# Fools rush in (CP007 b)

**URL:** <http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475>\
**Category:** CSG2001\
**Created:** [November 17, 2001, 7:20pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475 "2001-11-17T19:20:06Z")\
**Posts on this page:** 8\
**Page:** 1

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**Author:** ![Richard\_Marken2](http://discourse.iapct.org/letter_avatar_proxy/v4/letter/r/edb3f5/32.png) [@Richard\_Marken2](http://discourse.iapct.org/u/Richard_Marken2)\
**Post date:** [November 17, 2001, 7:20pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/1 "2001-11-17T19:20:06Z")

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[From Rick Marken (2001.11.17.1120)]

Bill Williams (16 November 2001 23:00 CST) to Bill Powers:

> For more than a decade Bill Powers has made repeated requests that I join  
> him in colaborative effort to develop a general model of the market process.  
> I have declined, because as I have repeated told him, I view Keynes 1936  
> \_General Theory\_ as at least a proximately adaquate theoretical treatment  
> of the macro economy. Powers, however, without bothering to read Keynes  
> has strong opinions as to what Keynes acomplished-- nothing. This opinion  
> is derived from Bill Powers dad, an accomplished chemist who didn't find  
> it neccesary to read Keynes either. I will repeat once again, it is usually  
> prudent to familiarize oneself with the existing literature before spouting off  
> about it. ANd, the rewards for rediscovering the wheel are minimual. My  
> suggestion to Bill would be to find someone more suitable for a fools errand.

I'm happy to rush in and help with this errand. So that make two so far.

I think we need some criterion for evaluating the success of any model  
we build. Since we are building a model of the macro economy I suggest  
that the criterion of success be precise prediction of the behavior of  
time varying macro economic variables. T.C. Powers did what is basically  
a qualitative analysis of the predictions of the leakage model. I think  
we should try to do better. I envision a model that predicts, say, time  
variations in GNP as well as a simple control model predicts variations  
in handle movements in a tracking task. Assuming that the macro economic  
model is a control model, we should be able to predict the behavior of  
the output variables -- the variables that protect controlled variables  
from disturbance -- from the behavior of the disturbance variables. So,  
for example, if leakage actually is a disturbance that is compensated  
for by variations in money supply and production, then if we can measure  
leakage correctly (from the model's perspective) then we should be able  
to predict the output variables (money supply and production) almost  
exactly. If we can produce a model that fits the data nearly perfectly  
(RMS error of prediction on the order of 2% or less, say) I think people  
would pay attention to the model even if we are not real economists.

Best regards

Rick

> **···**
>
> --  
> Richard S. Marken  
> MindReadings.com  
> marken@mindreadings.com  
> 310 474-0313

---

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**Author:** ![bnhpct](http://discourse.iapct.org/user_avatar/discourse.iapct.org/bnhpct/32/34_2.png) [@bnhpct](http://discourse.iapct.org/u/bnhpct)\
**Post date:** [November 17, 2001, 10:29pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/2 "2001-11-17T22:29:59Z")

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[From Bruce Nevin (2001.11.17 14:20 PST]

Rick Marken (2001.11.17.1120) --  
\>Since we are building a model of the macro economy I suggest  
\>that the criterion of success be precise prediction of the behavior of  
\>time varying macro economic variables.

The motivation for modelling is the problem that we are limited by a kind of indeterminacy principle, where we can observe the behavior of a system as a black box, or we can open the box, dissect the system, and look at its internal structures, but a dissected system can't behave. The purpose of modelling is to understand the internal organization of that which is modelled. Consequently, another important criterion is that the organization of the model should correspond as far as we can determine to the organization of the system being modeled.

As we discussed not too long ago, a proposed model of aggregate entities can produce aggregate "behavior" that correlates well with statistical data while having no correlation with the control systems and their relations whose behaviors are statistically aggregated.

&nbsp;&nbsp;Bruce Nevin

> **···**
>
> At 11:20 AM 11/17/2001 -0800, Richard Marken wrote:

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**Author:** ![Richard\_Marken2](http://discourse.iapct.org/letter_avatar_proxy/v4/letter/r/edb3f5/32.png) [@Richard\_Marken2](http://discourse.iapct.org/u/Richard_Marken2)\
**Post date:** [November 17, 2001, 10:56pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/3 "2001-11-17T22:56:12Z")

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[From Rick Marken (2001.11.17.1500)]

Bruce Nevin (2001.11.17 14:20 PST) --

> As we discussed not too long ago, a proposed model of aggregate entities  
> can produce aggregate "behavior" that correlates well with statistical data  
> while having no correlation with the control systems and their relations  
> whose behaviors are statistically aggregated.

Of course. So?

Models of the behavior of aggregates (like Ohm's law) can be quite  
useful in themselves. And in this case, since the aggregate economic  
model will be built from an aggregation of individual control systems,  
we will know for sure that the behavior of the aggregate model emerges  
from the behavioral organization of the individual entities from which  
it is constructed. So, while (like Ohm's law) the behavior of the  
aggregate economic model may differ from the behavior of the individual  
entities that make it up, we will know (unlike Ohm's law, when it was  
formulated) how the behavior of the aggregate is related to the behavior  
its individual components.

Best regards

Rick

> **···**
>
> ---  
> Richard S. Marken  
> MindReadings.com  
> marken@mindreadings.com  
> 310 474-0313

---

<div class="post-metadata">

**Author:** ![bnhpct](http://discourse.iapct.org/user_avatar/discourse.iapct.org/bnhpct/32/34_2.png) [@bnhpct](http://discourse.iapct.org/u/bnhpct)\
**Post date:** [November 17, 2001, 11:27pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/4 "2001-11-17T23:27:23Z")

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[From Bruce Nevin (2001.11.17 15:25 PST)]

Rick Marken (2001.11.17.1500)--  
At 02:56 PM 11/17/2001 -0800

You suggest an analogy between aggregate econometric data and Ohm's law. Electrical current and voltage are measured more easily and reliably, and by less theory-laden means, than economic data. Using such data may lead to conclusions that were presupposed in (and by) the gathering of the data. I don't know that this is so, only something to be wary about. If a model built up from the interactions of autonomous control systems produces like econometric data -- and also data hitherto not observed because not looked for -- that will be convincing.

I have every confidence that you will persist as long as you find it rewarding to do so. I'm only suggesting that alternative approaches have value.

&nbsp;&nbsp;Bruce Nevin

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**Author:** ![Bill\_Powers1](http://discourse.iapct.org/letter_avatar_proxy/v4/letter/b/8e7dd6/32.png) [@Bill\_Powers1](http://discourse.iapct.org/u/Bill_Powers1)\
**Post date:** [November 17, 2001, 11:34pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/5 "2001-11-17T23:34:56Z")

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[From Bill Powers (2001.11.17.1624 MST)]

Rick Marken (2001.11.17.1120)--

> Since we are building a model of the macro economy I suggest  
> that the criterion of success be precise prediction of the behavior of  
> time varying macro economic variables. ...

> If we can produce a model that fits the data nearly perfectly  
> (RMS error of prediction on the order of 2% or less, say) I think people  
> would pay attention to the model even if we are not real economists.

Yes, I should think so, but I'd settle for considerably less. The economy  
may have a lot more variability in it than a tracking task has, and  
essential data may prove hard to find. I think that Bill Williams' approach  
of taking on the major unsolved problems of economics would also get us  
somewhere. Of course to do that we would have to know what those problems  
are, and agree that they need to be solved (a judgement that I guess every  
person has to make privately). Some study is called for.

Best,

Bill P.

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**Author:** ![Richard\_Marken2](http://discourse.iapct.org/letter_avatar_proxy/v4/letter/r/edb3f5/32.png) [@Richard\_Marken2](http://discourse.iapct.org/u/Richard_Marken2)\
**Post date:** [November 17, 2001, 11:51pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/6 "2001-11-17T23:51:44Z")

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[From Rick Marken (2001.11.17.1550)]

Bruce Nevin (2001.11.17 15:25 PST)--

> I have every confidence that you will persist as long as you find it  
> rewarding to do so. I'm only suggesting that alternative approaches  
> have value.

What alternative approaches do you have in mind?

I've presented a control theory approach twice at CSG meetings and  
received nothing but resistance (except from Bill Powers, who offered  
many constructive suggestions). Why is there so much resistance to a  
control theory approach to economics? I have no doubt that there are  
many problems with the details of my approach (and am hoping to get help  
on these from economic experts). But I thought the overall picture of  
the economy that I presented, as a collection of produce/consumers  
(i.e.: input controllers), was a step in the right direction. Don't you  
think so?

Best regards

Rick

> **···**
>
> --  
> Richard S. Marken  
> MindReadings.com  
> marken@mindreadings.com  
> 310 474-0313

---

<div class="post-metadata">

**Author:** ![bnhpct](http://discourse.iapct.org/user_avatar/discourse.iapct.org/bnhpct/32/34_2.png) [@bnhpct](http://discourse.iapct.org/u/bnhpct)\
**Post date:** [November 18, 2001, 12:23am UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/7 "2001-11-18T00:23:37Z")

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[From Bruce Nevin (2001.11.17 16:23 PST)]

Rick Marken (2001.11.17.1550) --

> **···**
>
> At 03:51 PM 11/17/2001 -0800, Richard Marken wrote:
> 
> I can't say about the resistance that you perceive. Except for the dubious status of Leakage, and the questions of data and structural correspondence that I just mentioned, I agree that it is a useful and constructive step, as far as it goes.
> 
> The alternative is to reconstruct economics from the bottom up, beginning with transactions among autonomous control systems, rather than from the top down, on the assumption that economists have measured the right things in appropriate ways and have not lost important distinctions in their aggregations.
> 
> The article by John Henry that Bill Williams cited a while back seems helpful.
> 
> I will be out of touch until Monday or Tuesday.
> 
> &nbsp;&nbsp;Bruce

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<div class="post-metadata">

**Author:** ![Richard\_Marken2](http://discourse.iapct.org/letter_avatar_proxy/v4/letter/r/edb3f5/32.png) [@Richard\_Marken2](http://discourse.iapct.org/u/Richard_Marken2)\
**Post date:** [November 18, 2001, 5:44pm UTC](http://discourse.iapct.org/t/fools-rush-in-cp007-b/4475/8 "2001-11-18T17:44:40Z")

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[From Rick Marken (2001.11.18.0940)]

Me:

> What alternative approaches [to developing a model economy] do you have in mind?

Bruce Nevin (2001.11.17 16:23 PST)

> The alternative is to reconstruct economics from the bottom up, beginning  
> with transactions among autonomous control systems, rather than from the  
> top down, on the assumption that economists have measured the right things  
> in appropriate ways and have not lost important distinctions in their  
> aggregations.

Could you be a little more specific about what you mean here. What  
interactions do you think should be included in the model (with  
280,000,000 people in an economy, each controlling 1000s of perceptions,  
that's a lot of possible interactions)? How can we know what aggregate  
variables should be measured by looking at individual interactions? Can  
you give an example of the kind of "important distinctions" you think  
might have been lost in standard economic aggregations? Perhaps you  
could contrast your proposed approach with Bill Powers' (2001.11.16.0811  
MST) reformulation of Bill Williams' economic analysis of the  
relationship between income and investment that was appended to Bill  
Williams (16 November 2001 23:00 CST) post.

Best regards

Rick

> **···**
>
> --  
> Richard S. Marken  
> MindReadings.com  
> marken@mindreadings.com  
> 310 474-0313