From[Bill Williams 24 March 2004 6:50 AM CST]
[Peter Small (2004.03.24) in commenting on
Michelle Ivers (2004.03.24 1445 EST) wrote:
The problem I'm having with PCT is that many people > are
seeing PCT as being at a higher level organization > than I feel
is warranted.
This is Peter's perception, but it is a mistaken perception.
[Peter doesn't see control theory as] an overall
concept into which other concepts have to fit. I see it
more as a neat little concept that is useful to
incorporate into other concepts higher up the
hierarchy.
This idea of concepts fitting into the hierarchy of other > concepts is
brought
out nicely by Herbert Gintis in an > article he wrote in February 2003
entitled "Towards a > Unity of the Human Behavioral
Sciences" (http://www-unix.oit.umass.edu/~gintis/unity_abst.html)
In this paper, Ginis put a strong case
Don't believe this for a moment. Gintis's argument is fatally defective.
And, it is easy to demonstrate the deficiency. As far as I know, the
Santa Fe people have yet to make a fundamental contribution to
economic theory. The Gintis paper is based upon a fundametnally
mistaken premise-- maximization.
for putting Game Theory at the top of an organizing
conceptual framework.
Not at all. Not even close.
This would put PCT into proper perspective.
Peter's a bright guy, but he has got this all wrong. All wrong.
Not only this, it gives a new
perspective to the current discussion between Bill >Powers and Bill
Williams on using PCT in economics.
Peter is almost as fun to play with as Rick.
First the discussion between Bill Powers and myself has had nothing at all
to do with applying control theory to economics. So far at anyrate the only
subject of discussion has been a review of an area of agreement regarding
time and modeling, and the start of a discussion concerning macro economic
principles.
In the Gentis paper to which Peter provides a link there appears an
assertion in the section 3: "The Universality of the Rational Actor Model"
their appears an assertion:
In the first sentence in this section Gentis says,
"The rational actor model asserts that agents have _preferences_ reflecting
their utilities and the trade-offs among these wants, and that agents
maximize their utility...."
The recent shift of mainstream economics to a game theoretic stance is often
said, as Peter and Gentis are asserting that game theory provides the answer
to everything, or at least a better answer to the question of how to provide
a foundation for social theory. However, as my quotation from Gentis
indicates, and I thank Peter for bringing the paper to my attention, the
basis of the game theoretic analysis, and this goes back to Frank Knight in
the 1920's, remains a conception of behavior that is based upon the
principle of maximization. The difficulty presented by adopting
maximization as your foundational principle is that it is a conception that
can not provide reasonable answers to easily specified situations. Among
these is the Giffen Paradox. The principle of maximization assumes that
preferences always take the form such that applying the principle of
maximization will identify an optimum pattern of behavior-- and when applied
in economics it doesn't work. The maximization principle has been known not
to work since Alfred Marshall introduced this problem into the mainstream of
discussion in his Principles text in 1895.
When I was a graduate student as a thesis I attempted to develop an
alternative to the principle of maximization. I used the Giffen paradox as
an
anomalous case from which to make this attempt. But, I didn't get anywhere,
so I bluffed my way into a Ph.D. As some people will tell you I
am good at bluffing. Thirteen years later, and still trying to find a
method that would explain the Giffen behavior I encountered Bill Powers. He
was interested in economics, but didn't see a way to apply control theory to
economic questions. Together we solved the paradox over a long
weekend.
The difficulty that I had, knowing the economic side of the issue, and the
difficulty Powers had knowing modeling, was that to solve the problem
you needed to know more than anyone single person at the time knew.
Knowing modeling alone wasn't enough, and neither was knowing the
economics. However, one the problem was solved by combining what we knew, I
did a literature search and I found that the problem had
been solved. See item 4 in the bibliography below. But, Beckman for some
reason didn't go on to apply control theory to enough other
problems in economics to demonstrate its applicability. If you happen to
read the paper which I wrote and Marken edited for "American Behavioral
Scientist" be warned that some parts are all fucked up. Marken thought, as
usual, that he was smarter, knew more, and etc etc, and he
attempted to improve the paper I'd written with consulting me.
So, giving the principle of maximization a game theoretic gloss, ala Gentis
doesn't explain the
Giffen anomaly. However, control theory does explain the anomaly, and in
addition provides the
basis for asserting that no commensurable preference function can explain
Giffenness.
The bibliography is a bit out of date, however, as far as I know nothing of
any significance has happened in the
last year or two, or even threee.
Bill Williams
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