From[Bill Williams 29 April 2004 8:30 PM CST]
Since meeting Jing Chen at a heterodox economics conference last Summer I
have been corresponding with Jing. His approach to economic issues from the
standpoint of information theory appears to me to similar in some ways to
the one I have been developing employing control theory. Control theory and
Information theory may be considered to be two sides of a new conception of
physical phenomena that emerged out of Clerk Maxwell's work. If this
perspective is valid then information theory and control theory my be
complementary sides of an encompassing perspective upon the meaning and
control of the life process. I've supply the caption "Chen's Manifesto"
for some text I've taken, with his permit, from his web site.
(http://web.unbc.ca/~chenj/) Or, for the time being searching goggle using
Jing Chen, Chen's web sight comes up first.
Much of what Chen says about new understandings that are available using
information or entropy theory can also be said concerning new understandings
that can be reached using control theory. In confronting an orthodox
tradition in economics the combined insights gained from both the approach
that Chen has adopted as well as a control theory analysis may be more
effective than either of the possibilities in isolation. I have not myself
reached a final conclusion about every detail of Chen's work. However, I
find it sufficiently interesting that I think it is well worth considering.
For one thing the perspective Chen is developing exposes new weakness in
Orthodox theory, and thus whether or not Chen's work is correct as a
constructive contribution, the new critical insights are themselves of
interest.
Bill Williams
Chen's Manifesto
Social sciences are about conscious decisions of human beings. To understand
social sciences, we must understand human mind, which is an organ of
computation engineered by natural selection. We find that some psychological
patterns, such as conservatism, reflect the constraint of entropy laws.
Others, such as framing and herding, are evolutionary adaptations to enable
the efficient processing of information, which is the reduction of entropy.
Still others, such as overconfidence and loss aversion, are mental attitudes
that help us survive the constant dissipation endured by all non-equilibrium
systems. The entropy theory offers a unified understanding of the patterns
of human mind. It provides an alternative theoretical foundation to rational
expectation theory, which does not fit well with empirical evidences.
Modern science was germinated from astronomy, which Wiener termed as "an
ideally simple science". Finance, which studies prices changes under
uncertainty abstracted from all the intrigues of social and organizational
complexities, is indeed an ideally simple social science. It is usually in
simple subjects that original insights and methodologies are developed and
applied with great effectiveness. For example, calculus was invented by
Newton to calculate the planet orbits. This analytical thermodynamic theory
was inspired by Black-Scholes option theory, a highly technical theory in
finance.
We have applied the theory to understand many fundamental problems in social
sciences. All the problems are analyzed with the unified methodology. This
is in sharp contrast to analysis based on general equilibrium theory, where
many different models are developed for different problems. Even patterns
easily understood by most people, such as increasing returns, have to be
described by extremely ingenious and arcane mathematical models.
The development of a new science takes the efforts of many people. I hope
you find the theory helpful to your thinking and research. If you have any
comments or questions, please drop me a note. I will be very happy to hear
from you.