in psychology?
So, I think you are chasing the wind. If it is the best use of your time that you can come up with, so be it. Produce something new and I will evaluate it. I am all for acquiring better knowledge and methods to achieve better ends. I am an engineer at heart. Some of the brightest PCTers on this Net not only were schooled in the previous theories
KK: To start some thinking about this premise, I will raise just five points for now:
is the economic system a closed-loop system? Was not the USA depression, or its steady rise to the most prosperous nation in the world in less than a century proof of an open-loop system?
BP: No, it was not, any more than the occurrence of periodic wars shows they are signs of open-loop systems. Those were consequences of how the people in the USA and elsewhere interacted with each other. And people are control systems, not open-loop systems.
Oh, I agree people are closed control systems. I don’t agree that economic systems behave only as closed loop control systems. One reason is that not every element of the economy is the result of human action. In fact, the hurricanes that hit New Orleans, overwhelmed its economy regardless of what humans did. It was an open loop phenomena in the economic system in my view. But, offer your perception and how such non-human factors will be incorporated in your model.
KK: is the elemental basis for an economy what producer people and consumer people do? Or, since the economy of a nation is always measured in monetary units, is it more sensible to start with people who make financial transactions, generally called buyers and sellers?
BP: Definitely it is what buyers, sellers, producers, and consumers of goods and services do. These are all living human control systems and everything that happens in economies happens only because of what these people want and perceive and do. An economy is not some mysterious machine operated by invisible rules or jerked around by some invisible puppeteer. We have met the economy and it is us. It is what people do as they try to control what happens to them. The economy is just one special case of human behavior.
Saying it is one thing. Trying to model what buyers and sellers do takes a theory. Just observing the difficulty in defining what money is, or how prices get established or why on this Net, suggests to me that you are unlikely to discover a theory that everyone can accept, especially with those darn experts that have competing theories they have discovered.
Oh, the economy is a mysterious system that even weather affects in ways that are unknown and unknowable to humans with or without an historically accurate model! It has invisible and unwritten and unmeasurable rules not created by humans. It is like the origin of the universe or how it works…mysterious.
The Hubble exposes past scientific explanations as bogus and leaves scientists scratching their heads and disagreeing on new speculations of what they observe. But, hey, something so much easier as modeling what seven billion people do or don’t do to change economic development, well that will be rather easy, or so you seem to think, and we can ignore the non-human-made and non-human-controllable properties. Good luck.
KK: is an inanimate economic system subject to the rules of PCT?
BP: There is no inanimate economic system. If you remove the people, there is no economy.
If there were no people, we would not need an economic model either. The rules, written and unwritten, of the inanimate economic system limit what people can and cannot do to achieve their goals. You have not created the economic system used in America and can’t even suggest who did, or who can change it, and what people will and will not do even if it changes by decree.
KIK: Do people individually, or even collectively, control the economic system performance or does the economic system constrain and control what people want and can do?
BP: The people, individually and collectively, create and sustain the interactions we call economics. The people ARE the economic system; what they want and do is the engine that drives economics, and that totally determines the economic processes we observe.
I have already suggested that the weather can determine what we observe in the economic process regardless of what people in the system do. A nuclear attack by an external enemy will also cause economic interactions beyond the control of the Americans. People are people; they are not an economic system. This sounds wise, and may well be a missing element in most economic theories. So, again, when you quit talkin and start chalkin, me and many others will consider your findings. People will control for many things other than an economic system producing at best some side effects.
KK: if we want someone to build a model of a system, would we want that someone to be a novice or someone who has worked tirelessly to know all there is to know about the real system and how it has performed historically? Would we ask a entomologist to make a model of our country's human health care system?
BP: I would greatly prefer an open-minded novice who understands modeling to create the model, rather than someone who has built up a store of prejudices and incorrect rules of thumb because of not having a proper model and therefore not understanding what is really going on. Would you rather have an effort to model human behavior run by 100 behaviorists with 50 years each of experience studying behavior, or a naive engineer who happens to know about control theory?
I would rather have 100 behaviorists create and apply the model to test their understanding of human behavior. Then, they might reorganize. They won’t because an engineer finds a more satisfying theory. Over 35 years seems to prove that. Will poking your finger at economists and how stupid they are produce any greater change in accepted theory than what that has happened with classic psychologists?
At least folks like Rick and Dick and David had a knowledge of and practiced the old psychology theory that might influence classic psychologists to reconsider their own dogma. They are more effective witnesses of better behavior theory than auto mechanics. But, you have no credibility with economists. I believe that will hamper the acceptance of any economic discoveries you claim your model reveals. Again, if you perceive making an economic model is the best use of your time, who am I to say you should not? I guess I am just hoping to share some perspective that might influence you to deal more with behavior issues, than economic issues.
KK: is there anyone who believes that a country’s economy is an independent variable? Or, is it obvious that different economic systems in many nations work differently and affect the economic system performance in any one country?
BP: I don’t care what anyone believes; they can and do believe anything imaginable. I care about what they can demonstrate to be true. An economy consists of all the dependent variables that people control, all the reference conditions that specify how they want those variables to be, all the physical laws that connect actions to their consequences, and all the biological laws that enable human beings to exist and work as they do. All economic systems, however different they may appear, work because of these elements of human behavior. The differences arise from differences in goals, perceptions, and available means of control, not because the dirt inside the boundaries of Albania contains an Albanian economic system and so on country by country.
You have been to China. Do you not care what they believe and do in their economic system? Are you interested in how they are doing? Are you interested in how the economy is doing in Pittsburgh? Would such knowledge help you ensure your model includes their beliefs and actions? Note that their economic performance is relatively good and was achieved without the benefit of your hoped for educational model.
KK: The kind of person I would want to make a new economic model would be someone who is steeped in economic systems, their components and their historic performance.
BP: That would not give you a model; it would give you a defense of the most authoritative misconceptions that precede the first successful model. In 1491, the consensus among experts was that Columbus would sail right off the edge of the world into an abyss. When great increases in our understanding occur, inevitably it is the experts who are proven wrong, because they became expert in what was previously believed and, most probably, argued vehemently against the new understanding as it began to take shape. Therefore I would not turn the construction of a model of the economy over to people steeped in the old ways of thinking and who know only the history of economics – though I would consult them on matters of fact.
Columbus acted on the existing global system. He did not make a model first, or have to, to advance understanding. He conducted an experiment to test the understanding of the current system. I believe the same thing is true for the economic system. In this sense, Rick seems right. We know about actions taken to affect the system performance. We should be able to learn from those results. Unfortunately, data and correlations are so misunderstood that their conclusions are not trustworthy.
KK: Data is helpful but a working model to me would also have to include a theory of how the components of the economic system interact. When you run the model, aren't you really testing the theory in the model to know whether it accurately duplicates what has been historically observed?
BP: Absolutely, that is precisely what we do in generating any working model. We make a guess as to how the model should be organized (how its components should interact), fill the model in with any imaginary properties it needs in order to run, and run it. Then we compare what the model did with what the real system did and look for all the differences we can find. We use historical data for this because predictions would be futile until we can at least make the model match what has already happened. That’s just standard practice in the physical sciences and engineering. That is exactly how I would organize the development of an economic model, and how I’ve already described the project, in case you missed it.
I am with you here Bill for most physical sytems. I just do not think you, even with some help from those who have learned what economic systems can and have done, can do it for a system that combines physical and human interactions by individuals or collectively within nations .
As we modify the model to eliminate the differences from real data, we begin to understand the real system better, and see where the basic organization of the model may need revision. So around and around we go, model, data, test, revise, model, data, test, revise … each time making the model more like the real system. This process can converge to some pretty good models. It gave us modern physics and chemistry.
If you have the time and knowledge to model the complex system of economics, go for it. Knowing how to create a model is valuable. Are tracking models the kind of knowhow that ensures understanding the public education system or the national economic system. I think it is a stretch and can easily fail. It is not sufficient to create an accurate model without including all the variables and their interactions that are part of the economic system. Producers and consumers? I doubt that will get you to first base. And, runs, not hits, are what will achieve a winning change in how economy policy should be set by those who can do that, whomever that is. Do you know who that is? Does the economy change effectively when those in authority change the economic system, or is it those people who act in the system that make the changes?
KK: Here are some simple questions about national economies that might reveal whether someone is aware of and steeped in how economic systems perform and work, and produce superior results than other systems and other nations.
BP: What’s this obsession with being superior to other systems and other nations? Who cares who we’re superior to? Is this some kind of king-of-the-hill contest? Don’t you know you’re well off without having someone much worse off to point to? I’d like to see everybody happy and satisfied, wouldn’t you? Isn’t it a little embarrassing to sit at the banquet table burping and picking your teeth while others watching you are starving? Or does that just make sitting at the banquet table seem even better? It makes me uncomfortable.
Looking at how different economic systems and policies perform relatively give us clues as to what variables and policies matter to desired results. To act like this is immaterial, and simply start with a clean sheet of paper to see how producers of pork bellies can find economic fulfillment by using their output to obtain an input of jewelry they desire, seems like an unnecessary regression. Starting from scratch seems to ignore one of our most valuable human abilities; the ability to learn from experience and from others.
KK: What nation has the largest economy in the world? What has that nation done that makes its results so much more superior than even #2?
BP: From the adjectives you use, I would guess that that nation just wants to be better than everybody else. Is there something to admire in that?
Is there something to admire in not caring about what is possible? Is it better to be satisfied with the average? Should those below the average have a goal of becoming average? I make no condemnation of those who want to excel and achieve what has not been achieved before. Do you?
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If we look at productivity per citizen rather than just size, what are the top 20 nations in GDP per citizen? How do we explain the differences?
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What nations have the largest markets for products and services? What nation has the largest market for automobiles in 2009? What role does market size play in an national economy versus the gross domestic product or production capacity of that country?
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What measure of economic performance in a nation is the most vital in the quality of life experienced by its citizens?
KK: What are the top ten largest economies in the world? What economic system do each of them use? Is there ranking primarily related to the economic system enforced in their country by the government or by the actions and efforts of its citizens?
BP: Ah, the last one strikes a chord. Certainly it’s not the lavish riches we wallow in. I’d say that friendship and love, respect for other human beings, understanding human nature, appreciation of beauty and knowledge, and seeking new frontiers are among the top measures of quality of life. Having a lot of money without those things wouldn’t mean much. Being better than everybody else certainly isn’t among them. Neither is selfishnes or self-congratulation or self-importance or self-aggrandizement. Read the Bible – Jesus told us what matters. Consider the lilies of the field; they toil not nor do they spin, yet they are just as important in the human economy as the highest priest or the Roman emperor. A rich man has about as much chance of getting into Heaven as a camel has of passing through the eye of a needle. I don’t know if Jesus was the son of God, I think not, but he was pretty far ahead of his time. It’s not surprising that he got in trouble with the Establishment – just about every Establishment there was at the time. Even his own people chose Barrabas.
Thanks for quoting the Bible as if you think it might be relevant. But, aside from that and its author, here Bill we totally agree. It is why I think working on a model of the economy, or how to accumulate more money or wealth, is a waste of time. So, read your own words and stated beliefs. Why not use your knowledge and gifts to advance those human needs that are way more important than bank accounts and assets? I try to do that and the quality of my life has gotten better as I quit worrying about politics and economics in the USA.
I honestly don't know why we would expect someone with little practical knowledge of various economic systems, or their differences, or how they have performed relatively to do a valuable job of creating a model to explain the actual and prospective working of the economy in any given country.
Well, I’ve told you what I think.
And, I have too. Perhaps we just disagree. It would not be the first time. Yet, life and friendship has gone on and prevailed. You have made my life better. I wish I could do the same for you.
I long for a coherent explanation from Bill. Perhaps I just don't get it?
Maybe you don’t. I don’t know – you’re there inside of you, and I’m out here. You have expressed your preferences pretty well in your post, and I’ve rejected most of them, so you should have a pretty good idea of what I get and don’t get, though you can’t know, either.
If I wanted to create a model for the most sensible and economic way to produce and consume electrical power and energy, I would not seek the best chef in the country. The smartest and most powerful financial economists in the world are right here in Pittsburgh this week. Shouldn't they be guiding and funding development of a new economic model.
Good God, NO! Aren’t you forgetting what these financial geniuses have just finished doing to us from behind? Those of them who weren’t the leaders in causing the crashes didn’t do a thing to stop the disasters because they had no more idea of how the system works than the janitor who cleans up after them has. All they have is a lot of superstitions and business-school mottos to back them up. Expand or die, yeah, sure. Indifference curves, oh boy. They know what to expect from each other, of course, which is why they don’t trust each other. I’m not saying they’re stupid; they’re just full of facts that ain’t so. There is no “law” of supply and demand. There are only people who want things and act however necessary to get them. But economists know nothing about people, so they try to formulate economic theories with no people in them. That’s why there is no economic model yet (apologies to the new agent-based economic theorists, who are trying to put the people back in).
There is a lot of truth in what you say. But, when I think of economic systems, I do think of what people can and could do to improve their quality of life as they define it with more economic resources. Perhaps it is to have a Lexus or Mercedes? Perhaps it is to pay the outrageous costs of a college education for their children or a lung transplant for their mother. I won’t count on our government to do either for me. Look how they run the post office if you buy that model for our economy.
I suspect that less than a percent of the money they are spending while in Pittsburgh would put a world-class model development team together that could devote all the time and resources necessary to get the best model possible in the least amount of time. If a model really is possible and needed, would it not be obviously worthwhile to get the proposal defined and accepted for action?
It’s a lot of fun to exaggerate and I don’t apologize.
Your faith is touching but misguided. The vast knowledge you imagine doesn’t exist. It’s not that these guys don’t know anything: obviously they know an enormous amount. They just don’t know about the important and essential things, such as people being control systems. And I’ll bet there isn’t one of them that knows how to construct and test a model (do you?). Without that missing knowledge, the rest of what they know is useless.
As I previously said, I do not need a model to conduct a scientific experiment on the real economy of businesses who provide economic power and control for employees who find that valuable. Yes, I have constructed models and collected data to see if they fit. I call it the Defective Work Model. It helps people understand their quality control system and how to improve performance. If I really thought I could model the economic system in the USA, I would join your effort. I am skeptical and will not apologize for that. If you know know enough to make it happen, I will praise you and eat some crow.
What is the restraint? Why would that be resisted as a disturbance to what reference perception?
Very simple: I don’t agree with your assessment of the abilities of these people. I don’t think they know how to construct a model. I don’t think that much of what they know is true. I don’t think they know how people work.
We are close in perception here. But, knowing how people work is not the only thing necessary to know what kind of economic system works best. I think that is at the heart of our difference?
I wish I knew but about all I can do is guess. I can guess about chasing the wind and hope I might discover an accurate model of where it comes from or where it goes, but there seems to be more worthwhile ways to spend my time.
I can agree with that. I take it that you’re not volunteering your services to the model-building team. Go play tennis with David.
You perceive that one correctly. David and I play tennis with each other a few hours a year. It satisfies some higher level references for how we spend our time. The rest of the year, David and I try to use our time and knowledge to help people achieve their stated goals. Helping you achieve your economic model goal is not one for me. To my knowledge David uses his time for other purposes more meaningful to him too. I think we both agree that your PCT knowledge and models have been helpful to us. Perhaps your economics model will be too, but that is not obvious to us at this time as a goal we do not know how to satisfy or one that needs attention.
I really love you, Kenny, but sometimes you can be a pain in the neck. Well, so can I.
Best,
Bill P.
I love you too Bill and that won’t change whether or not you create an economic model based on human behavior. You are seldom a pain in my neck. You are a blessing and humble about it besides. I wish I could say the same for the Republican/Democrat rants by Rick or his rants against professed economists or believers in the Bible. If there is a state that needs his help, Calliefornia provides a great opportunity. I wish he would get busy there with his theories on politics, ethics and economics instead of on CSGNet. I really do not need his perceptions on the economy to improve the quality of my life. It would be like chasing the wind for me.
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