Closed Loop Economics

[From Rick Marken (2005.01.10.2230)]

I found this quote from FDR�s last State of the Union message to
Congress (Jan. 11, 1944) in an economics paper I'm reading. I think it
would make a nice front piece for a book on Closed Loop Economics. I
particularly like the phrase �Necessitous men are not free men". The
PCT version would be the less catchy (but equally true) "Necessitous
men are not in control of their perceptions".

"We cannot be content, no matter how high [the American] standard of
living may be, if some fraction of our people�whether it be one-third
or one-fifth or one-tenth�is ill-fed, ill-clothed, ill-housed, and
insecure.

We have come to a clear realization of the fact that true individual
freedom cannot exist without economic security and independence.
�Necessitous men are not free men �."

It's interesting to see how close we were to a humane (and human) view
of economic man almost exactly 60 years ago. What are the chances of
hearing something like this in the next State of the Union Message?

Richard S. Marken
marken@mindreadings.com
Home 310 474-0313
Cell 310 729-1400

Richard S. Marken
marken@mindreadings.com
Home 310 474-0313
Cell 310 729-1400

[From Bill Powers (2005.01.11.0745 MST)]

Rick Marken (2005.01.10.2230)–

We
have come to a clear realization of the fact that true individual

freedom cannot exist without economic security and independence.

“Necessitous men are not free men
”."

An interesting view from that pinko commie socialist bleeding heart
radical liberal FDR. Oh, how the rich hated him, and I am remembering
screaming purple-faced apoplectic hatred from the parents of rich kids I
knew. The problem is that the rich know perfectly well the truth of what
FDR said – he didn’t have to tell them that independence and
power depend on one’s economic clout. What they hated him for was saying
that everyone ought to have independence and power. If there are no poor
and weak, how can anyone be rich and powerful? The man must be
mad.

The hierarchy of goals has to be understood to see what causes the
schisms in our society. The conflicts we see are only where the
underlying disparities are expressed, not where they’re caused. It does
no good to try to resolve them at that level. You just get a different
conflict. What you have to ask is what goal is served and what goal is
frustrated if the conflict is overcome first in one way, then the other
way. Money in itself is not a goal except for the feebleminded. It’s what
money can do for you that matters, that gives you a reason for wanting
it. Up to a point, having money means survival, then comfort. But beyond
that point, what does it mean? There is where we find the real issues.
The real issues are not about economics. They’re not even about prestige.
They are about control.

Best,

Bill P.

···

[From Rick Marken (2005.01.11.0915)]

Bill Powers (2005.01.11.0745 MST)

An interesting view from that pinko commie socialist bleeding heart radical
liberal FDR. Oh, how the rich hated him, and I am remembering screaming
purple-faced apoplectic hatred from the parents of rich kids I knew.

What an amazing phenomenon was ol' FDR. I wonder if it was the polio that
made him so aware of human control problems (which he, himself, would
probably not have experienced otherwise). We shall probably never see his
like again.

···

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Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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This is from Phil Runkel, replying to remarks by Powers and Marken about

The first vote I cast for a presidential candidate I cast for FDR. He
died while I was in the army. I cried.

[From Bryan Thalhammer (2005.01.11.2200)]

Rick,

Yes, this is an epochal quote. I am watching PBS Frontline Stories from a
Small Planet, a piece on genocide in Darfour in the Sudan and terrorist
attacks in Iraq. Talk about people who are necessitous. Gosh.

I do not believe we will ever see the likes of FDR again. And it is not very
likely at all that the State of the Union script will contain any sincere
attempt to deal with this problem for the next four years. And any attempt
to generate this type of message by the opposition will be met with
"screaming purple-faced apoplectic hatred from the rich kids..." :D:D:D What
are they ever controlling for???

But we will see someone who will revive his standards and restore our
Nation. Maybe not right away, but some time after the collective hypnosis we
are suffering from passes. At the present, people will just act as living
control systems. They will output into the environment, they will take what
they need, they will push back, fight back, and do what they can to survive,
balancing risk with conviction. With people in desparate need, control for
means of survival may operate with higher gain than anyone is prepared for
in this Country.

I read McClelland's and McPhails collective action writings. What I am not
sure is how collective action is closed loop. I understand how individual
living control systems operate closed loop, but I wonder what happens when
collective action goes into the environment becoming various disturbances or
perceptual inputs for others, including those in need, and those "less" in
need.

If collective action is closed loop through the environment for all
involved, how does energy or the results of actions move from the "hand" of
one person intact to the perceptual inputs of others? Cannot some outputs
fall not being perceived? Or am I reading this differently. I am not an
economist, but don't some bread crumbs fall to the ground not to be picked
up by anyone? Do some windfalls evade the economy or collective actions? And
do some loaves of bread travel through the informal market, which does not
get measured by the economists?

Thanks.

--Bryan

···

[From Rick Marken (2005.01.10.2230)]

I found this quote from FDR�s last State of the Union message to
Congress (Jan. 11, 1944) in an economics paper I'm reading. I think it
would make a nice front piece for a book on Closed Loop Economics. I
particularly like the phrase �Necessitous men are not free men". The
PCT version would be the less catchy (but equally true) "Necessitous
men are not in control of their perceptions".

> "We cannot be content, no matter how high [the American] standard of
> living may be, if some fraction of our people�whether it be one-third
> or one-fifth or one-tenth�is ill-fed, ill-clothed, ill-housed, and
> insecure.
>
> We have come to a clear realization of the fact that true individual
> freedom cannot exist without economic security and independence.
> �Necessitous men are not free men �."

It's interesting to see how close we were to a humane (and human) view
of economic man almost exactly 60 years ago. What are the chances of
hearing something like this in the next State of the Union Message?

Richard S. Marken
marken@mindreadings.com
Home 310 474-0313
Cell 310 729-1400

[Martin Taylor 2005.01.11.23.35]

[From Bryan Thalhammer (2005.01.11.2200)]

Rick,

Yes, this is an epochal quote. ...
I do not believe we will ever see the likes of FDR again. ...
But we will see someone who will revive his standards and restore our
Nation.

Jimmy Carter tried, but he was therefore considered a wimp. Jimmy
Carter tried to act like a Christian, instead of simply proclaiming
himself to be one. Wasn't it Jesus, too, who issued the economic
commandment: "Cast thy bread upon the waters, and it shall return to
you many fold" or something like that? That's part of Jesus's
doctrine that you don't hear too much of, these days.

I read McClelland's and McPhails collective action writings. What I am not
sure is how collective action is closed loop.

The primary difference that I can see is that the closed loops in
living organisms are control loops (i.e. low-gain input with
high-power outputs that can stabilize the input) whereas closed loops
involving independent living organisms have similar gains and one
can't really distinguish "input" from "output" other than by
definition. The closed loops in a community are not control loops,
for the most part.

···

> [From Rick Marken (2005.01.10.2230)]

> I found this quote from FDR's last State of the Union message to
> Congress (Jan. 11, 1944) in an economics paper I'm reading. I think it

would make a nice front piece for a book on Closed Loop Economics. I
particularly like the phrase "Necessitous men are not free men". The
PCT version would be the less catchy (but equally true) "Necessitous
men are not in control of their perceptions".

> "We cannot be content, no matter how high [the American] standard of
> living may be, if some fraction of our people-whether it be one-third
> or one-fifth or one-tenth-is ill-fed, ill-clothed, ill-housed, and
> insecure.
>
> We have come to a clear realization of the fact that true individual
> freedom cannot exist without economic security and independence.
> "Necessitous men are not free men "."

It's interesting to see how close we were to a humane (and human) view
of economic man almost exactly 60 years ago. What are the chances of
hearing something like this in the next State of the Union Message?

Richard S. Marken
marken@mindreadings.com
Home 310 474-0313
Cell 310 729-1400

I was a boy when FDR died. Everyone in my family cried and I remember
wondering why. Sixty years later, I think I know.

Regards,

Fred Nickols
nickols@att.net

···

-----Original Message-----
From: Control Systems Group Network (CSGnet)
[mailto:CSGNET@listserv.uiuc.edu] On Behalf Of Philip Runkel
Sent: Tuesday, January 11, 2005 7:14 PM
To: CSGNET@listserv.uiuc.edu
Subject: Re: Closed Loop Economics

This is from Phil Runkel, replying to remarks by Powers and Marken about
>

The first vote I cast for a presidential candidate I cast for FDR. He
died while I was in the army. I cried.

[From Bryan Thalhammer (2005.01.12.1115 CST)]

Martin,

[Martin Taylor 2005.01.11.23.35]

The primary difference that I can see is that the closed loops in
living organisms are control loops (i.e. low-gain input with
high-power outputs that can stabilize the input) whereas closed loops
involving independent living organisms have similar gains and one
can't really distinguish "input" from "output" other than by
definition. The closed loops in a community are not control loops,
for the most part.

What constitutes open or closed and to what granularity is what concerns me
in this discussion. I am not an economist, but totally closed has as many
implications as partially open, which is the thing I am trying to get my
head around, too. One "energy" or force, or something moving around in the
environment (no longer in the living control system), by definition (I
think) you don't know what it is: someone's input, an output, or
environmental disturbances that are not directly connected to actions from a
living being. Yes, there are artifacts, such as a footprint or the words in
this list, that seem connected to inputs/outputs, but they are more
impressions than force or energy until they are combined in a perceptual
input.

While out there in the environment, my guess is that energies dissipate, or
become combined with natural forces, and that is why I see something of
opennness in those factors. Perhaps what you write above, closed loops in a
community, is the net or identified forces that one can say are closed upon
themselves, or the closed loop that matters. I am thinking of little bugs in
a petrie dish, where the collective action can be guaged within that measure
of water and bugs. But in the greater world, particularly of human
interaction and commerce, a lot of whirlpools exist and things are not as
easy to measure. Maybe this is just a matter of semantics, whether the gross
phenomenon of interaction is closed or open, and whether what we are saying
is closed is the identified or net interaction.

Thanks,

--Bryan

[From Rick Marken (2005.01.12.0920)]

Bryan Thalhammer (2005.01.11.2200)

I read McClelland's and McPhails collective action writings. What I am not
sure is how collective action is closed loop.

I think that in at least one of Kent McClelland's papers he talks about
collective control in terms of virtual references for inputs. While a
collection of people is not really a control system, in certain
circumstances it can be analyzed as though it were a control system acting,
as a collective, to keep an input variable at some reference value.

For example, suppose that each person in a collection of 3 people is
controlling for a certain amount of the same variable, X. Think of X as an
amount of bread. Suppose that one person wants (has a reference for) 3 units
of X, another wants 2 units of X and the last wants 10 units of X. So
together these three have a virtual reference for 15 units of X (bread).

Let's assume that one of these people is a farmer, the other a miller and
the third a baker. So there three, acting independently, can affect the
amount of X (bread) available to be consumed by the collective. Assuming
that each individual produces enough output (the farmer grows enough wheat,
the miller mills enough flour and the baker bakes enough bread) to produce
15 units of X (bread) then, looking at this from the collective level, we
see a collection of individuals controlling for keeping their input of bread
(X) at 15 units.

This view of the collective is how I visualize the economy in terms of
collective control. In an economy, X is all goods and services that are
wanted by the collective. Each member of the economic collective has, I
believe, a reference for certain amounts of each of the goods and services
represented by X. Adding over all individuals (and the references within
each individual) would yield the virtual reference for X in the collective.
A large subset of the individuals in the collective (excluding the very
young, the very old and the infirm) act (in specialized roles) to produce X.
To the extent that X matches the virtual reference for X, the economy is
working: the collective is successfully controlling for what it wants and
needs (the collective reference for X).

Of course, there are many details involved in the operation of the
collective that have to be taken into account when modeling the economy. In
particular, we have to know how production works at the collective level --
in terms of the contributions of labor, capital and management to variations
in X -- in order to get a good idea of how an economy actually works. But I
think it is a pretty good bet that the economy, at the collective level,
mirrors the closed loop controlling done by the individuals who make it up.
I think you can get a better sense that this is true by reducing an economy
to its smallest possible size: one person.

We can see in the behavior of this individual the same functions that we can
see in a large economy, like that of advanced industrial states. The
individual must take actions that _produce_ results that the individual
_consumes_. For example, the one person economy satisfies its want
(reference) for food by reaching (acting) for a berry, say, grabbing it off
the vine, bringing the plucked berry to the mouth, producing a berry in the
mouth and then consuming it, thereby reducing the error in the food wanting
system.

A single person economy is both producer and consumer, as is the case in the
large industrial economy, where we can see even more clearly the production
and consumption roles of the people who make up the economy. Of course, what
is hard to see in both the individual and collective case is the fact that
production and consumption are components of the process of control. Unless,
of course, you are wearing control theory glasses.

···

--
Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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[From Bruce Gregory (2005.0112.1306)]

Rick Marken (2005.01.12.0920)

Of course, what
is hard to see in both the individual and collective case is the fact
that
production and consumption are components of the process of control.
Unless,
of course, you are wearing control theory glasses.

They are on the rack next to the free-market glasses and the
second-coming glasses.

The enemy of truth is not error. The enemy of truth is certainty.

[From Rick Marken (2004.01.12.1200)]

Bruce Gregory (2005.0112.1306)]

Rick Marken (2005.01.12.0920)

Of course, what is hard to see in both the individual and
collective case is the fact that production and consumption
are components of the process of control. Unless,
of course, you are wearing control theory glasses.

They are on the rack next to the free-market glasses and the
second-coming glasses.

And the predictive control glasses and the stories glasses and...

···

--
Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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may contain privileged information. Any unauthorized review, use,
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[From Bruce Gregory (2005.0112.1540)]

Rick Marken (2004.01.12.1200)

And the predictive control glasses and the stories glasses and...

I'll take your word for it, since you seem to be the one with the
vision problem.

The enemy of truth is not error. The enemy of truth is certainty.

[From Bruce Abbott (2005.01.12.1730 EST)]

Rick Marken (2005.01.12.0920)--

. . . Of course, what is
hard to see in both the individual and collective case is
the fact that production and consumption are components of
the process of control. Unless, of course, you are wearing
control theory glasses.

I'm wondering if your control theory glasses are rose
tinted. Where is there any evidence that, in the collective
case, "production and consumption are components of
control"?

It is easy to come up with a reasonable senario in which
individuals, each acting to control variables important to
them, produce a runaway, boom-and-bust production and
consumption cycle. Indeed, economic history is replete with
examples of economies behaving in just this way. You have
individual negative-feedback systems contributing to an
aggregate positive feedback system.

So from my perspective it seems a bit early to be claiming
as fact the idea that aggregate production and consumption
are components of a(n aggregrate) control process.

Bruce A.

[From Bruce Gregory (2005.0112.1755)]

Bruce Abbott (2005.01.12.1730 EST)

So from my perspective it seems a bit early to be claiming
as fact the idea that aggregate production and consumption
are components of a(n aggregrate) control process.

I don't want to harm your credibility, but I agree with you. It seems
_most_ unlikely. (In fact, it would be a miracle if it proved to be the
case.)

The enemy of truth is not error. The enemy of truth is certainty.

[From Bill Powers (2005.01.12.1601 MST)]

Bruce Gregory (2005.0112.1755)
Bruce Abbott (2005.01.12.1730 EST)

So from my perspective it seems a bit early to be claiming
as fact the idea that aggregate production and consumption
are components of a(n aggregrate) control process.

I don't want to harm your credibility, but I agree with you. It seems
_most_ unlikely. (In fact, it would be a miracle if it proved to be the
case.)

Not to set precedents, but I'm inclined to agree with both of you. An
aggregate control system is not the same thing as an aggregate OF control
systems. The latter is real; the former is not.

In my view economics is the study of people controlling for what they want
mainly by working, inventing, and managing. If you can model all of the
main ways in which they do this, you will have a very large model
consisting of interacting entities, behaving (one hopes) like the real
economic system in the important regards. It may be possible to boil such a
model down to sectors which represent groups having common characteristics,
but with the speed and capacity of modern computers I don't think we need
to do a lot of boiling down.

The nice thing about having such a model would be that you wouldn't have to
believe anything about economics.

Best,

Bill P.

[From Rick Marken (2005.01.12.1540)]

Bruce Abbott (2005.01.12.1730 EST)--

Rick Marken (2005.01.12.0920)--

. . . Of course, what is
hard to see in both the individual and collective case is
the fact that production and consumption are components of
the process of control. Unless, of course, you are wearing
control theory glasses.

I'm wondering if your control theory glasses are rose
tinted.

I always wonder that. That's why I do research to test my models. Looking at
a system through control theory glasses doesn't "prove" that the system is
organized as a control system. The glasses just let you see things in terms
of controlled variables, outputs, inputs, disturbances and reference states.
That's just the first step in science: developing a model. The next step
is, of course, to test the model.

Where is there any evidence that, in the collective
case, "production and consumption are components of
control"?

I've pointed to some, such as the steady decrease in the budget deficit
through the 90s while there were pronounced variations in the growth rate
throughout this period. Assuming that the rate of growth in GDP has an
effect on government revenue, variations in rate of growth are a disturbance
to the deficit. The fact that these disturbances had little effect on the
rate of change in the deficit suggests that the deficit was a controlled
variable.

Another piece of evidence that the economy involves collective control is
the fact that GDP grows at about the same rate as the population of a
country. Sometimes GDP grows a bit faster than population but, generally,
GDP grows along with population. I think this is evidence that GDP is a
controlled variable because GDP does not have to grow along with population.
It could just stay constant or even decline. IN fact, GDP grows because
people make it grow. And people make it grow because it's what people want.
And when the number of people grows the amount of GDP wanted also grows. So
people seem to be acting tomake GDP grow to match a growing reference for
GDP.

It is easy to come up with a reasonable senario in which
individuals, each acting to control variables important to
them, produce a runaway, boom-and-bust production and
consumption cycle.

That seems to be consistent with the view that the economy does involve
collective control.

So from my perspective it seems a bit early to be claiming
as fact the idea that aggregate production and consumption
are components of a(n aggregrate) control process.

I don't think it's early. As I understand it, you first propose a model
based on observation and _then_ test it.

···

--
Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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disclosure or distribution is prohibited. If you are not the intended
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[From Rick Marken (2005.01.12.1630)]

Bill Powers (2005.01.12.1601 MST) --

An aggregate control system is not the same thing as an aggregate
OF control systems. The latter is real; the former is not.

In my view economics is the study of people controlling for what they want
mainly by working, inventing, and managing. If you can model all of the
main ways in which they do this, you will have a very large model
consisting of interacting entities, behaving (one hopes) like the real
economic system in the important regards. It may be possible to boil such a
model down to sectors which represent groups having common characteristics,
but with the speed and capacity of modern computers I don't think we need
to do a lot of boiling down.

It's so nice to have something to disagree with you about.

I think what I disagree with you about is how much boiling down is
appropriate in an economic model. I want to boil down a lot more than you
do.

If you were really going to model the economy as interacting control systems
you would have to model (for the US) about 250,000,000 agents, each
controlling for hundreds of thousands of different variables (all the goods
and services produced) by doing the hundreds of thousands of different
things people can do to produce and consume these things. Of course you
can't do this. All modeling involves some degree of boiling down. Indeed,
all of our models are not real, in the sense you describe above. Even the
simple tracking model is an unreal representation of what is surely a large
collection of parallel as well as hierarchically related neural control
systems. We are using an aggregate control system -- a single, boiled down
control system -- to represent what is surely an aggregate of many hundreds
of control systems.

I think that, in the case of economics, the boiling down (or aggregation)
should be done to a level that is both scientifically viable (in terms of
accounting for the data) and relevant to economic policy decisions. I am not
committed to a particular level of aggregation; I think what is appropriate
will become apparent as the model development continues. My bias may be to
go to a higher level of aggregation (boiling down) than you. But I bet that,
if we both end up trying to model the economy at the same level (the economy
of a nation, for example, rather than the economy of some segment of a
nation, like a single household) we will end up at very similar levels of
boiling down.

···

--
Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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[From Bill Powers (2005.01.13.-655 MST)]

Rick Marken (2005.01.12.1540)--

> Where is there any evidence that, in the collective
> case, "production and consumption are components of
> control"?

I've pointed to some, such as the steady decrease in the budget deficit
through the 90s while there were pronounced variations in the growth rate
throughout this period. Assuming that the rate of growth in GDP has an
effect on government revenue, variations in rate of growth are a disturbance
to the deficit. The fact that these disturbances had little effect on the
rate of change in the deficit suggests that the deficit was a controlled
variable.

Or else that growth rate does not affect the deficit. To show that the
deficit is a controlled variable, you not only have to demonstrate that it
would be affected by the disturbance if there were no control, but you have
to show that it ceases to be controlled when no longer perceived, and you
have to identify the action that controls it. Simply showing that there is
no effect does not show that there is any action being taken against the
supposed disturbance. Why do you say that growth rate would affect the
deficit if there were no control of deficit?

Best,

Bill P.

···

Another piece of evidence that the economy involves collective control is
the fact that GDP grows at about the same rate as the population of a
country. Sometimes GDP grows a bit faster than population but, generally,
GDP grows along with population. I think this is evidence that GDP is a
controlled variable because GDP does not have to grow along with population.
It could just stay constant or even decline. IN fact, GDP grows because
people make it grow. And people make it grow because it's what people want.
And when the number of people grows the amount of GDP wanted also grows. So
people seem to be acting tomake GDP grow to match a growing reference for
GDP.

> It is easy to come up with a reasonable senario in which
> individuals, each acting to control variables important to
> them, produce a runaway, boom-and-bust production and
> consumption cycle.

That seems to be consistent with the view that the economy does involve
collective control.

> So from my perspective it seems a bit early to be claiming
> as fact the idea that aggregate production and consumption
> are components of a(n aggregrate) control process.

I don't think it's early. As I understand it, you first propose a model
based on observation and _then_ test it.

--
Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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may contain privileged information. Any unauthorized review, use,
disclosure or distribution is prohibited. If you are not the intended
recipient, please contact the sender by reply email and destroy all copies
of the original message.

[From Bill Powers (2005.01.13.0701 MST)]

Rick Marken (2005.01.12.1630)–

I think what I disagree with you
about is how much boiling down is

appropriate in an economic model. I want to boil down a lot more than
you

do.

In the Test Bed beta, I have boiled the system down to a consumer with
one goal for goods and another goal for savings, a manager with a goal
for inventory, a goal for investment reserve, and a goal for general cash
reserve, a plant that does the production and holds the plant inventory
and plant cash reserve and a household that receives goods into a
household inventory, and wages or capital income into a household cash
reserve,.

The manager is proposed to control plant inventory by adjusting prices,
and the plant cash reserve by adjusting capital distributions. The
consumer is proposed to control the household inventory by spending money
out of the household cash reserve, and the household cash reserve by
working for wages (the recipients of capital income do not work). Wages
in dollars pass from the plant’s cash reserve to the household’s cash
reserve. Work consists of producing goods at a certain productivity:
goods per hour worked. Wages are paid as dollars per hour worked. Goods
are sold at a price, so many dollars per good. The dollars pass from the
holusehold cash reserve to the plant cash reserve.

When this model runs you get a circular flow of goods and money in
opposite directions just like in TCP’s book. You can put leakage into it,
growth of population, growth in productivity, or any other factors you
think are important. If you don’t believe in leakage you can leave it out
and see what happens. If you think consumption is caused by income
(Keynes’ thesis) you can put that into the model and see what
happens.

All the arguments will come after people see what happens and don’t
believe the results. They will insist there’s something wrong with the
model if it doesn’t agree with their theory, and that will lead to more
careful construction of the model, including fixing the things they say
are wrong in it. This will focus arguments on the critical issues and
point out how to resolve them.

The main point of all this is to get economics on a model-testing basis
instead of an arena for flame wars, hotly defended prejudices,
superstition, and mathematical bumbling, its current condition.

This model needs to be expanded in several regards. One kind of expansion
would be to include multiple goods, multiple plants, and multiple
households, run by people with different settings for the assumed
reference levels, and possible different kinds of reference levels
(different strategies). In this way we could, for example, produce
supply-demand curves. If wage negotiations were included, we could
examine inflation. Adding banks would bring in effects of interest rates.
And so on.

If you were really going to
model the economy as interacting control systems

you would have to model (for the US) about 250,000,000 agents, each

controlling for hundreds of thousands of different variables (all the
goods

and services produced) by doing the hundreds of thousands of
different

things people can do to produce and consume these things. Of course
you

can’t do this. All modeling involves some degree of boiling down.

Yes. But the boiling down has to include everything that needs to be
included to create an explanatory model. You can’t, for example, just
assume that the economy will expand, and then create a model that will
behave that way. That’s modeling behavior, not modeling the system. You
have to allow for models that may sometimes expand and sometimes
contract, and include an explanation of what makes them do
that.

I think that, in the case of
economics, the boiling down (or aggregation)

should be done to a level that is both scientifically viable (in terms
of

accounting for the data) and relevant to economic policy decisions. I am
not

committed to a particular level of aggregation; I think what is
appropriate

will become apparent as the model development continues. My bias may be
to

go to a higher level of aggregation (boiling down) than you. But I bet
that,

if we both end up trying to model the economy at the same level (the
economy

of a nation, for example, rather than the economy of some segment of
a

nation, like a single household) we will end up at very similar levels
of

boiling down.

It’s legitimate to aggregate control systems when they all control
similar variables. You can aggregate, for example, working people who
control for saving money. Over the set of such people the amount
to be saved (the reference level) can range from zero to some maximum,
the loop gain likewise. But because they’re all controlling the same
variable, savings, you can aggregate them into a virtual control system
for purposes of predicting mass behavior – how much the economy saves
and how hard it tries to maintain the average level of savings by
adjusting spending and working. In my model, different managers may try
to control inventory at different levels, and do so by adjusting prices
with high or low gain, but such managers form a group that acts as a
virtual control system for the inventory of all plants managed in that
way.

Aggregate models will not predict very accurately because the actual
parameters have a wide range of values. To get more accurate models you
can create bins, with independent control systems having, for example,
weighted reference levels for the common controlled variable at the
center of each quintile. How many bins you use will depend largely on how
big your computer is and how fast it is. You just program for N bins, and
adjust N as appropriate. If you want total aggregation you set N = 1. I
was, the last time I worked on it, trying to set up the Test Bed that
way, so I could have P plants, H households, G goods, P prices, and so
on. The first test, of course, would be to see if the model still runs
properly with P = H = G = P … = 1. Then I would try setting them to 2
and see if everything still works. Then I’d set the numbers to 10000 with
appropriate parameter distributions and come back tomorrow to see what
happened.

“I” means, of course, “somebody”.

Best,

Bill P.

[From Rick Marken (2005.01.13.0830)]

Bill Powers (2005.01.13.-655 MST)--

Rick Marken (2005.01.12.1540)--

I've pointed to some, such as the steady decrease in the budget deficit
through the 90s while there were pronounced variations in the growth rate
throughout this period.

Or else that growth rate does not affect the deficit.

Of course.

Simply showing that there is
no effect does not show that there is any action being taken against the
supposed disturbance.

Of course. I wasn't saying that the data provide an appropriate test of
control, proving that the deficit is controlled. I was just pointing to
evidence of _possible_ control. The data are evidence in the sense of being
observations that would lead one to suspect that the deficit might be
controlled. It would take a lot more testing to prove that the deficit was
(or was not) under control.

Best

Rick

···

--
Richard S. Marken
MindReadings.com
Home: 310 474 0313
Cell: 310 729 1400

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