# Correlations and politics

Just catching up on a few points -- too much on CSGNET recently to read everything.

Correlations first.

[From Bill Powers (2007.07.24.1339 MDT)]

Richard Kennaway carried this even farther, proving that group data can be made up of subsets of individual data organized in an infinity of ways that have nothing to do with the group data. There is simply no way to deduce an individual's internal organization from group data: Kennaway put the QED on that.

As I understand what happened, that paper has been rejected and was never published.

I only tried "Science", which turned it down on the grounds of not being the sort of paper they would deal with, which I think is accurate. I never submitted it anywhere else. If someone knowledgable in the area would like to suggest a journal, I could dust it off and give it another go.

[From Bill Powers (2007.08.02.0834 MDT)]

Brief comment. I keep forgetting this, but my initial question on this statistics business was very simple: given a certain correlation, what is the probability that a statement about an individual that is based on group statistics will be incorrect?

That depends on what the statement is. For the statement "for this individual, the Y variable is above the mean", and a bivariate normal correlation between X and Y, I answer this in table 2 of my correlations article.

For zero correlation it is 50% (of course). For any positive correlation it is higher: c=0.5 gives 67%, c=0.8 gives 80%, c=0.9 gives 85.6%.

For the statement "the Y variable falls in a specified decile", the answer is in table 3.

For zero correlation it is 10%. At c=0.9 it is still only 25%, at c=0.95 it is 47%, and c=0.99 gives 78%. In other words, if you're measuring correlations, forget about decile estimation.

The rest is politics.

[From Bill Powers (2007.08.02.0834 MDT)]

The second comment is similar: can anyone lay out the theoretical basis for libertarianism, representative democracy, rule of law, dog-eat-dog, or whatever system concept likes behind the political discussions? We're in a theory-based seminar here, so it seems appropriate to ask what theoretical bases there are for the various points of view.

For libertarianism, I would recommend David Friedman's "The Machinery of Freedom". It's not online, but as a sampler you can read some sample chapters and some of his other writings on the topic at his website, http://www.daviddfriedman.com/

[From Rick Marken (2007.08.01.1012)]

Great post Jeff. I think one of the great questions of the 21st
century will be why a wonderfully humanistic model of human nature
(PCT) has been so attractive to free market types whose approach to
society seems so inhumane, to me anyway.

There is no need to wait. All questions of this form can be answered immediately, because mutatis mutandis, they all have the same answer.

You judge them to have an inhumane view, because you believe the free market (a) has certain consequences, and (b) these consequences are inhumane. You then assume that everyone believes (a) and (b). However, other people draw their conclusions from their beliefs. They do not draw your conclusions from their beliefs. Wondering why they do not reject their beliefs on the basis of your conclusions is not to the point.

If, however, you read those advocating free markets (see the reference to David Friedman above, and the mentions I have made of his work before in this forum), then you would know that such people do not, in fact, predict the consequences you expect. They predict completely different consequences. They also predict consequences of the policies you favour that are completely different from yours: that is why they reject those policies. You may disagree with their predictions, but, having read their predictions, and their arguments for them, you cannot claim that *they* favour the consequences that *you* predict for *their* beliefs, nor that *they* oppose the consequences that *you* predict for *your* beliefs.

To me, PCT makes a very strong theoretical support for libertarianism. PCT says that people do what it takes to achieve their goals, and that their goals are inside their heads, where you can't get at them. As a result, if you do not like someone else's goals, there is very little you can effectively do about it. The only thing you can ever do to anyone is create disturbances to their perceptions. They may find a way around whatever you did instead of changing their goals. If the disturbance is sufficiently large, maybe they will change their goals, but possibly in a way that is even less to your liking. I have never attempted the herding of cats, but that is the phrase that comes to mind.

Hence such things as the Laffer effect, that above a certain point, raising taxes reduces revenue (because people rearrange their affairs to avoid the tax). Hence the ineffectiveness of performance indicators as a basis for salaries, promotions, and funding (because people perform to the letter of the targets instead of what management really wanted). Hence the phenomenon that passing a law against something does not stop it happening.

If one does not understand that (a) people have their own purposes and (b) you cannot control anyone else's purposes, then one falls inevitably into the pattern of demanding more and more government while seeing it work less and less.

I was going to write more, but drawing the straight road from minimum wage laws to hanging dissidents from meathooks is perhaps a little strong for the present audience. However, I do have a few questions for anyone who thinks that a free market is "inhumane":

1. If you have ever run a company and employed people, how did you decide who to hire and what to pay them? Someone who could do the job, and the going rate?

2. If you have ever sold a house or a car, did you try to get as much as you could for it?

3. If you have ever made a major purchase, such as a house or a car, did you look at many candidates and choose the one best fitting your needs and budget, and bargain with the sellers for whatever reduction or extras you could get?

4. Have you ever bought or sold at auction? eBay counts.

···

--
Richard Kennaway, jrk@cmp.uea.ac.uk, http://www.cmp.uea.ac.uk/~jrk/
School of Computing Sciences,
University of East Anglia, Norwich NR4 7TJ, U.K.

[From Rick Marken (2007.08.03.1350)]

I was going to write more, but drawing the straight road from minimum
wage laws to hanging dissidents from meathooks is perhaps a little
strong for the present audience. However, I do have a few questions
for anyone who thinks that a free market is "inhumane":

1. If you have ever run a company and employed people, how did you
decide who to hire and what to pay them? Someone who could do the
job, and the going rate?

Have you ever worked at a company where upper management made 10 to
500 times what you make?

2. If you have ever sold a house or a car, did you try to get as
much as you could for it?

Have you ever owned a house that you could not possibly afford to buy
now because your country's middle class disappeared?

3. If you have ever made a major purchase, such as a house or a car,
did you look at many candidates and choose the one best fitting your
needs and budget, and bargain with the sellers for whatever reduction
or extras you could get?

You betcha.

4. Have you ever bought or sold at auction? eBay counts.

Sure. I've seen the market in action and it's a lot of fun.

I have nothing against markets. I just don't think they always give
what I consider to be the best solutions. I think markets arose as
soon as specialization developed in human production systems. The guy
who raised goats who wanted to have some bread with his milk had to
see how many loaves of bread he could get for how many goats. The
invention of money made this kind of market more efficient. And I
suppose the market works pretty well to determine how much of this you
can get for that. But I think there is intrinsic unfairness in the
market system that probably showed up shortly after the first goat was
exchanged for a few weeks worth of bread. People who specialize in
producing certain things will get more in exchange for their product
than those who happen to specialize in producing other things. The
guy who happens to make bread may turn out to be the Bill Gates of the
village because people want more bread than goat's milk. There's
nothing intrinsically more valuable about making bread than raising
goats; it's just the luck of the draw. I consider that somewhat unfair
-- a flaw in the market -- but it's OK as long as the discrepancy
doesn't become too large. But it often does become too large, for my
taste, anyway.

As I look around at current economies, I see results of a "free
market" that I don't care for. I don't like the fact that a few people
have enormous wealth and that others live in poverty and squalor. I
don't like the fact that the market has put "middle class" home
ownership out of reach of people with median incomes. There are many
of "solutions" that the market has come to that I don't care for;
ridiculously inequitable wealth distribution probably being the main
thing. I do not believe that people like Donald Trump, who is worth
billions, contribute a 10000 times more to society than people like
Bill Powers, who is apparently worth 1000s.

So, while I can't really think of any desirable alternative to a "free
market" for determining what people make and what things cost, I am in
favor of regulating that market in ways that will make things a little
fairer, from my perspective. That's why I favor a highly progressive
tax on all income (wages and capital). It allows the government to
redistribute income so that income distribution is a little closer to
what I (and, I think, most people) think is reasonable and that also
gives most everyone the ability to control their input better.

So I'm in favor of regulated markets simply because it is a way for me
to control my perception of economic fairness, in terms of wealth
distribution. I also think it makes for a more livable, civil society
and a more stable economy. I think the data bear that out, but we can
get to that.

Best regards

Rick

···

On 8/3/07, Richard Kennaway <jrk@cmp.uea.ac.uk> wrote:
--
Richard S. Marken PhD
Lecturer in Psychology
UCLA
rsmarken@gmail.com

[From Fred Nickols (2007.08.04.1625 ET)]

Re the snipped portion of Richard Kennaway's post below...

I am on pretty good terms with one of this country's leading statisticians
and, with your permission, Richard, will pass along your paper to him for
(a) a quick review and (b) a possible recommendation regarding a journal to
which to submit it.

Regards,

Fred Nickols
nickols@att.net

···

-----Original Message-----
From: Control Systems Group Network (CSGnet)
[mailto:CSGNET@LISTSERV.UIUC.EDU] On Behalf Of Richard Kennaway

I only tried "Science", which turned it down on the grounds of not
being the sort of paper they would deal with, which I think is
accurate. I never submitted it anywhere else. If someone
knowledgable in the area would like to suggest a journal, I could
dust it off and give it another go.

From Hank Folson (2007.08.04)

Richard Kennaway <jrk@CMP.UEA.AC.UK>:
...
However, I do have a few questions
for anyone who thinks that a free market is "inhumane":

Here are 4 variations on the questions:

1. If you have ever run a company and employed people, how did you
decide who to hire and what to pay them? Someone who could do the job,
and the going rate?

1a. If you have ever run a company and employed people, did you prefer to hire: Someone who could do the job, and the going rate?
Someone who could do the job, but was willing to do it for less than the going rate?
Someone who could do an outstanding job, but only for more than the going rate?

2. If you have ever sold a house or a car, did you try to get as much
as you could for it?

2a. If you manufacture housing or vehicles, do you try to influence
customers to buy more than they need, up to possibly more than they can
prudently afford?

3. If you have ever made a major purchase, such as a house or a car,
did you look at many candidates and choose the one best fitting your
needs and budget, and bargain with the sellers for whatever reduction
or extras you could get?

3a. Have you found that when making major purchases from
multi-billion dollar, multi-national corporations, you can convince
them to modify their products and/or pricing to suit you better?

4. Have you ever bought or sold at auction? eBay counts.

4a. When you sell at auction, is your goal to end up with the market
price? Or is your goal to get more than the market price?

···

----------

Is the second set of questions consistent with PCT? Is the second set of questions consistent with Libertarian philosophy?

Sincerely,
Hank Folson

[From Richard Kennaway (2007.08.06.1849 BST)]

[From Rick Marken (2007.08.03.1350)]
I have nothing against markets. I just don't think they always give
what I consider to be the best solutions.

These two sentences directly contradict each other. I am reminded of the New Yorker cartoon showing a couple in a restaurant on a date. The woman says: "Of course I don't want you to change at all. But sure, it would be great if you were completely different."

I think markets arose as
soon as specialization developed in human production systems. The guy
who raised goats who wanted to have some bread with his milk had to
see how many loaves of bread he could get for how many goats. The
invention of money made this kind of market more efficient. And I
suppose the market works pretty well to determine how much of this you
can get for that. But I think there is intrinsic unfairness in the
market system that probably showed up shortly after the first goat was
exchanged for a few weeks worth of bread. People who specialize in
producing certain things will get more in exchange for their product
than those who happen to specialize in producing other things. The
guy who happens to make bread may turn out to be the Bill Gates of the
village because people want more bread than goat's milk. There's
nothing intrinsically more valuable about making bread than raising
goats; it's just the luck of the draw. I consider that somewhat unfair
-- a flaw in the market -- but it's OK as long as the discrepancy
doesn't become too large. But it often does become too large, for my
taste, anyway.

So this is what you believe:
"Success is largely down to luck, not skill or effort."
"It is wrong for one person to have more than another."

Is this the system concept level that Bill was asking to see exposed?

My corresponding beliefs are these:
"Success is largely down to skill and effort, not luck."
"There is no such thing as too much success."

BTW, in the real world of farming, those who find bread profitable and goat milk unprofitable switch to bread production. Or wheat. Or wheat mills. Or something. No farmer "happens" to specialise in one product.

As I look around at current economies, I see results of a "free
market" that I don't care for. I don't like the fact that a few people
have enormous wealth and that others live in poverty and squalor. I
don't like the fact that the market has put "middle class" home
ownership out of reach of people with median incomes. There are many
of "solutions" that the market has come to that I don't care for;
ridiculously inequitable wealth distribution probably being the main
thing. I do not believe that people like Donald Trump, who is worth
billions, contribute a 10000 times more to society than people like
Bill Powers, who is apparently worth 1000s.

People get not what you or I may think they deserve, but what other people give them. People paid Trump to do what he does, which I understand from Wikipedia is property development.

You: "It is wrong for one person to pay another a large amount of money for something I don't consider worth that much."

Me: "It is good for people to strike whatever deals seem to them worth making."

So, while I can't really think of any desirable alternative to a "free
market" for determining what people make and what things cost, I am in
favor of regulating that market in ways that will make things a little
fairer, from my perspective.

You like the free market, but it would be great if it was completely different.

That's why I favor a highly progressive
tax on all income (wages and capital). It allows the government to
redistribute income so that income distribution is a little closer to
what I (and, I think, most people) think is reasonable and that also
gives most everyone the ability to control their input better.

How does taking someone's money away enable them to control their input better? It's like nailing the steering wheel in place to make the car travel straighter.

I understand, at second hand, that poverty in the US was gradually declining until the War On Poverty started, since when it has remained static. Giving poor people money does not seem to make them non-poor.

···

--
Richard Kennaway, jrk@cmp.uea.ac.uk, http://www.cmp.uea.ac.uk/~jrk/
School of Computing Sciences,
University of East Anglia, Norwich NR4 7TJ, U.K.

[From Rick Marken (2007.08.06.1210)]

Richard Kennaway (2007.08.06.1849 BST)--

> Rick Marken (2007.08.03.1350)
>I have nothing against markets. I just don't think they always give
>what I consider to be the best solutions.

These two sentences directly contradict each other.

Why? I have nothing against democracy either but it also doesn't
always give the best solutions. I think it's possible to want to
improve things without getting rid of them entirely.

So this is what you believe:
"Success is largely down to luck, not skill or effort."
"It is wrong for one person to have more than another."

Is this the system concept level that Bill was asking to see exposed?

That's not my system concept. I think "success" is a subjective
experience anyway (it's getting perceptions to match your references),
and that achieving it has largely to do with skill. And I think it's
fine for one person to have more than another. I do think there is
quite a bit of luck involved in how much of the economic "pie" one
manages to get; a lot of skill too but some luck. And I also think
people can end up with too much of that pie, for my taste, anyway.

My corresponding beliefs are these:
"Success is largely down to skill and effort, not luck."
"There is no such thing as too much success."

What do you define as "success"? I can think of many skillful,
hardworking people who were failures financially but were certainly
successful in other ways: Shubert and Edwin Armstrong (inventor of FM)
come immediately to mind.

BTW, in the real world of farming, those who find bread profitable
and goat milk unprofitable switch to bread production. Or wheat. Or
wheat mills. Or something. No farmer "happens" to specialise in one
product.

It wasn't profitability that I was talking about but how much profit
you get from certain enterprises. I was assuming that both the goat
and wheat farmer make a profit, even a hefty one. It's just that
circumstances make the rewards of wheat farming greater than those of
goat ranching. Another way of putting it is like this: a teacher in
the US makes 10-100 times less than the average lawyer. That's the way
the relatively free market works out what should be paid. I think that
result stinks. I think the skill and effort put in by most teachers is
not nearly 10 - 100 times less than that put in by lawyers. It may be
less, but not that much less. So I view that difference in
compensation as a poor free market solution. I imagine you don't. So
there we jolly well are, aren't we. There is a difference in system
concepts between us, but I don't think it is quite the one you
describe.

You: "It is wrong for one person to pay another a large amount of
money for something I don't consider worth that much."

Me: "It is good for people to strike whatever deals seem to them worth making."

OK, that's a bit closer to our difference.

You like the free market, but it would be great if it was completely different.

I suppose you could say that. Not "completely" different, though. I
actually would like the exchange part of the market to remain free, in
the sense that people should be allowed to sell their goods and
services for whatever they can can get for them. I would just like
the government to correct for what the populace agrees are unfair
discrepancies that result from operation of this market. If everyone
is happy with the result of the operation of the free market then
there will be no need to tweek it.

How does taking someone's money away enable them to control their
input better?

I think people with billions of dollars have more than enough money
available to control their input better. Taking away some of their
money would not hurt these people's ability to control but it would
contribute to the ability of others in the society to control their
inputs by paying for education and training (and for food and shelter
while they are getting that training, if necessary) that will allow
them to control better in the future.

I understand, at second hand, that poverty in the US was gradually
declining until the War On Poverty started, since when it has
remained static. Giving poor people money does not seem to make them
non-poor.

Right. What you have to give them is education and training and a
decent environment to live in while they are getting this training.
Redistribution of wealth does not mean taking money from the rich and
giving it to the poor. It means using the excess wealth held by the
rich to pay for things that help everyone control better (including
making more money) and that mainly means education, infrastructure and
recreation (for health).

Best

Rick

···

--
Richard S. Marken PhD
Lecturer in Psychology
UCLA
rsmarken@gmail.com

[From Richard Kennaway (2007.08.08.1732 BST)]

[From Rick Marken (2007.08.06.1210)]

> Richard Kennaway (2007.08.06.1849 BST)--
> BTW, in the real world of farming, those who find bread profitable

and goat milk unprofitable switch to bread production. Or wheat. Or
wheat mills. Or something. No farmer "happens" to specialise in one
product.

It wasn't profitability that I was talking about but how much profit
you get from certain enterprises.

That is what profitability means: the amount of profit. A farmer doesn't just switch out of goats if goats lose money -- he'll do it as soon as something else makes significantly more money.

Another way of putting it is like this: a teacher in
the US makes 10-100 times less than the average lawyer. That's the way
the relatively free market works out what should be paid.

The free market does not work out what people should be paid. It works out what they are paid.

I think that
result stinks. I think the skill and effort put in by most teachers is
not nearly 10 - 100 times less than that put in by lawyers. It may be
less, but not that much less. So I view that difference in
compensation as a poor free market solution. I imagine you don't.

Indeed I don't. You appear to believe this:
"People should be paid in accordance with the value of what they do."

My belief is this:
"People should be paid whatever anyone wants to pay them. If that means that work that I personally value highly is paid a fraction of the pay of work I value less, I don't care."

How do you propose to work out what people "should" be paid, given that no two people will agree? Government-set wages and prices? If you decree that teachers' salaries shall be doubled, who is going to pay, and who is going to stop a black market developing?

> You like the free market, but it would be great if it was completely different.

I suppose you could say that. Not "completely" different, though. I
actually would like the exchange part of the market to remain free, in
the sense that people should be allowed to sell their goods and
services for whatever they can can get for them. I would just like
the government to correct for what the populace agrees are unfair
discrepancies that result from operation of this market.

This is doublethink. You want prices to be freely set as long as they're the prices you approve of. I want prices to be freely set, period.

> How does taking someone's money away enable them to control their

input better?

I think people with billions of dollars have more than enough money
available to control their input better.

A moment ago, your standard of excessive wealth was 10 times the salary of an employee in a company. Now you're retreating to talking about billionaires, of which there are not actually all that many in the world. Two of them are notably giving away substantial sums.

BTW, divide your own income by 10, and you're looking at people who think that *you're* the bloated rich.

Redistribution of wealth does not mean taking money from the rich and
giving it to the poor. It means using the excess wealth held by the
rich to pay for things that help everyone control better (including
making more money) and that mainly means education, infrastructure and
recreation (for health).

Right, it means taking money from the rich and giving it to government contractors.

···

--
Richard Kennaway, jrk@cmp.uea.ac.uk, http://www.cmp.uea.ac.uk/~jrk/
School of Computing Sciences,
University of East Anglia, Norwich NR4 7TJ, U.K.

This didn't seem to make it earlier so I'm sending it again. Sorry if
it pops up later because it was stuck in a router;-)

···

---------- Forwarded message ----------
From: Richard Marken <rsmarken@gmail.com>
Date: Aug 8, 2007 11:07 AM
Subject: Re: Correlations and politics
To: "Control Systems Group Network (CSGnet)" <CSGNET@listserv.uiuc.edu>

[From Rick Marken (2007.08.08.1110)]

Richard Kennaway (2007.08.08.1732 BST)--

That is what profitability means: the amount of profit. A farmer
doesn't just switch out of goats if goats lose money -- he'll do it
as soon as something else makes significantly more money.

That's just conventional economic thinking. In fact, the farmer will
switch to the more profitable wheat only if he is controlling for
increasing profit. People are control systems, not the utility
maximizers imagined by clueless economists.

The free market does not work out what people should be paid. It
works out what they are paid.

I know.

How do you propose to work out what people "should" be paid, given
that no two people will agree?

I don't. As I said, I have no better solution than the free market. I
don't advocate that the government set wages and prices. I am for the
government minimizing the discrepancies through taxation.

This is doublethink. You want prices to be freely set as long as
they're the prices you approve of. I want prices to be freely set,
period.

Me too. There is no doublethink. I want things to operate pretty much
the way they already do operate in most modern industrialized
societies: relatively free market with highly progressive government
taxation for common infrastructure. The US is worse than other members
of this group only because it doesn't tax progressively enough and it,
therefore, has to borrow to pay for what little useful infrastructure
it provides. Things are going to continue getting uglier here in the
US unless a true social democrat takes over soon.

A moment ago, your standard of excessive wealth was 10 times the
salary of an employee in a company. Now you're retreating to talking
about billionaires, of which there are not actually all that many in
the world. Two of them are notably giving away substantial sums.

I just used billionaire as an example. I think the tax rate should be
highly progressive (as it is in most civilized industrial societies).
And there should certainly be a level of income below which there is
no tax at all or a negative tax.

BTW, divide your own income by 10, and you're looking at people who
think that *you're* the bloated rich.

Hey, I know I am bloated rich and I love it! But, like Warren Buffet,
who is a tad richer than me, I just believe that we richer people can
afford to give proportionately more to the common weal than others.
Right now I am paying a higher tax rate than Warren and even he knows
this is absurd. Greed is killing the soul (and the quality) of my once
great nation. Simple, stupid greed -- justified by the belief that
greed makes things better.

Best regards

Rick
--
Richard S. Marken PhD
Lecturer in Psychology
UCLA
rsmarken@gmail.com

--
Richard S. Marken PhD
Lecturer in Psychology
UCLA
rsmarken@gmail.com

That is what profitability
means: the amount of profit. A farmer

doesn’t just switch out of goats if goats lose money – he’ll do
it

as soon as something else makes significantly more money.

That’s just conventional economic thinking. In fact, the farmer will

switch to the more profitable wheat only if he is controlling for

increasing profit. People are control systems, not the utility

maximizers imagined by clueless economists.
[From Bill Powers (2007.08.09.0130 MDT)]

Rick Marken (2007.08.08.1110) –

I think you’re both overlooking how expensive it is to switch out of
goats and into wheat, or vice versa. Maybe a megafarmer can do it, but a
small one can’t. This is a bit like the way the labor market is thought
of by ivory tower economists. If you lose your job at General Motors,
well hey, just go to work in electronics, that’s a wide open market! The
fact that you need a couple of years of education to make the switch, not
to mention enough money to relocate from Detroit to Silicon Valley and
find one of those jobs and not starve while you’re doing in, is sort of
overlooked. Or else the attitude is “Things are tough all over. When
things get tough the tough get going.” If you don’t make it, the
clean-up crews will remove the bodies in the morning, so who
cares?

Best,

Bill P.

[From Rick Marken (2007.08.09.0820)]

Bill Powers (2007.08.09.0130 MDT)--

I think you're both overlooking how expensive it is to switch out of goats
and into wheat, or vice versa. Maybe a megafarmer can do it, but a small one
can't. This is a bit like the way the labor market is thought of by ivory
tower economists. If you lose your job at General Motors, well hey, just go
to work in electronics, that's a wide open market!

Hey, I can only deal with one economic misconception at a time;-)

My main point was that how people act depends on the results they want
and on disturbances to those results. If the goat farmer is not making
as much as the wheat farmer the goat farmer might change occupations
if 1) he can perceive the difference in income 2) he is controlling
for making more than the wheat farmer 3) he is willing to control for
taking the time and expense of making the change (your point above),
4) he is able to deal with disturbances, like droughts, when he starts
wheat farming, etc etc.

Economists seem to view people as little expected utility maximizing
boxes that act only to keep $x p($) (which is what utility is, $reward times the probability of getting that reward) maximized. When you look at people as systems trying to control for all kinds of things -- food, love, satisfaction, a better world for all (if your a liberal) or a better world for your clan (if you are a Republican) -- then the picture of what economics _is_ changes completely. Best Rick ··· -- Richard S. Marken PhD Lecturer in Psychology UCLA rsmarken@gmail.com (Resending, because it didn't appear to get out the first time.) [From Richard Kennaway (2007.08.09.1720 BST)] [From Rick Marken (2007.08.09.0820)] Bill Powers (2007.08.09.0130 MDT)-- I think you're both overlooking how expensive it is to switch out of goats and into wheat, or vice versa. Maybe a megafarmer can do it, but a small one can't. This is a bit like the way the labor market is thought of by ivory tower economists. If you lose your job at General Motors, well hey, just go to work in electronics, that's a wide open market! Hey, I can only deal with one economic misconception at a time;-) My main point was that how people act depends on the results they want and on disturbances to those results. If the goat farmer is not making as much as the wheat farmer the goat farmer might change occupations if 1) he can perceive the difference in income 2) he is controlling for making more than the wheat farmer 3) he is willing to control for taking the time and expense of making the change (your point above), 4) he is able to deal with disturbances, like droughts, when he starts wheat farming, etc etc. Quite so. That looks like a description of maximising income. Real farmers of all sizes really do make these sorts of decisions all the time, at least so I gather from occasionally listening to an early morning farming programme on the radio. They even diversify into things like jam production and hotel management if they see an opportunity. At least, that's how it works over here, and it's the U.S. that's supposed to be the land of go-getting entrepreneurs, not peasants who just sit on their plot complaining that the farmer next door is raking it in. Whatever goals people may have, nobody goes into business to go out of business. Whatever else they want, making their living is a precondition for it. You made that point yourself a message ago, saying that getting more money enables people to control better. You use that to justify giving people money taken from other people, but not to justify expecting them to do anything for themselves, and you actively oppose them being too good at it if they do. Economists seem to view people as little expected utility maximizing boxes that act only to keep$ x p($) (which is what utility is,$
reward times the probability of getting that reward) maximized.

That is not what utility is. Utility is observed by observing what people will exchange for what. In many situations a common medium of exchange (i.e. money) provides a convenient way to attach a number to it, but the number is not the utility, and economics is not centrally concerned with money at all.

Multiplying by the probability is not accurate. People are in general found to be risk-averse: they will prefer to receive a certain $50 than half a chance of$100. That is why riskier forms of investment generally pay more, on average, than safer ones: people are not willing to pay so much for riskier investments with the same average rate of return.

When
you look at people as systems trying to control for all kinds of
things -- food, love, satisfaction, a better world for all (if your a
liberal) or a better world for your clan (if you are a Republican) --
then the picture of what economics _is_ changes completely.

I don't think it does. But I haven't yet seen what such a revised version of economics would look like. Is "control-maximising boxes" an advance on "utility-maximising boxes"? There have been discussions on the list, but they've never gone very far. I've not always read them, so perhaps I have missed something.

···

--
Richard Kennaway, jrk@cmp.uea.ac.uk, http://www.cmp.uea.ac.uk/~jrk/
School of Computing Sciences,
University of East Anglia, Norwich NR4 7TJ, U.K.

(Rick M.) My main point was that
how people act depends on the results they want

and on disturbances to those results. If the goat farmer is not
making

as much as the wheat farmer the goat farmer might change occupations

if 1) he can perceive the difference in income 2) he is controlling

for making more than the wheat farmer 3) he is willing to control
for

taking the time and expense of making the change (your point above),

1. he is able to deal with disturbances, like droughts, when he
starts

wheat farming, etc etc.

(Richard K.): Quite so. That looks like a description of maximising
income. Real farmers of all sizes really do make these sorts of
decisions all the time, at least so I gather from occasionally listening
to an early morning farming programme on the radio. They even
diversify into things like jam production and hotel management if they
see an opportunity.

At least, that’s how it works over here, and it’s the U.S. that’s
supposed to be the land of go-getting entrepreneurs, not peasants who
just sit on their plot complaining that the farmer next door is raking it
in.

Whatever goals people may have, nobody goes into business to go out of
business. Whatever else they want, making their living is a
precondition for it. You made that point yourself a message ago,
saying that getting more money enables people to control better.
You use that to justify giving people money taken from other people, but
not to justify expecting them to do anything for themselves, and you
actively oppose them being too good at it if they
do.
[From Bill Powers (2007.08.11.0651 MDT)]

Richard Kennaway (2007.08.09.1720 BST) –

Richard K, I think you’re voicing the kind of reasoning that conventional
economists (and capitalists) have used for a long time. I don’t think
it’s right. Yes, people go into business to make money, because everybody
needs money in a money economy. But that’s not what I hear from people
who talk about going into business for themselves. Their main reason is
that they don’t want to work for someone else, and a second reason is
that they want to choose for themselves what they do for a living. It’s a
matter of controlling their own lives. People who have done this are
heard to joke, only it’s not really a joke, about getting out of their
9-to-5 40-hour work-week in order to put in 80 hours a week. But being
the boss instead of being bossed make it worth the effort, I guess. They
aren’t all fixated on being super-rich.

When you look at
people as systems trying to control for all kinds of

things – food, love, satisfaction, a better world for all (if your
a

## liberal) or a better world for your clan (if you are a Republican)

then the picture of what economics is changes
completely.

I don’t think it does. But I haven’t yet seen what such a revised
version of economics would look like. Is “control-maximising
boxes” an advance on “utility-maximising boxes”?
There have been discussions on the list, but they’ve never gone very
far. I’ve not always read them, so perhaps I have missed
something.

I don’t think the boxes are either utility or control
“maximizing” systems. I think they’re control systems. It’s not
“maximizing” to set your goals higher than you can ever reach.
When you do that you lose control. A true maximizing system is tricky to
design: it has to reverse its efforts when the maximum is passed, because
the feedback becomes positive at that point. And anyway, normal people
control for “enough”, not the maximum amount of anything they
can get. There is something wrong with people who really maximize: they
are obsessed and have lost control. There are jokes about maximizers:
“Oh, you like pancakes? Come on home with me, I have trunks full of
them.”

In America we have many people walking around who have lost control of
their weight: they are maximizing something and it is killing them. Very
rich people are obsessed with wealth; getting and keeping wealth eats up
their lives and they really have little else of worth going on. I grew up
a poor boy in a village full of millionaires, which was like billionaires
in the 30s and 40s. Being rich was about all they did. They didn’t seem
to have any more fun than I did, and their children called me
“Prof” in high-school because I liked to know things and
understand things – and they thought that was rather strange. I didn’t
like being around the parents very much – they were sometimes nice, but
whatever they did they had to do in such a way that money and possessions
featured prominently. That made it tough to socialize for a boy with one
suit and an job that paid $2.00 per hour. The view of wealth from below is a bit different from the way it looks when you’re floating on the surface. As you noted, there were some attempts to produce models of economic systems on CSGnet a while back. They were thwarted by a problem with one person (an economist) who couldn’t stand the idea of amateurs having anything to contribute to economic theory. He died, but those of us who clashed with him also liked him and somehow the energy behind this effort died, too. I suppose we should get back to it. There is a movement afoot in economics called “agent-based modeling.” It’s getting close to PCT but hasn’t really broken free of the old mold. It uses the radical concept that people are active agents and have something to do with economics (our economist pronounced “individual” with a sneer). My approach was entirely based on agents: people who were acting to control various variables, which I idealized as flows of goods and money around various loops. Managers, for example, controlled inventories by adjusting prices, their goal being to maintain a constant inventory (neither increasing nor decreasing). Lots of other similar goals could be defined. Consumers, too controlled for savings of a certain amount, and acquisition of goods at a certain rate (neither more nor less). I never got to wage negotiations or more sophisticated ideas, though wages could be adjusted and the results observed. The model was limited but behaved pretty realistically, I thought; our economist, however, was too offended to do much with it. I don’t think he understood it. Anyway, we do need a real theory of economics and I think PCT (in combination with knowledgable economists) could help generate one. I don’t think anyone has one yet. Best. Bill P. [From Rick Marken (2007.08.11.0745)] Richard Kennaway (2007.08.09.1720 BST)-- Quite so. That looks like a description of maximising income. I meant it to be a description of _controlling_ income. At least, that's how it works over here, and it's the U.S. that's supposed to be the land of go-getting entrepreneurs, not peasants who just sit on their plot complaining that the farmer next door is raking it in. The only ones complaining are the ones controlling their own income relative to their neighbor's. People whose income matches their reference and who are not controlling relative income won't have to try anything "entrepreneurial" even if the farmer next door is raking it in. Whatever goals people may have, nobody goes into business to go out of business. Whatever else they want, making their living is a precondition for it. You made that point yourself a message ago, saying that getting more money enables people to control better. Only if they don't already have enough money to control well. You use that to justify giving people money taken from other people, but not to justify expecting them to do anything for themselves, and you actively oppose them being too good at it if they do. Gee, I didn't know I said that;-) I think it's OK to give people money taken from others when the people being given the money have so little that they can't control at all and the people from whom the money is being taken have so much that taking some won't affect their ability to control at all. But the main justification I see for taking money from people (that is, the reason I think taxation is justified) is to pay for infrastructure that promotes the common good: education, transportation, courts, police and fire, health care, etc. Do libertarians oppose having a governing system that collects taxes to make investments in "social capital" like this? >When >you look at people as systems trying to control for all kinds of >things -- food, love, satisfaction, a better world for all (if your a >liberal) or a better world for your clan (if you are a Republican) -- >then the picture of what economics _is_ changes completely. I don't think it does. But I haven't yet seen what such a revised version of economics would look like. Is "control-maximising boxes" an advance on "utility-maximising boxes"? There have been discussions on the list, but they've never gone very far. I've not always read them, so perhaps I have missed something. It's not control maximizing that I think is going on; it's just collective controlling. My view of economics, as informed by control theory, is that an economy is a collection of control systems acting collectively to control their perceptions of things like food, love, cars, houses, travel, art, mathematics, etc. I started writing this yesterday and see that Bill Powers has written a reply (which I have not read yet). But I bet Bill will describe the difference between conventional and PCT economics. So I'll stop it here. I will just make one quick note: If the market is so great at determining remuneration for services, why does the market in countries like Britain, Norway, Sweden, Denmark, France pay their CEOs about 20 times what their average employee is paid while in the US we pay our CEOs over 450 times what the average employee is paid. I think the market is a little "freer" for our CEOs than for our workers;-) Best Rick ··· -- Richard S. Marken PhD Lecturer in Psychology UCLA rsmarken@gmail.com [From Kenny Kitzke (2007.08.11)] <Bill Powers (2007.08.11.0651 MDT)> <Richard K, I think you’re voicing the kind of reasoning that conventional economists (and capitalists) have used for a long time. I don’t think it’s right. Yes, people go into business to make money, because everybody needs money in a money economy. But that’s not what I hear from people who talk about going into business for themselves. Their main reason is that they don’t want to work for someone else, and a second reason is that they want to choose for themselves what they do for a living. It’s a matter of controlling their own lives. People who have done this are heard to joke, only it’s not really a joke, about getting out of their 9-to-5 40-hour work-week in order to put in 80 hours a week. But being the boss instead of being bossed make it worth the effort, I guess. They aren’t all fixated on being super-rich.> Bill, did I miss where Richard suggested people go into business to become “super rich?” I think you’re casting nets. You are generalizing, based upon “what you hear”…whatever that means, on why people go into business for themselves. What if what I hear is different? What if what Richard hears in England is different from what either you or I hear in the USA? And, who made you the one to decide what is right for others to do in how to earn a living or live regarding anything? You rail against using group data to characterize individuals: and rightly so. Then you take hearsay from a few individuals to characterize a group’s “main reason” for action and even claim to know their “second reason.” Do you have any actual data? Have you belonged to a small business association where the reasons hundreds of people have made this decision are made clearly known to you? Have you ever made this decision for yourself? I have done both. I would not dare to characterize the main or secondary reason why all (or most) sole proprietors make this choice based on what I hear my acquaintances say. There are way too many variables involved. And, I suspect that the way they combine in any one person to form their internal reference for “working for oneself” is unknown and frankly, unknowable, even for individuals, much less for groups of individuals. I can also testify that neither your main nor second reasons were major factors in my own decision to start my own business. I worked 20 years for others. Working for myself was a terrifying thought, not a desire. Nor did I change my field of endeavor. I did what I was doing before as a contractor rather than an employee. Your experience and understanding of such matters and their “rightness” has little credibility for me. They are just your opinions and the opinions of others sincerely differ from yours. I do admire your theory of human behavior and its credibility through its models and experiments. It seems right to me. How much is my opinion worth to you? ··· Get a sneak peek of the all-new AOL.com. [From Bill Powers (2007.08.12.0140 MDT)] Kenny Kitzke (2007.08.11) ··· Bill, did I miss where Richard suggested people go into business to become “super rich?” I think you’re casting nets. # He spoke of people “maximizing,” which is what most economists I know about believe is behind economic decisions. In businesses, I have always heard, the objective is to maximize return on investment. I don’t necessarily believe that this is a universal objective among actual businessmen (as opposed to theoretical ones). In fact, Newell (or was it Simon?) got a Nobel Prize for proposing that managers “satisfice” instead of “maximize” – that they set objectives for profit or production and try to satisfy them. Good old Wikipedia: The word satisfice was coined by Herbert Simon as a portmanteau of “satisfy” and “suffice”. Simon pointed out that human beings lack the cognitive resources to maximize: we usually do not know the relevant probabilities of outcomes, we can rarely evaluate all outcomes with sufficient precision, and our memories are weak and unreliable. A more realistic approach to rationality takes into account these limitations: This is called bounded rationality . Some consequentialist theories in moral philosophy use the concept of satisficing in the same sense, though most call for optimization instead. ===================================================================================== You are generalizing, based upon “what you hear”…whatever that means, on why people go into business for themselves. I admit it. In fact that’s what I said, isn’t it? I haven’t done a scientific survey of all businessmen (small to big); I’m basing my opinion on what a few of them have said to me in conversations, and what I have heard some of them saying to each other, and what others who are “leaders” say in news interviews. But this is just my impression, not the result of systematic research. I could be mistaken, though obviously I don’t think so right now. What if what I hear is different? What if what Richard hears in England is different from what either you or I hear in the USA? I would be interested in what you and Richard hear about this. And, who made you the one to decide what is right for others to do in how to earn a living or live regarding anything? Do you have any actual data? Have you belonged to a small business association where the reasons hundreds of people have made this decision are made clearly known to you? Have you ever made this decision for yourself? I have done both. I would not dare to characterize the main or secondary reason why all (or most) sole proprietors make this choice based on what I hear my acquaintances say. There are way too many variables involved. And, I suspect that the way they combine in any one person to form their internal reference for “working for oneself” is unknown and frankly, unknowable, even for individuals, much less for groups of individuals. I can also testify that neither your main nor second reasons were major factors in my own decision to start my own business. I worked 20 years for others. Working for myself was a terrifying thought, not a desire. Nor did I change my field of endeavor. I did what I was doing before as a contractor rather than an employee. I have the right to have some control over things that affect me, and so do other people. If a merchant cheats me I have a right to seek redress, as does everyone else. Of course if I steal from the merchant, the merchant has the same right. The critical aspect of how the owner of a firm with employees earns a living is that he earns it primarily through the labor and time of others. This creates the potential for severe conflict, because a business takes in only a certain amount of income after material costs and taxes and it must be divided among capital expenses, profit for owners, and pay for workers. The last I heard, about 60% went to capital expenses (including to owners), 40% went to labor. This is despite the fact that a far larger part of the work, skill, and expertise involved in gaining this income is provided by the workers. This division is the prime bone of contention between management and labor. It’s not really possible for a businessman running a company of any size to pursue only his own interests, because his actions and decisions affect a large number of people, not even counting the customers. No, but I’d like to hear what they say – and to find out if what they say is matched by what they do. No, I’ve made only one decision which was not to be a businessman. I don’t think it’s unknowable, but I do agree that testing specimens would be the best way to find out. One way to get a lead on this would be to look at the kinds of disturbances that businessmen resist the most strongly. That will speak louder than their words. In your case I don’t believe there are many, if any, employees involved. And since you contract with business organizations, I assume that your work has to satisfy someone on the other end of the contract, just as an employee would have to do. It’s not quite like a business that employs people and sells to the general public. Your experience and understanding of such matters and their “rightness” has little credibility for me. They are just your opinions and the opinions of others sincerely differ from yours. I do admire your theory of human behavior and its credibility through its models and experiments. It seems right to me. How much is my opinion worth to you? OK, so lay out how your opinions differ from mine, and what you base them on. Quite a lot, actually, especially after hearing you speak about your areas of expertise at the last CSG meeting. Speak your mind. Best, Bill P. [From Bill Powers (2007.08.12.0140 MDT)] Kenny Kitzke (2007.08.11) ··· While I was looking at wikipedia, I thought I’d check out economics: ============================================================================= A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay : “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Scarcity means that available resources are insufficient to satisfy all wants and needs. With Absent scarcity and alternative uses of available resources, there is no economic problem . The subject thus defined involves the study of choices as they are affected by incentives and resources. ======================================================================================= This is interesting to me because it defines economics as a study of conflict, and clearly identifies “choices” as attempts to resolve conflicts. Economists I have known think conflict is good, but prefer to discuss the winners. They don’t speak much of unresolved conflict in which everybody gets crippled (like the dreaded gasoline price wars). Losers can sink or swim, and it serves them right. As to the consumers, let them eat cake. In economics, “the community” does not include consumers (see Keynes). Best, Bill P. [From Bill Powers (2007.08.12.0140 MDT)] Kenny Kitzke (2007.08.11) ··· More wikipedia: ===================================================================================== Main article: Neoclassical economics is reflected in an early and lasting neoclassical synthesis with Keynesian macroeconomics, [32] and in the supply and demand model of markets. Is usually used as a starting point for microeconomics . It represent incentives and costs as playing a pervasive role in shaping decision making . An immediate example of this is the consumer theory of individual demand, which isolates how prices (as costs) and income affect quantity demanded. ====================================================================================== Here, in the “consumer theory of individual demand,” is where we find the model of human organization. The consumer theory of individual demand presents indifference curves. These curves show the tradeoff for the consumer in buying different numbers of goods of two kinds, X and Y. Of course this can be expanded to any number of goods. ============================================================================== For an individual, indifference curves and an assumption of constant prices and a fixed income in a two-good world will give the following diagram. The consumer can choose any point on or below the budget constraint line BC. This line is diagonal since it comes from the equation . In other words, the amount spent on both goods together is less than or equal to the income of the consumer. The consumer will choose the indifference curve with the highest utility that is within the budget constraint. I3 has all the points outside of their budget constraint so the best that the consumer can do is I2. This will result in them purchasing X* of good X and Y* of good Y. Income effect and price effect deal with how the change in price of a commodity changes the consumption of the good. The theory of consumer choice examines the trade-offs and decisions people make in their role as consumers as prices and their income changes. ============================================================================= The points X* and Y* show the maximum amount of X and Y that can be obtained under a particular budget constraint. If the budget limit is higher, both X and Y are purchased in greater amounts. In other words, a person can never get enough of X or Y. If the person were ever satisfied with the amount of X and the amount of Y, then raising the budget limit would not increase the amount of either one that is purchased. So the theory of consumer demand is based on the “scarcity” concept of economics. It also fails to include the concept of a reference level, because the reference level defines the amount of a good that is considered “enough”, at which level the person will cease any effort to get more of it regardless of its price. In my present circumstances, you would have to pay me to give me a second car, if only enough so I could advertise it for sale and insure and license it to keep in on the street until sold (my garage is full of stuff). In my economic models, the consumer has a reference level for the amount of goods purchased per unit time, and another for the amount of savings desired. There is also a fixed (but adjustable) wage. This creates a law of supply and demand without the need for indifference curves, or rather it generates indifference curves automatically as a consequence of interactions among different control systems. And it allows for the case in which the income is greater than what is needed to satisfy all the reference levels. Purchases do not have to rise with income as is the case under neoclassical economic theory (Keynes believed the same thing). Note also that the control-system model also shows the Giffen Effect, in which raising the price of one good causes a person to buy more of it (this happens when there is a budget constraint and the two goods provide different kinds of benefit at different costs). Bill Williams thought this was an important contribution of PCT to economics. So PCT leads to a theory of economics fundamentally different from neoclassical ideas, by showing the basis for the so-called law of supply and demand and showing that scarcity is not needed to generate it. Of course it explains “satisficing” too. Is there a Nobel Prize for explaining why someone else got a Nobel Prize? Best, Bill P. Re: Correlations and politics [From Richard Kennaway (2007.08.08.1732 BST)] and others [From Rick Marken (2007.08.06.1210)] and others I’m just back from a week away, and find a weird series of interchanges between you two, based entirely, so far as I can see, on your individual ideas about morality. I have seen no evidence of scientific enquiry from either of you on this matter. Richard (and Rick): What are the side-effects of a transaction freely entered into? Do they ever disturb a controlled perception of anyone not party to the transaction? Do they ever affect another person’s environmental feedback paths in such a way as to make control easier or more difficult? What are “rights”, and why are “rights” considered to be outside of the realm of discussion? Why is something a “right” in one culture not a “right” in another? Why do “rights” evolve and change over time within a culture? ··· Richard said: "My belief is this: “People should be paid whatever anyone wants to pay them. If that means that work that I personally value highly is paid a fraction of the pay of work I value less, I don’t care.” Consider this situation: X is a strong guy with a known-to-be-nasty group of friends (think Cosa Nostra). X conducts a transaction with Y, by simple discussion: X “I think you should pay me$100”; Y “Why would I want to do this”; X
“Because you like me, DON’T YOU?”; Y “Here’s
$100”. That’s certainly a free transaction, and both parties benefit, Y by getting$100, X by being (temporarily) assured of not
having his shop trashed or himself beaten up.

Now Z, who sweeps floors for X, comes along and says “I’ve
swept your floors all month, and now I’d like the $100 we agreed you would pay me”. X: “I haven’t got the$100, as I gave it to
Y”.

Questions (for Richard, but anyone can answer): (1) Has Z been
affected by the transaction, freely entered into by X and Y? (2)
According to your moral theory, does Z have any “right” to
influence the transaction between X and Y? (3) If Y was not backed by
his friends but was X’s favourtie nephew, would that change your

Richard said:

My belief is this:

"People should be paid whatever anyone wants


to pay them. If that means that work that I personally value highly is
paid a fraction of the pay of work I value less, I don’t
care."

In the example, did X value the work of Y more highly that that
of Z?

Could you discuss other side-effects of transactions freely
entered, such as, for example, a transaction whereby X and Y agree
that Y should cut all the trees on the land of X, paying X handsomely
for them, thereby subjecting the land of neighbour Z to extensive
erosion?

Could these questions be answered without using the concept of
“rights” imposed by some higher authority or by your own
systems principles? Could they be answered by reference to what would
be likely to happen in an environment of control systems interacting
through a common environment rather than only with each other in
isolated dyads acting in an abstract infinitely resourced
environment?

[From Bill Powers (2007.08.12.0140
MDT)]

Kenny Kitzke (2007.08.11) –

While I was looking at wikipedia, I
thought I’d check out economics:

# ============================================================================= A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay: “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Scarcity means that available resources are insufficient to satisfy all wants and needs. With Absent scarcity and alternative uses of available resources, there is no economic problem. The subject thus defined involves the study ofchoices as they are affected by incentives and resources.

This is interesting to me because it
defines economics as a study of conflict, and clearly identifies
“choices” as attempts to resolve conflicts.

That is one way of looking at it, for sure, but it misses the
possibility that the resources in question can be newly generated by
activity (building a road increases the resources available to all
people along its path except perhaps for those whose property is
expropriated).

The PCT question is how the effects of economic transactions
affect the ability of each person to control their perceptions. These
effects may involve controlled perceptions directly (of the people in
the transaction, which, if agreed, should bring each participant’s
controlled perceptions closer to their reference values), may be
disturbances to other controlled perceptions in the participants or in
bystanders, or may affect the environmental feedback paths available
for perceptual control by the participants or other people, then or
later. Using non-renewable resources is a prime example of the latter,
as is altering the cmposition of the atmosphere or the oceans.

Richard and Rick have been kind enough to share their beliefs.
Here’s mine:

0: One can consider a continuum from “good” to
“bad”, which is a perception in the observer. In what
follows, unless otherwise stated I am the observer.

1. If any action or event either increases the ablity of some
control system to control its perception or brings that perception
closer to its reference value, without affecting the ability of any
other control system to control its perception, that’s
“good”. (The action or event in question may or may not be
part of the output of the control system whose perception is under
consideration).

2. If any action or event either decreases the ablity of some
control system to control its perception or brings that perception
further from its reference value, without affecting the ability of any
other control system to control its perception, that’s

3. Most actions and events both influence controlled perceptions
in one or more control systems and affect the abilities of some
control systems to control their perceptions. Whether the result is
“good” or “bad” for an affected organism depends
on how the highest level control systems in that affected organism
(person, animal, vegetation …) are affected; whether the effect is
“good” or “bad” overall depends in particular on
the highest level control systems of the observer who is making the

4. My personal “good-bad” judgment says that no one
person is privileged over any other, so if some action or event
improves the ability of a small number of people to control while
equally reducing the ability of a large number of people to control,
that’s bad. I do not believe that reducing the ability of a bacterium
to control is necessarily “good” or “bad”, but for
organisms between bacteria and humans it is better to increase rather
than decrease their ability to control their perceptions – therefore
there is a balance to be struck between increasing the ability of some
people to control some perceptions and that or some animals (or trees)
to control theirs.

5. [Back to quasi-technical argument] The change in ability to
control from the addition or subtraction of one dollar to the
available capital is greater, the fewer dollars one has. Hence,
transferring one dollar from a rich person to a poor person would be
“good” if it were an isolated event. Whether in any specific
case it would be “good” depends on the side effects of the
transaction.

On balance I agree with both Rick and Richard in the
following:

Rick:

Redistribution of wealth does not mean
taking money from the rich and

giving it to the poor. It means using the excess wealth held by
the

rich to pay for things that help everyone control better
(including

making more money) and that mainly means education, infrastructure
and
recreation (for health).

Richard:
Right, it means taking money from the
rich and giving it to government contractors.

And employees, and improving the abilities of both rich and poor
to control, not to mention enhancing the abilities of those
contractors and employees to control their perceptions.

Whether this is “good” or “bad” depends on
your personal sense of ethics and morality. In mine, as stated above,
it’s “good”. In Richard’s, I infer from the tenor of the
exchange that it’s “bad”.

Martin

[From Bill Powers (2007.08.12.1130 MDT)]

## Martin Taylor (2007.08.12)

This is interesting
to me because it defines economics as a study of conflict, and clearly
identifies “choices” as attempts to resolve
conflicts.

That is one way of looking at it, for sure, but it misses the possibility
that the resources in question can be newly generated by activity
(building a road increases the resources available to all people along
its path except perhaps for those whose property is
expropriated).

If the resources in questions are regenerated so there is no longer a
scarcity, then according to Robbins there is no longer an economic
problem, and if I interpret that correctly, economic principles do not
apply.

I report that conclusion; I don’t agree with it.

The PCT question is
how the effects of economic transactions affect the ability of each
person to control their perceptions. These effects may involve controlled
perceptions directly (of the people in the transaction, which, if agreed,
should bring each participant’s controlled perceptions closer to their
reference values), may be disturbances to other controlled perceptions in
the participants or in bystanders, or may affect the environmental
feedback paths available for perceptual control by the participants or
other people, then or later. Using non-renewable resources is a prime
example of the latter, as is altering the cmposition of the atmosphere or
the oceans.

I think there is a step that has to precede this level of analysis;
namely, the step of modeling the economy from first principles to see how
it actually works. Only when we understand the consequences of organizing
it in various ways can we have any basis for a rational design, or argue
about which consequences are preferable to which others. Many assertions
are made about how this or that action will affect the economy; I very
seriously doubt that anyone, even an economic guru, actually knows what
those effects will be.

By first principles I mean the simplest facts of control: consumers have
reference conditions for goods, labor, leisure, savings, and other
things; producers have their own reference signals as managers for the
conduct of business, and are also consumers with consumer-like goals. The
environment has properties relevant to economics. If we can incorporate
the most important of goals and their associated control processes into a
model, we can start trying different actions to see their effects. I
won’t really believe anything anyone says about what will happen until I
can see a model behaving as they say it will. Nobody is smart enough to
deduce the results in his head.

We can build models on what we know, and argue about the results, and
improve the models to deal with each others’ objections, until we arrive
at a model that we all agree is acceptable. Then we can watch it work and
have some basis for consensus. Short of that, all we can do is exchange
preferences and prejudices.

Best,

Bill P.

[Martin Taylor 2007.08.12.14.54]

[From Bill Powers (2007.08.12.1130 MDT)]

Martin Taylor (2007.08.12) --

The PCT question is how the effects of economic transactions affect the ability of each person to control their perceptions.

I think there is a step that has to precede this level of analysis; namely, the step of modeling the economy from first principles to see how it actually works.

We can build models on what we know, and argue about the results, and improve the models to deal with each others' objections, until we arrive at a model that we all agree is acceptable. Then we can watch it work and have some basis for consensus. Short of that, all we can do is exchange preferences and prejudices.

I'm not sure whether to call this defeatist or idealist. Either way, it's a good way to pre-empt other approaches, and, I think unhelpful. The equivalent in physics would be to argue that one should not study thermodynamics until one can model the quantum interactions among all the particles in a system.

"First principles" in PCT includes a lot of general statements that follow from the basic claim: "All behaviour is the control of perception", and from straightforward physical arguments.
Example: It is not possible to control exactly N independent perceptions through an environment with M degrees of freedom where M < N. (The degrees of freedom are, of course, measured in units of inverse time).
Example: If two control systems control their perceptions as the same function of environmental variables, they can do so provided each has a tolerance zone and the two tolerance zones overlap.
Example: The side effects of any action are highly likely to be nearly orthogonal to any specific perception, but it is highly likely that they will disturb some other perception. And so forth.

Statements like these require no models. They are, if correctly stated, simply consequences of normal science outside of PCT, and can be used to develop consequent statements that MUST be true of any PCT model that respects the underlying assumptions (which it must do if it is to represent observable data), in the same way that complicated theorems of Euclidean geometry follow from the interrelations of a few simple axioms. And as with Euclid, it is important that the assumptions of the axioms be respected, because failure in one basic proposition to represent observable reality can result in falsity of the derived propositions. That's where reality checks come in: does the real world actually behave that way?

Most PCT simulations violate obervable reality in that they ignore the necessary sources and sinks of energy. Usually, this doesn't matter, but when we get talking about resource limitations and conflict (resources often being food supply and fossil energy supply) even a PCT model probably would have to take into account the energy supply to the individual control units modelled.

It is always better, of course, if one can produce a model that uses only elementary control units linked by defined signal pathways, and that model accurately reproduces observed data. However, such success never demonstrates that the model is a true representation of the thing modelled. Nor does failure of the model to reproduce data accurately indicate that it is a false model; it may have inaccurate parameter values, or it may be correct but incomplete in that it fails to account for some influences that turn out to be important.

What is best is when different lines of enquiry support each other: models are constructed only of elements for which evidence can be found in the structure of the thing modelled, are based on physical (including chemical and physiological) understanding, and produce results that match data. But none of these lines of enquiry should be used rhetorically or practically to turn off the other lines.

-----------And Now for Something Completely Different-------------------

Going back some years, to your paper with Tom Bourbon in the PCT special issue of International Journal of Human-Computer Studies, I called it "propaganda", a term to which you objected. I did not then understand your objection, but recently I read somewhere a comment about the "American prejudicial connotation of 'propaganda', a connotation that does not exist in English usage" (or words to that effect). You must have thought that my description of your paper as "propaganda" suggested that it was in some way false or unfair, whereas to me it simply meant that the paper was intended to support a position or point of view. Since I was unaware of the difference in usage, as, I presume, were you, the misunderstanding was, in retrospect, almost inevitable.

Martin