Economics Part II

[From Rick Marken (2006.06.23.1625)]

Marc Abrams (2006.06.24.1314)--

As I posted to JIm I am not interested in discussing economics per se on this list.

You may not be interested in discussing economic facts but you are clearly interested in discussing economic theories (such as Rothbard's "insights"; I had to take a shower after reading a couple of paragraphs). I'm not interested in discussing economic theories until I know what the economic facts are that we're trying to explain.

I'm still waiting to hear what the facts are on which you base your conclusion that there was a depression in 1929 and that FDRs policies exacerbated that depression. (And I would love to see the data relating state tax rates to state growth rates).

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

From [Marc Abrams (2006.06.24.0301)]

Rick, in reflecting on my last post I think it just might be worthwhile telling you why I have no interest in discussing much of anything with you,

First of all, my experience in this forum tells me that "discussions" with you end in acrimony and bad feelings. They also, for me at least, are unprofitable, unenlightening, and generally a very large waste of my time.

I said I owed you no explanations but I'm going to tell you why I believe this happens.

You are ideologically driven. Every "discussion" I have seen you enter, you enter for the purpose of "proving" a point or a belief you happen to hold. For you "knowing" that you believe in the "right" idea is very important. There doesn't seem to be room on this planet for more than one "right" view and it just so happens that you have it all the time.

Second, I understand that my ignorance far out weighs my knowledge even in subjects I think I know fairly well. So keeping an open mind is an important way of considering new ideas and things I may not have considered before. So I consider my "ignorance" a strength in that it continues to point me to areas where I may improve and expand my understanding. You on the other hand see ignorance as a "weakness" and you are unwilling to accept it for yourself or others.

Your economic "analysis" s a great example of all of this. What is the

purpose of your analysis? I'm not quite sure, but on the surface it seems you are trying to "prove" that Republicans are "bad" and taxes & Democrats are good for the economy.

For this you do some superficial correlation tests between the GNP and tax ratesand by golly, you come up with the fact that when taxes are raised the GNP continues to grow, so your claim than becomes. well how bad can taxes be if the GNP grows?

You call this an "analysis"? Apparently you don't take everything Bill POwers says sriously. The economy is so complex that no single mind minus simulation can understand how all the intereactions actually play out, yet you have no problem making a claim like this based on a single correlation. Sorry Rick, I would expect a great deal more from someone who was actually interested in understanding how taxation affects economic growth.

But that was not the purpose of your "analysis" was it? No. It was driven by your desire to "prove" that a certain set of beliefs you hold were valid and true and that makes for some _very_ bad science.

It is not even the fact that your knowledge of economics is superficial, but that you have no desire to improve it.

What can I gain by talking economics with you? Can you enlighten me? Not from what I have seen and certainly not from what you have done. So why bother. I'm afraid you have no idea as to how economics can inform perceptual control because you believe nothing can inform perceptual and I'm afraid you don't know enough about "micro" economics to understand how and where perceptual control informs it.

But again, this in itself is no crime. It is your seeming unwillingness to want to learn that limits your "discussions" to advocacy seesions for your beliefs.

Now to answer your post and be done with this thread.

[From Rick Marken (2006.06.23.1625)]

> Marc Abrams (2006.06.24.1314)--
>
  > As I posted to JIm I am not interested in discussing economics per se > on this list.

You may not be interested in discussing economic facts but you are

clearly interested in discussing economic theories (such as >Rothbard's "insights";

No, I'm not interested in discussing Rothbard. I'm interested in discussing how economics informs perceptual control and how perceptual control informs economics.

Rothbard happened to be the author of a book on "data" about the Great Depression so I offered it to you as a way for you to educate yourself on how others view the role of FDR and Hoover and their contribution to the Depression. That was what were discussing wasn't it?

No, that was what I _thought_ we were discussing. But it really wasn't. We were actually discussing your lack of understanding about the economic conditions surrounding the Great Depression and my views countered your beliefs and was contrary to your "analysis" so the "discussion" than turned to dicrediting me personally, as it always seems to do when you come up short. But I'm not biting this time, sorry.

I had to take a shower after reading a couple of paragraphs). I'm not

interested in discussing economic theories until I know what the

economic facts are that we're trying to explain.

A good start Rick and you might want to apply this very good rule to your own "analysis"

So lets start from the beginning. What are you trying to explain with your analysis and what does this have to do with perceptual control?

If would not ask you to read Rothbard's book in order to learn economic theory. Here, Rothbard is _applyoing_ his understanding of economics and trying to provide some insights as to why the Depression took place. His voice in one among many and that is the point. Before you go off thinking you have some unique view that no oine has ever had you would be wise to research it a bit and see where the thinking tends to go. There is a tremendous amount of diverse thought in economics and some economic "facts" are more generally accepted than othes. But to make a general blanket statement about all economists is silly and shows your lack of understanding.

I'm still waiting to hear what the facts are on which you base your

conclusion that there was a depression in 1929

And you will continue to wait. But if I was interested in discussing this any further I would ask;

First we need to define _what_ a depression is, what a recession is, and how the two differ. That is, what criteria are you using to make this claim. So since you are making a claim that FDR got us out of a Depression I'd like to know exactly what you think he got us out of and what policies effectuated that helped do this. I of course would like to know what "data" you are using to come to your conclusions.

and that FDRs >policies exacerbated that depression.

Read Rothbard's book. And in order to understand what Rothbard is saying you might want to get yourself up to speed a bit on economic history and theory, but I know you don't need to do that. Your "understanding" of your "data" is all you need and I will not try to disuade you. It is futile.

(And I would love to see the data relating state tax rates to state

growth rates).

So, what's stopping you? Go find the data, its available. Except that data would not fit neatly into your ideology so you will not seek it out because it could disconfirm everything you believe in with regard to taxes and you will not let that happen. But I will give you something to chew on; BTW, don't take this guysword for it, check his sources.

_Lower Tax Rates Mean Faster Economic Growth_

by Alan Reynolds

Alan Reynolds is a senior fellow with the Cato Institute.

Jeff Madrick recently wrote a New York Times article boldly claiming "there is no evidence" that "low-tax countries grow faster than high-tax countries."

"One of the most interesting research papers on the subject," he wrote, was done "a few years ago" by Sergio Rebelo and Nancy Stokey." That paper first appeared in 1993 -- the same year Rebelo co-authored a more ambitious study with William Easterly, who Madrick quotes approvingly. That study, "Fiscal Policy and Economic Growth," found that "marginal tax rates ... tend to be highly correlated with the level of income." Easterly and Rebelo also found "a negative association between growth and one tax variable: the marginal tax rate."

But Madrick, of course, only mentions Rebelo's other 1993 paper. And he also prudently avoids mentioning that Stokey's more prominent co-author, Nobel Laureate Robert Lucas, has estimated that cutting taxes on capital to zero could raise the stock of capital by 30 percent to 50 percent.

According to Madrick, Rebelo and Stokey "noted that income tax revenue in the United States rose to 15 percent of gross domestic product in 1942, from about 2 percent in 1913, when the tax was introduced. ... But, they concluded, 'This large rise in income tax rates produced no noticeable effect on the average growth rate of the economy.'"

The first problem is that averaging growth rates from World War I through the Great Depression obscures what happened when. From 1913 to 1921, the highest income tax rate soared from 7 percent to 73 percent and average economic growth was minus 0.3 percent. The top tax rate was then cut from 56 percent in 1922 to 25 percent from 1925 to 1928, and economic growth averaged 6 percent from 1921 to 1929.

In 1930, there was a huge increase in taxes on trade (tariffs). In 1932, the Hoover administration nearly tripled all tax rates, putting the highest rate at 63 percent. From 1929 to 1938, economic growth again averaged minus 0.3 percent. But lumping it all together, as Madrick does, makes it technically correct to say that growth of real GDP averaged 2.9 percent from 1913 to 1942, down modestly from a 4.3 percent pace from 1870 to 1913.

The second problem is that Rebelo and Stokey confuse tax revenues with tax rates. Revenues collapsed after the huge increases in tax rates and tariffs. Individual income tax receipts in 1939 were still 10.3 percent smaller than in 1930. And revenues from the steep tariffs on imports fell 38.4 percent from 1929 to 1936. In 1942, by contrast, individual income tax revenues rose by 130 percent in a single year because of war mobilization. To refer to the tax receipts of 1942 as if that was part of a long-term trend was deceptive.

Madrick also misquotes Joel Slemrod and Jon Bakija's 1996 book, "Taxing Ourselves," by saying, "Relatively low-tax nations like the United States and Japan did well, they found, but so did high tax nations in Scandinavia." What Slemrod and Bakija actually wrote was that "high tax countries like Sweden ... did relatively poorly."

Aside from that subtle distinction between doing well and doing poorly, it is not even clear what it means to boast that Sweden has merely a third less GDP per person than the United States when well over half of Sweden's GDP consists of government spending. Numerous studies, including Easterly and Rebelo, show that government consumption spending is bad for growth. My recent column "Supply Side Goes to Harvard" cited two of the latest studies showing that big government and high tax rates hold economies down.

Madrick instead looks backward, claiming Slemrod and Bakija "contradict earlier findings that purported to show that high taxes reduced growth rates." One of those "earlier findings" was the Easterly-Rebelo study. But Easterly and Rebelo were estimating the effect of marginal tax rates -- the income tax on each extra dollar earned. Slemrod and Bakija, by contrast, were talking about average tax receipts from 1970 to 1990 -- the sum of all taxes divided by GDP. That is a useless measure of tax distortions because taxes that do the most damage usually yield the least revenue.

Countries with the most progressive income tax rates, with top rates of 50 percent or more, collect very little revenue from that tax. That includes Japan and Turkey, which Slemrod and Bakija mislabeled as "low-tax" countries. France, with income tax rates as high as 57 percent, collects only about 6 percent of GDP from that tax. The United States, with federal tax rates below 40 percent, collects about 11 percent of GDP. When New Zealand's top tax was still only 33 percent, their individual income tax brought in nearly 17 percent of GDP. And since Russia adopted a 13 percent flat tax last year, revenues have been rising dramatically.

Countries trying to collect punitive taxes from the rich, like France and Sweden, end up short of rich people to tax. As a result, they mainly rely on flat-rate payroll and sales taxes (VAT). That is another reason we cannot combine revenues from all taxes to gauge the economic damage from high income tax rates. A 1999 study in the Journal of Public Economics by Kneller, Bleaney and Gemmell found that progressive income taxes were clearly harmful to growth, but found far less damage from flat-rate taxes on what people earn or spend.

Contrary to Madrick, the evidence from 1913 to 1942 shows that increased taxes and tariffs were accompanied by long periods of zero economic growth, and that sharply lower tax rates from 1922 to 1929 had the same invigorating effect that lower tax rates had in1964-69, 1983-89 and 1997-99. Ironically, even Madrick's handpicked sources, Easterly and Rebelo, found that marginal tax rates affected both the level of income and the rate of economic growth. Far from proving "there is no evidence" that lower tax rates are conducive to faster economic growth, Madrick has inadvertently demonstrated the extreme degree of trickery required to defend such an indefensible remark.

···

---------------------------------------

When you can come on this forum and say you were wrong and attribute it to your lack of knowledge rather than simply making an inadverdant "mistake" that would be a clear signal that you have opened up your mind to new ideas and are willing to listen to new ideas and accept the fact that no one view is perfect or certain.

BTW; were we in a recession or depression in 1929? If so in what month did one evolve to the other?

Regards,

Marc
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[From Rick Marken (2006.06.24.1720)]

Marc Abrams (2006.06.24.0301)--

For this you do some superficial correlation tests between the GNP and tax rates and by golly, you come up with the fact that when taxes are raised the GNP continues to grow, so your claim than becomes. well how bad can taxes be if the GNP grows?

I presented data that shows that growth rates were higher during periods when federal income tax rates were higher and than when they were lower. This is data that is readily accessible. I presented it because it puzzles me. There seems to be a general consensus in economics that increasing taxes leads to decreased growth. But here is readily available data that suggests that this is not the case. So my puzzlement is this: what is the basis for the economic consensus on the relationship between taxes and growth?

You call this an "analysis"?

No. I call it data. It's an observation. I don't know why it is observed, I just see that it is. You had said that taxes reduce economic activity (a claim that I believe all economists of all persuasions would agree with). But you didn't present any data to support that claim. You did say that such data is available at the state level. I'd like to see it. I just presented data that suggests that, at the federal level, anyway, increasing taxes does not necessarily lead to decreased economic activity (in terms of growth).

What can I gain by talking economics with you?

A respect for data, perhaps?

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

From [Marc Abrams (2006.06.25.0226)]

-> [From Rick Marken (2006.06.24.2230)]

  > But you said that the negative effect of taxes on economic activity was a "fact of life". What do you know that the economists don't >know?

Rick, I have a Masters in Economics.

  > And I don't want you to be puzzled about what I think this economic stuff has to do with PCT so I'll tell you (though I'm sure I've told >you many times before). I see an economy as control writ large. An economy is a population of individuals who are collectively acting to >produce the goods and services they want to consume. So economics is (or should be) the study of the collective control of perception.

Collective control??? Beam me up Scotty.

Bye, Bye Rick

···

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[From Rick Marken (2006.06.26.0900)]

Marc Abrams (2006.06.25.0226)--

Rick Marken (2006.06.24.2230)

But you said that the negative effect of taxes on economic activity was a "fact of life". What do you know that the economists don't know?

Rick, I have a Masters in Economics.

Congratulations. But what I would like to see is the data on which economists base their conclusion that increased taxes reduce economic activity. I assume that their must be such data. The data I presented shows only that a negative relationship between taxes and economic activity is not necessarily a fact of life.

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

From [Marc Abrams (2004.08.18.1124)]

Given Sowell's definition of economics I think a fair question is one that I
think Bill Williams has been trying to address and that is; Is economics an
_emergent_ property of two or more people or is it something that can be
understood by looking at one person.

I believe Bill's line of argument is that it _cannot_ be analyzed or
understood within the confines of one "skin bag" :-), hence the PCT
'sophistry'. I think Bill has a very important point.

Bill Williams cannot think about, or understand the economic literature for
anyone else. Bill W has his point of view, so given this Rick, and Sowell's
definition, what do you think and what is the basis for that understanding?

Marc

Re: Economics Part II
[From Rick Marken (2004.08.18.1030)]

Marc Abrams (2004.08.18.1124)]

Is economics an emergent property of two or more people or is

it something that can be understood by looking at one person.

Economic phenomena, such as growth, inflation, productivity, distribution of wealth (Gini index), etc., are clearly emergent in the sense that they result from the interaction between many people with their environment as well as with each other. So economic behavior is certainly an “emergent property of two or more people”.

But I also think that understanding control at the individual level can help one conceptualize what is going on in an economy at the aggregate level. I think economics is about control at the aggregate level. That’s why I got interested in it. I think economics is control writ large, something that I have not seen expressed in any economics text or by any economist.

When you look at the economy through control theory glasses you see collective control of input. An aggregate of controllers is continuously acting to produce the inputs it wants to consume. As in any control loop, input (consumption) and output (production) occur simultaneously, and output is the means by which input is brought to a reference state. The economic system (money, banks, markets, etc) is the environment in which outputs are produced and distributed to the aggregate consumer. So we have:

···
                                *                

Aggregate Controller * Economic system

                                *

Aggregate reference for input–>C *<–Aggregate input (consumption)

                            >   *           ^

                            >   *           |                    

                            v   *           |

                          error * -->Aggregate output (production)

                                *                 

                                *               

Given this view of the economy, an economy can be seen to be “working” to the extent that the aggregate controller is able to consume what it wants; when there is zero error. So control theory actually suggests possible metrics for how well an economy is doing. Economies (like that of North Korea) that fail to produce a reference amount of goods would get low marks but so would economies (like ours) that successfully produce plenty of goods but fails to distribute them in a way that satisfies the individual references of a large subset of the individuals that make up the aggregate.

Regards

Rick

Richard S. Marken

MindReadings.com

Home: 310 474 0313

Cell: 310 729 1400

From[Bill Williams 18 August 2004 4:40 PM CST]

[From Rick Marken (2004.08.18.1030)]

Marc Abrams (2004.08.18.1124)]

I'd like to thank Marc for restating one of objections that can be made to PCT economics. In scanning the rather extensive postings made by Bill Powers and Rick Marken, what I perceive is a point of view that is so internally inconsistent that I don't see that there is much of point my attempting to sort out what is being said.

I do, however, think Bill Powers attempt to correct Rick Marken's exposition of a PCT psychology is well worth careful study. As far as I know, I have never found any fault with Bill Powers treatment of agency and causation-- at least the one that he hints at in the 3 or four page apendix to _B:CP_. Rick's recent attempt to expound a PCT, as Bill Powers points out, would appear to indicate that Rick doesn't comprehend Bill Powers' position. I regard this as some crucial evidence that more work needs to be carried in in expounding the causal relationships involved in control theory.

Rick's exposition takes the form of a sequential/causal model. BilL Powers' conception, as I understand it, takes the form of a simultaneous equation/causal model. I've suggested in the past, and will do so again now, that sorting out the conception of causation as it applies to the application of control theory to human behavior would be likely, and perhaps more likely than any other effort at this point, to advance the project of understanding human behavior more adaquately. Untill this issue has been sorted out better than it is at present I don't think any of us is in a position to tackle more difficult issues. Perhaps I should say, _even more difficult_ issues.

[From Rick Marken (2004.08.18.1510)]

Bill Williams (18 August 2004 4:40 PM CST)

I do, however, think Bill Powers attempt to correct Rick Marken's exposition
of a PCT psychology is well worth careful study.

My exposition was on two different ways of explaining the same observation;
the observation of an S-R relationship. The conventional explanation is in
terms of an input-output model; the PCT explanation is in terms of a control
of input model. Bill objected to my use of the word "cause" to describe the
functional relationship between S (disturbance) and R (output) in the
control model.

Rick's recent attempt to expound a PCT, as Bill Powers points out, would
appear to indicate that Rick doesn't comprehend Bill Powers' position.

Well, I hope I can figure it out one of these days.

RSM

···

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

From[Bill Williams 18 August 2004 7:30 PM CST]

[From Rick Marken (2004.08.18.1510)]

Bill Williams (18 August 2004 4:40 PM CST)

I do, however, think Bill Powers attempt to correct Rick Marken's exposition
of a PCT psychology is well worth careful study.

My exposition was on two different ways of explaining the same >observation;

Since, as far as I know behaviorism never defined what a stimulus was, there never was a stimulus to observe.

I will repeat my assertion that Bill Powers' comments are worth careful study.

the observation of an S-R relationship. The conventional >explanation is in
terms of an input-output model; the PCT explanation is in terms >of a control
of input model. Bill objected to my use of the word "cause" to >describe the
functional relationship between S (disturbance) and R (output) >in the
control model.

Rick's recent attempt to expound a PCT, as Bill Powers points out, would
appear to indicate that Rick doesn't comprehend Bill Powers' position.

Well, I hope I can figure it out one of these days.

I am not going to hold my breath. However, Rick's failure to "figure it out" in regard to the most basic concepts of control theory, inclines me to an extreme skepticism regarding his comments regarding economics.

Maybe it would be better for Rick to figure out the basics concerning control theory before proceeding to a new field in which he has repeatedly demonstrated an unfamiliarity with the meaning of basic terms.

Bill Williams

From[Bill Williams 18 August 2004 7:40 PM CST]

[From Rick Marken (2004.08.18.1030)]

Marc Abrams (2004.08.18.1124)]

Is economics an _emergent_ property of two or more people or is
it something that can be understood by looking at one person.

Economic phenomena, such as growth, inflation, productivity, distribution of wealth (Gini >index), etc., are clearly emergent in the sense that they result from the interaction >between many people with their environment as well as with each other. So economic behavior >is certainly an "emergent property of two or more people".

Rick's use of the term "emergent" once angain illustrates that he doesn't have a grasp of the meaning of the economic terms nvolved. Currently the macro-economic concepts are defined in terms of what many heterodox or critical economists have repeatedly identified as austicly individualist conceptional foundation-- or the headonistic measures of income. Unfortuantely these crticis have yet to encounter Rick so they can have little conception of how autustic it is possible to be. I like Rick's use of the term, "certainly."

But I also think that understanding control at the individual level ...

As Bill Powers has pointed out Rick fails to understand a crucial point-- the nature of causation and the chage that an adoption of control theory demands in regard to the conception of agency and the process of control

Bill Williams

[From Bill Powers (2004.08.18.1715 MDT)]

Rick Marken (2004.08.18.1510)--

> Rick's recent attempt to expound a PCT, as Bill Powers points out, would
> appear to indicate that Rick doesn't comprehend Bill Powers' position.

Well, I hope I can figure it out one of these days.

There may be people reading CSGnet who think you mean that. I attest to
your expert comprehension of PCT, though we may argue about details once in
a while.

Best,

Bill P.

From[Bill Williams 18 August 2004 9:10 PM CST}

[From Bill Powers (2004.08.18.1715 MDT)]

Rick Marken (2004.08.18.1510)--

# Bill Williams said, { People not familiar with the peculiar methods of communicating, or failing to communicate on the CSGnet might be puzzled where the message that follows came from )

>> Rick's recent attempt to expound a PCT, as Bill Powers >>>points out, would appear to indicate that Rick doesn't >>>comprehend

Bill Powers' position.

Well, I hope I can figure it out one of these days.

There may be people reading CSGnet who think you mean that. I >attest to your expert comprehension of PCT, though we may argue >about details once in a while.

Yes, we all know that Rick is a PCT Hero. Readers of the CSGnet, however, are also aware that Rick sometimes makes "giant leaps in the wrong direction." Some of us are more picky about such details that others. Such details as Rick's argument that pedophiles might make good police officers.

I've got an idea! Why not send Rick to Mars. This would seem to be fair to me. Some of think that is where Rick came from.

If the causal status of a disturbance is a minor but as yet unresolved detail in the comprehension of control theory by PCT experts and heros, I don't see that there is any need to await the arrival of the lunatic fringe.

The very idea that a crew of PCT "experts and heros" is up to the task of reconstructing economics is laughable.

PCT folks ought to get their story straight. What _is_ the status of a disturbance in the proper application of control theory to human behavior?

Bill Williams

Re: Economics Part II

From [ Marc
Abrams (2004.08.18.1602)]

[From Rick Marken (2004.08.18.1030)]

Marc
Abrams (2004.08.18.1124)]

Is economics an emergent property of two or more people or is

it something that can be understood by looking at one person.

Economic phenomena, such as growth, inflation, productivity, distribution of
wealth (Gini index), etc., are clearly emergent in the sense that they result
from the interaction between many people with their environment as well as with
each other. So economic behavior is certainly an “emergent property of two
or more people”.

But I also think that understanding control at the
individual level can help one conceptualize what is going on in an economy at
the aggregate level. I think economics is about control at the aggregate level.
That’s why I got interested in it. I think economics is control writ
large, something that I have not seen expressed in any economics text or by any
economist.

I applaud your effort and don’t
mean to be rude, but you don’t have a clue. First, why reinvent the
wheel? System Dynamics and its ‘control’ paradigm has been modeling
economic processes for decades. What do you think PCT can add to this effort
and understanding?

I also think you might be putting the
cart before the horse here? Do you really think you know enough about the micro economic processes involved here between
two or three people before you worry about the applicability to a hundred million
and the macro effects?

Isn’t the focus of PCT on an individual’s
behavior?

For instance, how would PCT define the following
terms; Price, Costs, Constraints, Consequences, Incentives, Supply, Demand,
Goals, Motivation, Policies, Money, Productivity, Competition, Wealth, Growth, Incremental
Substitution, etc.

The PCT
definitions to these economic concepts are not as obvious as you might like to
think they are, and before you go around trying to make ‘models’ of
a macro economy you better be able to detail exactly
what these things represent and how you might be able to measure them.

How can you define and measure a concept
like ‘growth’ for a population when you can’t define it for
an individual in PCT? What does it mean from a PCT perspective
to be ‘wealthy’ or ‘poor’? Are these self concepts, concepts
we apply to others, or both? Does wealth provide us with a greater ability to
control? If so, how?

My point here is that I think PCT (or some derivative) could
and should inform both SD and economic thinking. I don’t think it provides
anything useful at the macro level that is not already being provided for by SD.

By ‘emergent’ properties I mean
properties that exist only between individuals. That is, a property
cannot exist within one individual alone, but does obviously reside in each individual.

When you look at the economy through control theory glasses you see collective
control of input. An aggregate of controllers is continuously acting to produce
the inputs it wants to consume. As in any control loop, input
(consumption) and output (production) occur simultaneously, and output is the
means by which input is brought to a reference state. The economic system
(money, banks, markets, etc) is the environment in which outputs are produced
and distributed to the aggregate consumer. So we have:

···
                                *

Aggregate Controller
*
Economic
system

                                *

Aggregate reference for input–>C *<–Aggregate input
(consumption)

                            >
  •       ^
    
                            >
    
  •       |
               
    
                            v
    
  •       |
    
                          error
    
  • –>Aggregate output (production)

                                  *
              
    
                                  *
    

Given this view of the economy, an economy can be seen to be
“working” to the extent that the aggregate controller is able to
consume what it wants; when there is zero error. So control theory actually
suggests possible metrics for how well an economy is doing. Economies (like
that of North Korea) that fail to produce a reference amount of goods would get
low marks but so would economies (like ours) that successfully produce plenty
of goods but fails to distribute them in a way that satisfies the individual
references of a large subset of the individuals that make up the aggregate.

Are you kidding? Rick, Bill W. has been trying to tell you something for a
very long time. Let me try and put it a bit differently. You are not interested
in modeling a economic system. You
are interested in trying to figure out a way to show how ’wealth’,
or at least wealth as defined by Rick, should be more evenly divided among a
population of people. This my friend was, is, and always will be a POLITICAL
question, not an economic one.

You really don’t understand some very basic economic principles do you? This
analysis is so full of holes I don’t even know where to begin and I’m
a rank amateur at economics.

If things are ‘produced’ and
not ‘distributed’ where do they go?

I guess you prefer a system where someone
else or another group of people decide what you can and should own. Even
socialist countries know this never works. How much of a ‘subset’
of the population is entitled to which goods? And who decides?

Do yourself a favor and put it too rest.
Take your political agenda somewhere else. Although I don’t approve of
how Bill W. played with you, when
you do things like this you just leave yourself wide open for pot shots. The
fact of the matter Rick is that PCT does not
support your vision for the world. Stop trying to shoe horn it into something
that just doesn’t fit.

Marc

From[Bill Williams 19 August 2004 5:20 AM CST]

While I have some points of disagreement with Marc, I do appreciate many of the things he says in the following post.

I have added some remarks using the pound (#) sign.

From [Marc Abrams (2004.08.18.1602)]

[From Rick Marken (2004.08.18.1030)]

Marc Abrams (2004.08.18.1124)]

Is economics an _emergent_ property of two or more people or is
it something that can be understood by looking at one person.

Economic phenomena, such as growth, inflation, productivity, distribution of wealth (Gini index), etc., are clearly emergent in the sense that they result from the interaction between many people with their environment as well as with each other.

# This is not, as I understand it what most people who use the term emergent mean by emergent.

So economic behavior is certainly an "emergent property of two or more people".

# At this point Rick's use of "certainly" is very premature.

But I also think that understanding control at the individual level

# There _is_ no invidual level.

can help one conceptualize what is going on in an economy at the aggregate level. I think economics is about control at the aggregate level.

# Rick has never display an understanding of what "aggregate" means when it is used by economists. Check out what Rick has to say about the income-expenditure identity.

That's why I got interested in it. I think economics is control writ large, something that I have not seen expressed in any economics text or by any economist. Neither for that matter does Bill Powers. Powers admits to this incomprehension when he said he didn't understand professor Bruun's argument concerning the identity of savings and investment.

I applaud your effort

# In my view, Rick's efforts are of the same value as someone who is attempting to learn to drive, does so by driving about on the wrong side of the road. The effects that I see are distructive.

and don't mean to be rude, but you don't have a clue. First, why reinvent the wheel? System Dynamics and its 'control' paradigm has been modeling economic processes for decades. What do you think PCT can add to this effort and understanding?

I also think you might be putting the cart before the horse here? Do you really think you know enough about the _micro economic_ processes involved here between two or three people before you worry about the applicability to a hundred million and the macro effects?

Isn't the focus of PCT on an individual's behavior?

For instance, how would PCT define the following terms; Price, Costs, Constraints, Consequences, Incentives, Supply, Demand, Goals, Motivation, Policies, Money, Productivity, Competition, Wealth, Growth, Incremental Substitution, etc.

The _PCT_ definitions to these economic concepts are not as obvious as you might like to think they are, and before you go around trying to make 'models' of a macro economy you better be able to detail _exactly_ what these things represent and how you might be able to measure them.

How can you define and measure a concept like 'growth' for a population when you can't define it for an individual in PCT? What does it mean from a PCT perspective to be 'wealthy' or 'poor'? Are these self concepts, concepts we apply to others, or both? Does wealth provide us with a greater ability to control? If so, how?

My point here is that I think PCT (or some derivative) could and should inform both SD and economic thinking. I don't think it provides anything useful at the macro level that is not already being provided for by SD.

By 'emergent' properties I mean properties that exist _only_ _between_ individuals. That is, a property cannot exist within one individual alone, but does obviously reside in each individual.

# I have not been enthuisatic about the use of the term "emergent" for a number of reasons. However, the definition that Marc provides may be a useful one.

When you look at the economy through control theory glasses you see collective control of input.

# Rick "sees" lots of things, whether the things that Rick "sees" are actually there is another matter. I am sorry that I am hung up on defintions, but it occurs to me that "collective control" may be an undefined term.

An aggregate of controllers

# "An aggregate of controllers?" As far as I know Rick has never specified how his _per impossible_ individual controllers are to be aggregated into a collective control system.

is continuously acting to produce the inputs it wants to consume. As in any control loop, input (consumption) and output (production) occur simultaneously, and output is the means by which input is brought to a reference state. The economic system (money, banks, markets, etc) is the environment in which outputs are produced and distributed to the aggregate consumer. So we have:

···

*
Aggregate Controller * Economic system
                                    *
Aggregate reference for input-->C *<--Aggregate input (consumption)
                                > * ^
                                > * |
                                v * |
                              error * -->Aggregate output (production)
                                    *
                                    *

# As far as I know Rick has never been told where this "aggregate controller" comes from. I might suggest that Rick read some economic history. How come for example after the stock market crash of 1929, and the following "great depression" something like a third of the American labor force was unemployed. Rick's digram does not have the capacity to explain what happened following 1929 in this country and the following world wide depression. No advocate of Bill Powers' dad's Leakages thesis has attempted to explain what happened economicly following the "great crash." Is there a place for such an event in Rick's model? Clearly no.

Given this view of the economy,

# It is pretensions for Rick to call this diagram "a view of the econoomy." I am going to call it a delusion. The delusion, or correction, one of its delusions is the absence of money in Rick's proposed control system. I guess we could say that the money all leaked out. Sorry Marc, but I can't resist. Bill Powers may describe me insane, but at least I have this idea that money is an important factor in a capitalist economy. Can you find where the money when in Rick's diagram? Maybe I am missing something here, but perhaps you could exlain to Rick about this thing called money.

an economy can be seen to be "working" to the extent that the aggregate controller

# Maybe if one has Rick's capacity for seeing things that aren't defined is taken into account, this makes sense. If one likes to start with defined terms it doesn't.

is able to consume what it wants; when there is zero error. So control theory actually suggests possible metrics for how well an economy is doing. Economies (like that of North Korea) that fail to produce a reference amount of goods would get low marks but so would economies (like ours) that successfully produce plenty of goods but fails to distribute them in a way that satisfies the individual references of a large subset of the individuals that make up the aggregate.

# Rick ought to remember the, ( sorry for the possible political content here, but I think it was a Republican ) offical who corrected a reporter who asked about what the reporter thought was a problem of unemployment. The economic spokesperson said, "Unemployment isn't the problem, unemployment is the solution." Rick fails to explain how, again _per impossible_ individual references are aggregated into a collective reference. I like Marc's comment that follows: Rick just doesn't get it.

Are you kidding? Rick, Bill W. has been trying to tell you something for a very long time. Let me try and put it a bit differently. You are not interested in modeling a _economic_ system. You are interested in trying to figure out a way to show how 'wealth', or at least wealth as defined by Rick, should be more evenly divided among a population of people. This my friend was, is, and _always_ will be a _POLITICAL_ question, not an economic one.

You really don't understand some very basic economic principles do you? This analysis is so full of holes I don't even know where to begin and I'm a rank amateur at economics.

If things are 'produced' and not 'distributed' where do they go?

# Lets not forget about the issue of where the money goes when it leaks!!! Rick's PCT economics is actually a leap in the wrong direction in comparison with Bill Powers' dad's efforts. At least Bill Powers' dad's economics was, as I understand it, largely concerned with the issue of money and purchasing power. Rick's "economy" because it doesn't explain stuff like the "great crash" and the "great depression" really is, as Bill Powers in another connection once said-- "a gigantic leap in the wrong direction." Bill Powers likes to sooth Rick's feelings after he says such stuff, but I will claim that the "great crash", the "great depression" and the second great world war were something more than technical details.

I guess you prefer a system where someone else or another group of people decide what you can and should own. Even socialist countries know this never works. How much of a 'subset' of the population is entitled to which goods? And who decides?

# What Rick is proposing is that we turn our attention from the existing economic literature-- some of this literature at least attempts to explain-- the great crash, the great depression, and the war economy that followed. We are suposed to dispose of everything that has been learned and wait for folks like Bill Powers and Rick Marken get around to telling us how it really is. This from the people who think that pedophiles would make good police officers, and it isn't going to cost us anything to go to Mars. I wonder, does anyone remember me having made such silly economic policy proposals?

Marc says,

Do yourself a favor and put it too rest.

Rick, it appears to me that you and Bill Powers really are engaged in a destructive, irresponsible, entirely implausible and self-deluded effort to think about the economic process in the absence of an adaquate preparation to do so with any approach to cooherence. It doesn't really have anything constructive to do with developing a sustainable and cummulatively developmental conception of the economy. In my view it is a result of a "ghost dance" between Bill Powers and his dad. Just one more in a string of the catastrophies of cybernetics.

Marc says,

Take your political agenda somewhere else. Although I don't approve of how Bill W. played with you,

Marc, how do you feel about the folks who deny that there was a holocaust?

In my opinion the great economic disruptions-- the great crash, the great depression, the massive unemployment, were events that contributed to Facism and thus eventually enabled Hitler to carry out the German attempt at a final solution. Bill Powers' and Rick Marken's approach to economics-- first discard eveything, and then wait upon the heros and experts of PCT sophistology to provide you with a real understanding of the economic process is potentially very distructive way of going about attempting to think about economic, political and social theory.

You may not appreciate my example, but remember when Rick insisted upon spouting off about the 911 events. One conspicious part of this was a consistent treatment of people from the Islamic and Arabic world, especially the radical elements as being less than human. To his credit Bill Powers rejected Rick's attempt to associate PCT with Rick's assertions that those with who Rick has no sympathy can, and even I suppose in Rick's view should be treated in a way that demeans their humanity.

The economic threads have been a bit different. Mainly I view the difficulties as having there source in Bill Powers' unfortunate relationship with his dad. As best I can judge the situation, Bill Powers doesn't actually have much of any actual interest in economics itself. If he were genuinely interested in economics I don't think he would be generating such howlers such as the "it isn't going to cost anything to go to Mars." Instead Bill Powers' interest in economic seems to derive from an attempt to put something over on his dad by demonstrating that he can out do his dad. But, the ghost dance is a complicated business.

when you do things like this you just leave yourself wide open for pot shots.

Yeah, Sometimes Rick really does make it easy for me. And, it seems to me that it would be more responsible to place more of the responsiblity upon Bill Powers. However, this is a complex business. When Rick gets going he frequetnly makes mistakes of a sort that Bill Powers rarely makes. And, then we get the corrections of Rick's mistakes by Bill Powers-- such as Rick's mistaken attempt to assign a causal role to a disturbance in a what Rick thought was a control, or at least a PCT, analysis. This isn't, by-the-way Bill Powers to the contrary, a minor technical issue. But, this would have been more readily recognized if Bill Powers had expanded upon the 4 or five page appendix to _B:CP_.

Marc says,

The fact of the matter Rick is that PCT does _not_ support your vision for the world. Stop trying to shoe horn it into something that just doesn't fit.

I would say this a bit differently, placing more responsiblity upon Bill Powers than on Rick. Nothing in my view in control theory provides any support for the argument that "it isn't going to cost economy anything to send people to Mars." This is a mantra that I think will be sufficient to provide the "Rest in Peace" slogan with which to dismiss Bill Powers' aspiration to out do his dad as an effort that has, to this point, been one that is clearly upside down in the ditch. When any reasonable person considers the claim that-- it isn't going to cost the economy anything-- the first thing that is going to come to mind is the vague notion of a "cost" that is anticipated to be "trillions and trillions." The effect, at least I would expect that the effect, of such a PCT economic sophistology upon a reasonable person is a conclusion that such an economic arguement is obviously so crack-pot as to be un-worthy of serious consideration. Pot-shots yes. Careful consideration-- obviously not.

I would think that Bill Powers from time to time has fits of sanity in which he recognizes that his PCT economics is not progressing the way he might hope. And, this, it seems likely to me, is the explaination for why Bill Powers is so angry with that "poor fool" Williams. If my chief assistant designer didn't understand stuff any better than Rick I'd be looking for somebody to blame too.

Bill Williams

[From Rick Marken (2004.08.19.0850)]

Marc Abrams (2004.08.18.1602)

Rick Marken (2004.08.18.1030)]

When you look at the economy through control theory glasses you see
collective control of input... So we have:

                                  *
Aggregate Controller * Economic system
                                  *
Aggregate reference for input-->C *<--Aggregate input (consumption)
                             > * ^
                             > * |
                             v * |
                           error * -->Aggregate output (production)
                                  *
                                  *

You really don�t understand some very basic economic principles do you? This
analysis is so full of holes I don�t even know where to begin and I�m a rank
amateur at economics.

I don't doubt that there are holes in this analysis. I would appreciate
hearing what you think the holes are so that I can fix them up. But I can't
improve my analysis if your criticisms of it are only that I am clueless,
that I don't understand basic economic principles or that I am pushing a
political agenda. These criticisms don't point to what should be changed in
the analysis. And, in fact, I don't think they really belong on CSGNet. If
you think something is wrong with my analysis, then I think it's most
productive to try to focus your criticisms on the analysis, not the analyst.

If things are �produced� and not �distributed� where do they go?

I think non-distributed production goes into inventory. In H. economicus,
production is continuously varied in order to keep inventory at zero.
Control of inventory would be another control loop, not shown in the general
sketch above. In H. economicus, inventory is controlled by the "composite
manager".

I guess you prefer a system where someone else or another group of people
decide what you can and should own.

I don't see where such a preference shows up in the diagram above. Anyway, I
don't prefer such a system at all. I happen to prefer a system just like the
one we have in the USA. I think you can fix up the system without changing
it into something else.

Regards

Rick

···

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

From [Marc Abrams
(2004.08.19.1756)]

[From Rick Marken (2004.08.19.0850)]

I don’t doubt that there are holes in this
analysis. I would appreciate

hearing what you think the holes are so that I
can fix them up. But I

can’t improve my analysis if your criticisms of
it are only that I am

clueless,

that I don’t understand basic economic principles
or that I am pushing a

political agenda. These criticisms don’t point to
what should be changed

in

the analysis. And, in fact, I don’t think they
really belong on CSGNet. If

you think something is wrong with my analysis,
then I think it’s most

productive to try to focus your criticisms on the
analysis, not the

analyst.

Ok, let’s take these things one at a time. First, you
are not ‘clueless’. This is one of the things that make it so exasperating. You’re
an extremely bright guy. What you seem not to have any idea about is basic
economic theory and principles. Bill Powers seems to think that basic economic
principles change depending on what economic policies you seem to favor and
this simply is NOT true. You and he, like many others tend to conflate
& confound political issues with economic ones. Keep in mind I am not
suggesting here that politics and economics are not entwined. They are, but
there are economic issues and political issues, just as there are psychological
and sociological issues involved with all people. Yes, there is divergence of
opinion and there are different theories, but there are some very core economic
concepts that everyone, or at least most economists seem to agree upon and I
don’t think you have any idea what those may be.

I am certainly not in a position to educate you, but
if you were really curious about it you should do the due diligence required to
talk about it effectively.

Look Rick, you are an author of an experimental
methods book and a modeler. Do I really need to get into a discussion with you
on model design, validity and reliability?

What makes you think you can make a valid or reliable
model of something you simply don’t fully understand? You are certainly capable
of understanding these things and if you actually understood some economics I
honestly believe you would see the folly of what you were attempting to ‘prove’.

Have you seen SD economic models and seen how others
have handled some of the processes and things you speak of?

sketch above. In H. economicus, inventory is
controlled by the "composite

manager".

This might be true if this was the old Soviet Union, but inventory is controlled in our system largely
by the consumer. What I mean by this is that the amount of inventory on hand is
the amount need to satisfy anticipated sales for a certain period of time. This
is not dictated by what anyone in the company would like to produce; this is dictated
by what is actually happening in the real world. Inventory is costly and
avoided if possible. The amount of inventory varies by sector and by a great amount.
Chrysler has 2 hours of inventory available. Ford usually has 2 weeks. The Soviet Union had sectors that kept over a years worth. GM
gets 6000 deliveries a day at their plants.

Your model does not show the effects of government tax’s,
subsidies, and a multitude of other things that interfere with the ‘free market’
like laws, regulations and tariff’s.

You also in my opinion have causation backward in this
diagram. In my economy, consumption drives production not the other way around,
and reference drives consumption not production.

In my view you ‘modeled’ the old Soviet
System.

Aggregate Controller *
Economic system

···
                                *

Aggregate reference for input–>C *<–Aggregate
input (consumption)

                            >   *           ^

                            >   *          
                            v   *           |

                          error * -->Aggregate

output (production)

                                *

                                *

I guess you prefer a system where someone
else or another group of

people decide what you can and should own.

I don’t see where such a preference shows up in
the diagram above.

Now do you?

I think you can fix up the system without
changing

it into something else.

OK, seems reasonable to me, but
how can you hope to change something you know nothing about. Don’t you
think you should have a firm footing in how things actually work?

You and Bill had no problem
jumping all over me for wanting to ‘improve’ PCT before I fully
understood it. Why is your position any different now then mine was then? I’m
sure you’ll come up with some rationalization, but I wish you luck
none-the-less. Unlike Bill Williams,
I think your effort is harmless because anyone who knows anything about
economics at all would not take your current effort seriously.

I’m sure there are a number
of folks at Rand who could point you in the
right direction to get yourself up to speed in the subject.

In a message dated 8/19/2004 7:45:20 PM Eastern Daylight Time,
mabrams@NVBB.NET writes:

<< OK, seems reasonable to me, but how can you hope to change something you
know nothing about. Don't you think you should have a firm footing in how
things actually work? >>

This discussion of "the economy" has devolved into a set of accusations and
name-calling. Why don't you who know so much about how the economy works begin
the task of modeling by telling us exactly how it works? It seems to me that
before you model something you should know what the something is that you are
modeling. So I expect that you will tell all of us "how things actually work"
in your next post.

Regards,

Chuck Tucker
8/19/04 2107 (I know this is not the expected format)

From [Marc Abrams (2004.08.19.2226)]

From Charles Tucker (2004.08.19.1945)

<< OK, seems reasonable to me, but how can you hope to change something
you
know nothing about. Don't you think you should have a firm footing in how
things actually work? >>

This discussion of "the economy" has devolved into a set of accusations
and
name-calling. Why don't you who know so much about how the economy works
begin
the task of modeling by telling us exactly how it works? It seems to me
that
before you model something you should know what the something is that you
are
modeling. So I expect that you will tell all of us "how things actually
work"
in your next post.

What would you like to know?

Exactly what didn't you understand in post to Rick?

I guess you thought this opening was a bit too much between what I said
above and this;

Ok, let's take these things one at a time. First, you are _not_ 'clueless'.
This is one of the things that make it so exasperating.

What do you like about Rick's model? What do you feel are good aspects of
his approach to economics? Besides calling him 'names' where else do you see
my arguments lacking?

I am all ears, please inform me.

Marc

[From Rick Marken (2004.08.19.0850)]

Marc Abrams (2004.08.19.1756)--

Rick Marken (2004.08.19.0850)]

I don't doubt that there are holes in this analysis. I would
appreciate
hearing what you think the holes are so that I can fix them up.

inventory is controlled in our system largely by the consumer.

I find that hard to believe. In order to control inventory the consumer
would have to perceive it and then be able to act to get the inventory
to a reference level. Though I suppose it's possible. People could go
and buy extra Oreos when they see an excess (relative to their
reference) piling up on shelf. But I'm inclined to think that it's the
business manager who manages the inventory, putting Oreos out on the
shelf when the inventory gets too low and slashing prices when the
inventory gets too high.

Your model does not show the effects of government tax's, subsidies,
and a multitude of other things that interfere with the 'free market'
like laws, regulations and tariff's.

My diagram didn't show these things because the diagram is just a
general representation of a closed loop economy. Taxes, capital
investment, depreciation (consumption of capital), prices (market
determined cost of goods, services, and labor) and so on are all part
of the "economic system", which is in the environment of the aggregate
controller. The economic system (like the environment of an individual
control system) determines what the system must do to produce what it
wants to consume. It's this economic system that is being modeled by
the "test bed" program. The test bed should include all relevant
constraints and rules of an economy.

You also in my opinion have causation backward in this diagram. In my
economy, consumption drives production not the other way around, and
reference drives consumption not production.

The diagram is of a _closed loop_ system, so causation runs in a
circle, as in any control loop. If anything "drives" the system it's
the aggregate controller's reference for input: aggregate human want
and need drive the system. If the loop is functioning properly, the
closed loop of production/consumption will produce the amount of goods
and services that matches the aggregate controllers reference.

In my view you �modeled� the old Soviet System.

Then I don't think you understand the diagram. I've modeled humans
acting via an economic system -- any economic system -- to produce the
goods and services they want. The Soviet system is just one kind of
economic system -- one kind of feedback function -- that could be put
in this loop.

Regards

Rick

···

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marken@mindreadings.com
Home 310 474-0313
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