Got Data?

Shannon_Williams · August 25, 2009, 11:14pm

[Shannon Williams (2009.08.25 1800 CST)]

[from Tracy B. Harms (2009-08-25 12:57 Pacific)]

Economists do the same sort of thing with the numbers you're looking
at. Economists presume that the numbers they see coming out of
economic activity are consistent with their working premises.

Yes, but Bill does not 'presume these numbers are consistant'. He
UNDERSTANDS how the numbers are generated. He thinks he knows why you
are seeing what you are seeing. He recognizes when you failed to make
an observation and what gaps are in your data. There is a huge
difference here. He does not presume that data is consistent with his
working premise. He spends nights organizing and reorganizing until
he understands.

Now Mark--, he definitely has different references than Bill. But he
is still very sensitive to contradictions.

···

--
Shannon

rsmarken · August 26, 2009, 1:15am

[From Rick Marken (2009.08.25.1810)]

Tracy B. Harms (2009-08-25 12:57 Pacific)]

[From Rick Marken (2009.08.25.1200)]

…
I’m still waiting to find out why the heck economists – virtually all of

them, liberal and conservative – believe that increasing taxes is

recessionary. Isn’t there an economist out there who can tell me why.

Data is only valuable insofar as it serves to test a theory.

I don’t think this is really true. Data is certainly necessary to test theories but it is often the basis for developing theories where none existed before. Indeed, I think data must always precede theory. Phenomena phirst, as I always say! There would be no need for a theory of motion until people observed things moving; there would be no need for a theory of the causes of thunder until people observed thunder.

The data

you’re talking about isn’t the result of a scientific test, so it

doesn’t (necessarily, or in a straightforward manner) apply against

any given theory.

Data doesn’t always result from a scientific test. Some data is just observed, like the fossils that were observed in various strata of the earth’s crust. No one set out to test the biblical creation theory by collecting this data but it’s certainly relevant to that theory. And it can and has been applied against it.

Your question naturally turns into the question "what are the theories

of economics that economists are so reluctant to imagine the data

might disprove?"

I don’t think it’s necessary to know what their theories are. Whatever they are, a prediction of those theories (all of them, apparently) is that taxes are recessionary. That’s what all economists say. That’s a predicted observation that is presumably derived from some economic theory. What I observe is completely inconsistent with that prediction. I want to know why.

From your situation as a control-systems theorist you

can readily imagine parallels. Somebody comes at you with a stack of

“data” and the confidence that it disproves that organisms control

Putheir perceptions, what are you going to do with that data?

Put it eagerly into my computer and try to figure out what is going on. If someone brought me data that seemed to disprove PCT I would be thrilled beyond measure.

You’re

going to start by wondering why, and especially how, it might put any

pressure whatsoever on PCT. You’re almost certainly going to start by

trying to interpret the “data” (including its context of collection)

from the perspective in which PCT is assumed to be accurate.

Not at all. I would carefully scrutinize the data and examine details of how it was collected. If it appears to be quality data and it really seems inconsistent with a prediction of PCT then I will keep doing research to figure out what is happening and, once I had enough information, I’d try to revise PCT so that it accounts for all the data it already accounts for as well as this new data.

Economists do the same sort of thing with the numbers you’re looking

at. Economists presume that the numbers they see coming out of

economic activity are consistent with their working premises.

OK. Well I want to know how they do this. How do they make an observed negative relationship between tax rate and unemployment, for example, consistent with their prediction of a positive relationship.

(Just as

PCTers presume “wild” numbers – numbers obtained under non-PCT test

conditions – are consistent with PCT.) The core premises are pretty

hard to test, and economics faces more difficulties with testing than

most sciences.

I’m sorry, I just don’t buy this. First of all, there is no such thing as “wild” numbers obtained under non-PCT conditions; they are simply data obtained under experimental conditions that don’t let you determine the controlled variable so the meaning of the data (as in Martin’s examples) in terms of PCT are not clear. If that’s what is going on in economics then it should be easy to explain the problem. But I can’t believe that’s the case here. Economists predict that increased taxes are recessionary (they lead to decreased growth and increased unemployment). The data is clearly inconsistent with this observation. I can’t see how the situation is anything like what goes on when PCT is tested using inappropriate methods. Even when such methods are used we have a pretty good idea of why what is observed is observed. Such data don’t contradict PCT; they just don’t tell us enough to know what is going on in terms of what variables are under control.

Best

Rick

···

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

rsmarken · August 26, 2009, 2:27am

[From Rick Marken (2009.08.25.1930)]

Bill Powers (2009.08.25.0629 MDT)

Rick Marken (2009.08.24.2100) –

A sudden thought inspired somehow by this thread.

Businesses are not democracies…

I’m sure that many other aspects of the business dictatorships could be spelled out. Other terms, of course, could be substituted, such as kingdom or duchy or fiefdom, as long as the meaning is “control of the many by and for the benefit of the few.” I think that is the main underlying conflict in the United States and elsewhere.

I wonder what would happen if this view were more publicly discussed?

I have somewhat publicly brought up something like this point (with some right wingers) and have never really gotten a clear answer. They just can’t think any other way than: government = oppression, private business = freedom. There is really no way to convince them that they might be wrong. Data is of absolutely no interest. They live by anecdote and the fierce conviction that they know the “truth”.

But this is an awfully good point. I’ve never presented it as clearly as you have here. If I am ever stupid enough to have a conversation with a “conservative” again I’ll try to make this point about government and businesses; maybe I’ll just copy this post and see what happens;-)

Best

Rick

···

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

Brandon_Smietana · August 26, 2009, 3:56am

There is much research which seems to have demonstrated that the
economists do not actually influence public policy at all. Rather than
choosing actions on the basis of theory and data, public policy
decisions are made by choosing the outcome and then finding a theory
which supports the desired legislation.

The validity of the theory or the data and its application to the
situation under consideration no longer has any bearing or relevancy to
policy decisions, as demonstrated by the WMDs we found in Iraq.

Evidence based policy

Policy based evidence

The following papers relating to public policy decisions are
delightfully disturbing.

"The Wireless Craze,The Unlimited Bandwidth Myth,The Spectrum Auction
Faux Pas, and the Punchline to Ronald Coase’s ‘Big Joke’ An Essay on
Airwave Allocation Policy" by Thomas W. Hazlett

This paper demonstrates the regard congress has for economic theory and
data. Even Nobel laureates in economics cannot get data, theory or
themselves taken seriously by congress. The data does not agree with
the theory and the data and theory are both in contradictions to the
political feasible. The comments from RAND are especially interesting.

Also see, "Psychological Bias as a Driver of Financial Regulation" by
David Hirshleifer

For reasons why we should not expect and cannot expect policy decisions
to be data, theory or reality driven, see "Much Ado About Ideas: The
Cognitive Factor in Economic Policy" by
John Kurt Jacobsen

If you would enjoy some graphs, data and statistical analysis then you
may indulge yourself with John B. Taylor's paper "The Financial Crisis
and the Policy Responses: An Empirical Analysis of What Went Wrong",
from which I may quote...

"Why Did the Crisis Worsen So Dramatically More Than a Year After It
Began?... On Friday of that week the Treasury announced that it was
going to propose a large rescue
package, though the size and details weren't there yet. Over the weekend
the package was put together and on Tuesday September 23, Federal
Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson
testified at the Senate Banking Committee about the TARP, saying that it
would be $700 billion in size. They provided a 2-1/2 page draft of
legislation with no mention of oversight and few restrictions on the
use. They were questioned intensely in this testimony and the reaction
was quite negative, judging by the large volume of critical mail
received by many members of the United States Congress. As shown in
Figure 13 it was following this testimony that one really begins to see
the crises deepening, as measured by the relentless upward movement in
Libor-OIS spread for the next three weeks. Things steadily deteriorated
and the spread went through the roof to 3.5 per cent."

So where did the $700 billion /number/ come from? "It's not based on
any particular data point," a Treasury spokeswoman told Forbes.com
Tuesday. "We just wanted to choose a really large number."

How do our elective representatives in the house and senate feel about
the bailout?

The pirate vote

Re-inflate the bubble, save the American economy!

It is interesting to note that every-time a decision is made, either

the democrats, republicans or executive is blamed by whoever is insulted
by the arbitrariness of the choice being made; where as the side being
argued against does not feel the need to answer at all to any of the
concerns raised. The use of data and theory in politics is restricted
to rationalization of choices which are determined on the basis of other
factors.

Data does not matter. Facts do not matter. Theory does not matter.
The television tells us what is true.

Data, evidence and facts are just not relevant in the context of
political matters such as setting tax rates. Tax rates will continue to
be set to the politically optimal levels, where we may define "political
optimal" tax rates to coincide exactly with the observed tax rates.

Bill_Powers1 · August 26, 2009, 3:36pm

[From Bill Powers (2009.08.26.0907 MDT)]

Rick Marken (2009.08.25.1930) –

Bill Powers (2009.08.25.0629 MDT)
Businesses are not democracies…

RM: I have somewhat publicly brought up something like this point
(with some right wingers) and have never really gotten a clear answer.
They just can’t think any other way than: government = oppression,
private business = freedom.

It may be more general than that. There is a broader way of thinking:
Laws, rules, customs and responsibilies = oppression; Doing anything I
want any time I want for my own benefit = freedom.

That fits quite well the way a corporation is organized, and how the
people who run corporations behave at least during working hours.
It also looks like the basis of crime and bullying. It leads me to think
of a missing or defective level of control.

What seems to be missing is the idea of “myself as part of a social
system that I help support and that makes life better for everyone
including me.”

You could argue that this part isn’t missing or defective in the ones we
are concerned about, it’s just organized around a different vision of a
social system. I don’t think we will make much progress with this problem
until we figure out just what the problem is.

Best,

Bill P.

Tracy_Harms · August 26, 2009, 4:12pm

[from Tracy B. Harms (2009-08-26 09:05 Pacific)]

At the moment I cannot reply in full, but I do want to say that I
don't see economists claiming what you say they claim.

···

On Tue, Aug 25, 2009 at 6:15 PM, Richard Marken<rsmarken@gmail.com> wrote:

[From Rick Marken (2009.08.25.1810)]
...

Your question naturally turns into the question "what are the theories
of economics that economists are so reluctant to imagine the data
might disprove?"

I don't think it's necessary to know what their theories are. Whatever they
are, a prediction of those theories (all of them, apparently) is that taxes
are recessionary. That's what all economists say. That's a predicted
observation that is presumably derived from some economic theory. What I
observe is completely inconsistent with that prediction. I want to know why.

... How do they make an observed
negative relationship between tax rate and unemployment, for example,
consistent with their prediction of a positive relationship.

Having put a fair degree of study into economics, I just have not seen
what you assert to be the case. Economists don't assert this
relationship, at least not as a general view.

Sorry that my time is, at present, too short for anything more than mere denial!

Tracy

Bill_Powers1 · August 26, 2009, 4:13pm

[From Bill Powers (2009.08.26.0945 MDT)]

There is much research which seems to have demonstrated that the
economists do not actually influence public policy at all. Rather than
choosing actions on the basis of theory and data, public policy
decisions are made by choosing the outcome and then finding a theory
which supports the desired legislation.

This is true almost regardless of the field of study, isn't it? I call it "goal-oriented reasoning" or "instrumental logic." There are very few scientists or even people aware of scientific thinking who go into public service (that I know about).

But to some extent, doesn't this depend on how solid the science is? I haven't seen many policies that fly in the face of physics or mathematics, for example, though I do seem to recall a legislature in Indiana or Ohio who wanted to change pi to a simple round number like 3.

However ignorant of any field of study our public officials and representatives are, we still have to keep trying to make the science better, if only for future generations. The biggest problem with economics is that it is apparently useless for predicting anything. After something has already happened, economists have endless glib explanations for it, but ask (while taking bets) what is going to happen next week and everything gets very quiet.

You make a good case to the effect that public economic policies are determined by something other than economic theory, but I don't see that as a reason to give up trying to understand economic systems.

Best,

Bill P.

···

At 11:56 PM 8/25/2009 -0400, Brandon Smietana wrote:

rsmarken · August 26, 2009, 6:00pm

[From Rick Marken (2009.08.26.1020)]

Tracy B. Harms (2009-08-26 09:05 Pacific)–

Having put a fair degree of study into economics, I just have not seen

what you assert to be the case. Economists don’t assert this

relationship, at least not as a general view.

I believe you. I just have never heard any economist say “That is not necessarily true” when someone (including themselves) asserts that taxes have a recessionary effect on the economy.

By the way, I took Brandon’s advice and looked at the relationship between capitals gains tax rate (rather than just top marginal income tax rates) and annual measures of growth and unemployment and the preliminary results (without lags; I’ll look at those tonight) are fascinating. There is a large positive correlation (~.50) between capital gains tax rate and growth; again, a result that is completely the opposite of what I believe would be predicted by economists; since 1929, the higher the capital gains tax rate in a year the greater the GDP growth rate in that year. And that positive relationship is considerably more pronounced than it is for that between top marginal income tax rate and growth. But the relationship between capital gains tax rate and unemployment rate is also positive, unlike the negative relationship between income tax rate and unemployment, which was negative. So capital gains tax rate does have the expected “recessionary” effect on unemployment rate, anyway. Maybe that’s why economists say tax rate is recessionary; they are just looking at the relationship between capital gains tax rate and unemployment rate.

More analyses to come this evening.

Best

Rick

···

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

rsmarken · August 26, 2009, 9:14pm

[From Rick Marken (2009.08.26.1415)]

Bill Powers (2009.08.26.0907 MDT)–

Rick Marken (2009.08.25.1930) –

RM: I have somewhat publicly brought up something like this point
(with some right wingers) and have never really gotten a clear answer.
They just can’t think any other way than: government = oppression,
private business = freedom.

BP: It may be more general than that. There is a broader way of thinking:
Laws, rules, customs and responsibilies = oppression; Doing anything I
want any time I want for my own benefit = freedom.

What seems to be missing is the idea of “myself as part of a social
system that I help support and that makes life better for everyone
including me.”

You could argue that this part isn’t missing or defective in the ones we
are concerned about, it’s just organized around a different vision of a
social system. I don’t think we will make much progress with this problem
until we figure out just what the problem is.

Yes, that’s what I’ve been trying to figure out: are right wingers (or conservatives or whatever you call them) unable to control for being part of a social system or are they controlling for being part of a social system that is so different from the one I’m controlling for being a part of that it just seems like they are not able to control for being part of a social system. This is a job for “the test”. Any right wingers out there who are willing to be explorers in an MOL session?

Best

Rick

···

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

DagArchive · August 26, 2009, 10:41pm

[From Dag Forssell (2009.08.26.1540)]

Rick Marken (2009.08.26.1415)]

...Yes, that's what I've been trying to figure out: are right wingers (or conservatives or whatever you call them) unable to control for being part of a social system or are they controlling for being part of a social system that is so different from the one I'm controlling for being a part of that it just seems like they are not able to control for being part of a social system. This is a job for "the test". Any right wingers out there who are willing to be explorers in an MOL session?

Why bully people on CSGnet by labeling them, very clearly implying right up front that they are inferior?

You have invited people to MOL sessions of this kind before. Then you insult whoever is foolish enough to try to answer you. I can see it coming. You can too, can't you?

As Bill said the other day -- this kind of crap can only go downhill. I propose you nip this in the bud. This is not PCT science, this is just bullying for the fun of bullying. Us (good, enlightened, guys) against "Them" (who desperately need to understand how unenlightened they are).

Not so best, Dag

Best, Dag

rsmarken · August 26, 2009, 11:06pm

[From Rick Marken (2009.08.26.1600)]

Dag Forssell (2009.08.26.1540)--

Rick Marken (2009.08.26.1415)]

Any right wingers out there who are willing to be explorers in
an MOL session?

Why bully people on CSGnet by labeling them, very clearly implying
right up front that they are inferior?

How do you feel about being bullied?

Best

Rick

···

--
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

Tracy_Harms · August 27, 2009, 12:54am

[from Tracy B. Harms (2009-08-26 17:37 Pacific)]

[From Rick Marken (2009.08.25.1810)]

ï¿½Tracy B. Harms (2009-08-25 12:57 Pacific)]
...

Data is only valuable insofar as it serves to test a theory.

I don't think this is really true. Data is certainly necessary to test
theories but it is often the basis for developing theories where none
existed before. Indeed, I think data must always precede theory. Phenomena
phirst, as I always say! There would be no need for a theory of motion until
people observed things moving; there would be no need for a theory of the
causes of thunder until people observed thunder.

You have a very different idea of data, in that case. I'm thinking
about numbers that are presented as meaningful, empirical
measurements.

People come to propose new ideas however they may. That naturally
flows from experience, from "phenomena", from the rich complexities of
life and living. In this case, though, we're not talking about getting
new ideas, we're talking about people using careful study to exert
critical pressure against ideas they already favor.

..

Data doesn't always result from a scientific test. Some data is just
observed, like the fossils that were observed in various strata of the
earth's crust.

That's a perfectly good sense of the word "data" even though it lies
somewhat away from the (numerical) idea I was working with. But even
here data is never "just observed." Fossilized bones didn't serve
toward refutation of recent-creation theories in and of themselves.
For that to happen, a broader set of alternative theories must be
formed.

... Somebody comes at you with a stack of

"data" and the confidence that it disproves that organisms control
their perceptions, what are you going to do with that data?

Put it eagerly into my computer and try to figure out what is going on. If
someone brought me data that seemed to disprove PCT I would be thrilled
beyond measure.

Of course; I think all of us here would. But what if someone brought
you data that didn't seem to put any pressure on PCT at all? What if
there was no hint in the data that anything runs against what we'd
expect, but the person who brought it to you happens to be excited
that its in plain contradiction? Wouldn't we think that in such a
circumstance, the misconceptions of the one bearing the data are the
only difficulties?

ï¿½...

Not at all. I would carefully scrutinize the data and examine details of how
it was collected. If it appears to be quality data and it really seems
inconsistent with a prediction of PCT then I will keep doing research to
figure out what is happening and, once I had enough information, I'd try to
revise PCT so that it accounts for all the data it already accounts for as
well as this new data.

Understood.

... I want to know how they do this. How do they make an observed
negative relationship between tax rate and unemployment, for example,
consistent with their prediction of a positive relationship.

To the best of my knowledge, they do no such thing.

Tracy

···

On Tue, Aug 25, 2009 at 6:15 PM, Richard Marken<rsmarken@gmail.com> wrote:

rsmarken · August 27, 2009, 4:02am

[From Rick Marken (2009.0826.2100)]

Tracy B. Harms (2009-08-26 17:37 Pacific)

You have a very different idea of data, in that case. I'm thinking
about numbers that are presented as meaningful, empirical
measurements.

People come to propose new ideas however they may. That naturally
flows from experience, from "phenomena", from the rich complexities of
life and living. In this case, though, we're not talking about getting
new ideas, we're talking about people using careful study to exert
critical pressure against ideas they already favor.

OK, I can live with your idea of data. So I presented data in your
sense, didn't I? I used careful study to find evidence that tests a
prediction of economic theory. What's wrong with that?

That's a perfectly good sense of the word "data" even though it lies
somewhat away from the (numerical) idea I was working with. But even
here data is never "just observed."

Actually, it was just observed, by coal miners in Britain and by,
typically amateur fossil hunters.

Fossilized bones didn't serve
toward refutation of recent-creation theories in and of themselves.
For that to happen, a broader set of alternative theories must be
formed.

Actually, I believe that fossil data was being collected before there
was any theory of speciation other than creation theory.

But what if someone brought
you data that didn't seem to put any pressure on PCT at all? What if
there was no hint in the data that anything runs against what we'd
expect, but the person who brought it to you happens to be excited
that its in plain contradiction? Wouldn't we think that in such a
circumstance, the misconceptions of the one bearing the data are the
only difficulties?

Of course. And I would explain to the fellow exactly why the data are
actually consistent with PCT (if they are) or why they can't be used
to test PCT (as in the case of Martin's data, where there was no test
for a controlled variable). If your point is that I am the poor fellow
who is excitedly -- and mistakenly -- bringing data to economists
that I think is a plain contradiction to economic theory, but isn't,
then that's fine with me. But I won't believe it until some economist
tells me why the data is not a plain contradiction to economic theory.
I can take it;-)

... I want to know how they do this. How do they make an observed
negative relationship between tax rate and unemployment, for example,
consistent with their prediction of a positive relationship.

To the best of my knowledge, they do no such thing.

OK, so that's why my data is not a plain contradiction to economic
theory; it's because economic theory doesn't predict that taxes are
recessionary. Then I have to ask why, then, the economist who I saw
on TV two nights ago said that raising taxes now is out of the
question because that would slow the recovery (in terms of GDP growth
and reduction of unemployment)? Are economists only talking about the
almost certain non-recessionary and possibly salutary effects of
substantially raising the top marginal income tax rate in their
department meetings?

Best

Rick

···

--
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

_Boris_Hartman · August 27, 2009, 2:33pm

Hi !

DF : As Bill said the other day -- this kind of crap can only go downhill.
I propose you nip this in the bud. This is not PCT science, this is
just bullying for the fun of bullying.

BH : Maybe I misunderstood something wrong, maybe you are referering to my
conversation with Bill because the only place I saw Bill lately using term
"downhill" was in conversation with me.

I think that no communication is "crap" or something necessarily "going
downhill" if somebody don't like it. This can be easily proved with PCT. PCT
"science" is proposing that people are purposefull, goal directed (oriented)
beings.

If I understand "crap going only downhill" right, I see communication in PCT
sense as communication of two persons who tried to "reach" their goals,
whatever "crap" they are using. I just see communication "exactly" following
briliant Perceptual Control Theory of human behavior. Not as "crap" going
"downhill", but as communication in which both sides tried to "reach" their
goals. When communication is going in direction of not meeting the goals
it's probably "going downhill" for a person who's "going away" from goals.

So by my oppinion communicators use different means to "achieve" their goals
through a control loop. If they don't succeed if "error" persists, because
they can't "fulfill" their goals, that doesn't mean it's a "crap"
communication. Communication is probably wrong in some points, providing no
way of agreement.

But people can learn and can try to make things go better. I think it's just
the question, how they do it or how they try to do it. I think "reaching"
their goals are people's everyday problem. And they try to solve problems
(not meeting goals) with different means, different "reorganizations". Some
needs also psychoterapist to help them or even better they rely on other
people to help them, maybe people who they ussually trust and can
communicate without fear that their communication we'll be exposed to others.

I see every communication as "who reaches the goals". His the "winner". But
it's also possible that all "wins" their goals. Then they must know, how to
negotiate, how to solve conflicts to satisfy them all. As Bill once said to
me : "You give me something what I need, and I give you something what you
need", what could mean that we both meet our goals.

This is how I see PCT working in practice in real life, as "science" of
explaining negotiation, conflicts, everydays life of people, living
creatures. But that probably depends from many parametrs, from how high
"goals are set" and all other characteristics of control systems. That's how
I see PCT as theoretical ground which explains as much as exactly what "is
happening" in reality, in relations between people, in interactions between
all living creatures and their environment, etcďż˝. So better match with
"reality", better theory.

I also see conversations on CSGnet as aplying theory of Perceptual Control
to every converstaion. I see it as applying theory in practice. What could
be other sensible use of theory ? What's the use of theory if we are just
talking about theory ?

I know it's difficult to understand theory when applied to ourselves. I know
it's easier to talk about theory applied to others. But theory probably
doesn't choose to whom is applied. I think only good "focused introspection"
is needed to realize what is happening, whether theory is adjusted with
"real facts" or not. Another problem is how to find a solution to what is
happening.

If I understand people right, they are always more or less "away" from their
goals, more or less experiencing "errors", probably trying to make their own
tempo of "reaching" goals, solving problems (reducing errors), creating
their own life-styles.

I try to use PCT as much as I can in everyday life. It's just working. By my
oppinion it's working also here on CSGnet in every conversation. I'm testing
it here on CSGnet, with Bill's permission. Making trials and errors to
understand theory better. But that doesn't mean it's a "crap". Wheather it's
perfectly right or not, I don't know yet exactly. Who knows ? But as PCT was
exposed publically I think we have to use it as much as we can.

But I'm asking myself what kind of goal can "persue" a person who talks
about "crap" in communication ? What goals he didn't "meet" ? Or what goals
he wants to "meet" ?

Best,

Boris

Kenneth_Kitzke_Value · August 27, 2009, 11:00pm

[From Kenny Kitzke (2009.08.27)]

Dag, I second your perception.

For years, you, I, some others, and even Bill, have begged Rick to keep his personal values and mores in his pocket (unless asked). He grinds on anyone who sees the world differently. His manner has been enough of a disturbance to CSG/PCT explorers and practitioners to drive them to silence or withdrawal.

The shame is what a great PCT contributor he can be if he would keep this forum focused upon PCT science. He just don’t get it. Only when Bill objects does Rick back off and act like he is sorry (and then only reluctantly and without any repentance).

That’s people and PCT for you! Trying to control them is futile. The person in greatest need of a MOL may be Rick? I love him anyway.

In a message dated 8/26/2009 6:42:43 P.M. Eastern Daylight Time, csgarchive@PCTRESOURCES.COM writes:

···

[From Dag Forssell (2009.08.26.1540)]

Rick Marken (2009.08.26.1415)]

…Yes, that’s what I’ve been trying to figure out: are right
wingers (or conservatives or whatever you call them) unable to
control for being part of a social system or are they controlling
for being part of a social system that is so different from the one
I’m controlling for being a part of that it just seems like they are
not able to control for being part of a social system. This is a job
for “the test”. Any right wingers out there who are willing to be
explorers in an MOL session?

Why bully people on CSGnet by labeling them, very clearly implying
right up front that they are inferior?

You have invited people to MOL sessions of this kind before. Then you
insult whoever is foolish enough to try to answer you. I can see it
coming. You can too, can’t you?

As Bill said the other day – this kind of crap can only go downhill.
I propose you nip this in the bud. This is not PCT science, this is
just bullying for the fun of bullying. Us (good, enlightened, guys)
against “Them” (who desperately need to understand how unenlightened
they are).

Not so best, Dag

Best, Dag

Brandon_Smietana · August 28, 2009, 12:30pm

Richard Marken wrote:

[From Rick Marken (2009.08.26.1020)]

    Tracy B. Harms (2009-08-26 09:05 Pacific)--

    Having put a fair degree of study into economics, I just have not seen
    what you assert to be the case. Economists don't assert this
    relationship, at least not as a general view.

I believe you. I just have never heard any economist say "That is not
necessarily true" when someone (including themselves) asserts that
taxes have a recessionary effect on the economy.

By the way, I took Brandon's advice and looked at the relationship
between capitals gains tax rate (rather than just top marginal income
tax rates) and annual measures of growth and unemployment and the
preliminary results (without lags; I'll look at those tonight) are
fascinating. There is a large positive correlation (~.50) between
capital gains tax rate and growth; again, a result that is completely
the opposite of what I believe would be predicted by economists;
since 1929, the higher the capital gains tax rate in a year the
greater the GDP growth rate in that year. And that positive
relationship is considerably more pronounced than it is for that
between top marginal income tax rate and growth. But the relationship
between capital gains tax rate and unemployment rate is also positive,
unlike the negative relationship between income tax rate and
unemployment, which was negative. So capital gains tax rate does have
the expected "recessionary" effect on unemployment rate, anyway. Maybe
that's why economists say tax rate is recessionary; they are just
looking at the relationship between capital gains tax rate and
unemployment rate.

More analyses to come this evening.

Best

Rick
--
Richard S. Marken PhD
rsmarken@gmail.com <mailto:rsmarken@gmail.com>
www.mindreadings.com <http://www.mindreadings.com>

This is interesting and somewhat related.

http://wikisum.com/w/Hibbs:_Political_parties_and_macroeconomic_policy

Abstract: "This study examines postwar patterns in macroeconomic
policies and outcomes associated with Ieft- and right-wing governments
in capitalist democracies. It argues that the objective economic
interests as well as the subjective preferences of lower income and
occupational status groups are best served by a relatively low
unemployment-high inflation macroeconomic configuration, whereas a
comparatively high unemployment-low inflation configuration is
compatible with the interests and preferences of upper income and
occupational status groups. Highly aggregated data on unemployment and
inflation outcomes in relation to the political orientation of
governments in 12 West European and North American nations are
analyzed revealing a low unemployment-high inflation configuration in
nations regularly governed by the Left and a high unemployment-low
inflation pattern in political systems dominated by center and
rightist parties. Finally, time-series analyses of quarterly postwar
unemployment data for the United States and Great Britain suggests
that the unemployment rate has been driven downward by Democratic and
Labour administrations and upward by Republican and Conservative
governments. The general conclusion is that governments pursue
macroeconomic policies broadly in accordance with the objective
economic interests and subjective preferences of their class-defined
core political constituencies."

Is inflation economically isomorphic to increased rate of taxation?
Inflation erodes purchasing power, where as taxation erodes income. I
would think that the dynamics of an economic system would be invariant
under a linear scaling of the currency unit.

Inflation decrease the purchasing power of all money (a linear scaling),
where as taxation only diminishes the derivative of capital accumulation
for each actor in an economy. Equity investments would presumably
undergo inflation at the same rate as the currency. This is complicated
by the fact that inflation creates a tax liability for an asset whose
value has undergone inflation, even if the purchasing power of cash
value of the asset remains unchanged.

For political reasons I would suspect that capital gains tax rate would
be negatively correlated with inflation, if only because of the
increased tax liability inherit from inflation. How much of the
correlation between capital gains tax rate and GDP growth is accounted
for by inflation?

rsmarken · August 28, 2009, 3:29pm

[From Rick Marken (2009.08.26.0830)]

This is interesting and somewhat related.

http://wikisum.com/w/Hibbs:_Political_parties_and_macroeconomic_policy

Abstract: "This study examines postwar patterns in macroeconomic

policies and outcomes associated with Ieft- and right-wing governments

in capitalist democracies.

Thanks. I’ll take a look.

For political reasons I would suspect that capital gains tax rate would

be negatively correlated with inflation, if only because of the

increased tax liability inherit from inflation. How much of the

correlation between capital gains tax rate and GDP growth is accounted

for by inflation?

Good suggestion. I’ll include inflation rate in my analyses. I did do some quick regressions on growth (G) and unemployment (U) using top marginal tax rate (MTR) and capital gains rate (CGR) as predictors. The results of all these analysis come out basically saying what I said earlier; moderate positive correlation between MTR and G, moderate negative correlation between MTR and U, large positive correlation between CGR and G and small positive correlation between CGR and U. That last result is the only one that is even barely consistent with the idea that increasing taxes is recessionary.

And one last note. With respect to Tracy Harms’ claim that economists don’t believe that increasing taxes is recessionary, here’s a quote from Paul Krugman’s column in the NY TImes today:

Consider what would have happened if the U.S. government and its
counterparts around the world had tried to balance their budgets as
they did in the early 1930s. Its a scary thought. If governments had
raised taxes or slashed spending in the face of the slump, if they had
refused to rescue distressed financial institutions, we could all too
easily have seen a full replay of the Great Depression.

I think Krugman qualifies as an economist, having won a Nobel in it. And Krugman is a liberal economist (so I usually like what he has to say) and he seems very data oriented because he presents a lot of it in his blog. And he also was born on the same day as me, which probably accounts for why he’s so smart. Nevertheless, he clearly believes that taxes are recessionary. I’m going to write and ask him why he believes this. I doubt that he’ll reply to me (even if I tell him we were born on the same day) but if he does I’ll certainly report it to the list.

Best

Rick

···

On Fri, Aug 28, 2009 at 5:30 AM, Brandon Smietana bjs35@buffalo.edu wrote:

Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

Brandon_Smietana · August 28, 2009, 9:51pm

Richard Marken wrote:

[From Rick Marken (2009.08.26.0830)]

    This is interesting and somewhat related.

    http://wikisum.com/w/Hibbs:_Political_parties_and_macroeconomic_policy
    > Abstract: "This study examines postwar patterns in macroeconomic
    > policies and outcomes associated with Ieft- and right-wing
    governments
    > in capitalist democracies.

Thanks. I'll take a look.

    For political reasons I would suspect that capital gains tax rate
    would
    be negatively correlated with inflation, if only because of the
    increased tax liability inherit from inflation. How much of the
    correlation between capital gains tax rate and GDP growth is accounted
    for by inflation?

Good suggestion. I'll include inflation rate in my analyses. I did do
some quick regressions on growth (G) and unemployment (U) using top
marginal tax rate (MTR) and capital gains rate (CGR) as predictors.
The results of all these analysis come out basically saying what I
said earlier; moderate positive correlation between MTR and G,
moderate negative correlation between MTR and U, large positive
correlation between CGR and G and small positive correlation between
CGR and U. That last result is the only one that is even barely
consistent with the idea that increasing taxes is recessionary.

And one last note. With respect to Tracy Harms' claim that economists
don't believe that increasing taxes is recessionary, here's a quote
from Paul Krugman's column in the NY TImes today:

    Consider what would have happened if the U.S. government and its
    counterparts around the world had tried to balance their budgets
    as they did in the early 1930s. It�s a scary thought. If
    governments had raised taxes or slashed spending in the face of
    the slump, if they had refused to rescue distressed financial
    institutions, we could all too easily have seen a full replay of
    the Great Depression.

I think Krugman qualifies as an economist, having won a Nobel in it.
And Krugman is a liberal economist (so I usually like what he has to
say) and he seems very data oriented because he presents a lot of it
in his blog. And he also was born on the same day as me, which
probably accounts for why he's so smart. Nevertheless, he clearly
believes that taxes are recessionary. I'm going to write and ask him
why he believes this. I doubt that he'll reply to me (even if I tell
him we were born on the same day) but if he does I'll certainly
report it to the list.

Best

Rick
--
Richard S. Marken PhD
rsmarken@gmail.com <mailto:rsmarken@gmail.com>
www.mindreadings.com <http://www.mindreadings.com>

Paul Krugman is very opinionated. Although very entertaining.

The Theory of Interstellar Trade; Paul Krugman
www.princeton.edu/~p*krugman*/*interstellar*.pdf

/Economic growth was an exogenous variable in economics until very
recently and I am under the impression that it is still an open area of
research.

There may be two components of economic growth, one which is negatively
correlated with regulatory barriers to innovation and another which
reflects short term fluctuations in macro-economic conditions. One of
the problems with using a covariance analysis of the relationship
between any type of "growth" (such as growth in productivity or GDP
growth in excess of population growth rate), is that the correlations
are meaningless if the relationship between growth and the other
variables are mediated through variables latent to the model.

Trying to derive a linear dynamical system from the economic time series
would probably be more valid than a covariance analysis. Descriptive
statistical models do not seem to have a notion of "causality", where as
a generative statistical model does. The problem of inferring a
generative statistical model from a time series would then seem related
to the problem of determining causal relationships between variables in
the time series being modeled.

The government influences some aspects of fiscal policy such as setting
central bank interest and tax rates. These could be treated as a
feedback control signals and would presumably be a noisy function of
economic and political conditions. Future economic conditions
themselves would be a stochastic function of existing economic
conditions and legislatively determined control parameters (Such as tax
rate and central bank interest rates).
/

···

On Fri, Aug 28, 2009 at 5:30 AM, Brandon Smietana <bjs35@buffalo.edu > <mailto:bjs35@buffalo.edu>> wrote:

tedcloak · August 28, 2009, 10:01pm

Richard Marken wrote:

[From Rick Marken (2009.08.26.0830)]

    This is interesting and somewhat related.

    http://wikisum.com/w/Hibbs:_Political_parties_and_macroeconomic_policy
    > Abstract: "This study examines postwar patterns in macroeconomic
    > policies and outcomes associated with Ieft- and right-wing
    governments
    > in capitalist democracies.

Thanks. I'll take a look.

    For political reasons I would suspect that capital gains tax rate
    would
    be negatively correlated with inflation, if only because of the
    increased tax liability inherit from inflation. How much of the
    correlation between capital gains tax rate and GDP growth is accounted
    for by inflation?

Good suggestion. I'll include inflation rate in my analyses. I did do
some quick regressions on growth (G) and unemployment (U) using top
marginal tax rate (MTR) and capital gains rate (CGR) as predictors.
The results of all these analysis come out basically saying what I
said earlier; moderate positive correlation between MTR and G,
moderate negative correlation between MTR and U, large positive
correlation between CGR and G and small positive correlation between
CGR and U. That last result is the only one that is even barely
consistent with the idea that increasing taxes is recessionary.

And one last note. With respect to Tracy Harms' claim that economists
don't believe that increasing taxes is recessionary, here's a quote
from Paul Krugman's column in the NY TImes today:

    Consider what would have happened if the U.S. government and its
    counterparts around the world had tried to balance their budgets
    as they did in the early 1930s. Itï¿½s a scary thought. If
    governments had raised taxes or slashed spending in the face of
    the slump, if they had refused to rescue distressed financial
    institutions, we could all too easily have seen a full replay of
    the Great Depression.

I think Krugman qualifies as an economist, having won a Nobel in it.
And Krugman is a liberal economist (so I usually like what he has to
say) and he seems very data oriented because he presents a lot of it
in his blog. And he also was born on the same day as me, which
probably accounts for why he's so smart. Nevertheless, he clearly
believes that taxes are recessionary. I'm going to write and ask him
why he believes this. I doubt that he'll reply to me (even if I tell
him we were born on the same day) but if he does I'll certainly
report it to the list.

Best

Rick
--
Richard S. Marken PhD
rsmarken@gmail.com <mailto:rsmarken@gmail.com>
www.mindreadings.com <http://www.mindreadings.com>

Paul Krugman is very opinionated. Although very entertaining.

The Theory of Interstellar Trade; Paul Krugman
www.princeton.edu/~p*krugman*/*interstellar*.pdf

/Economic growth was an exogenous variable in economics until very
recently and I am under the impression that it is still an open area of
research.

There may be two components of economic growth, one which is negatively
correlated with regulatory barriers to innovation and another which
reflects short term fluctuations in macro-economic conditions. One of
the problems with using a covariance analysis of the relationship
between any type of "growth" (such as growth in productivity or GDP
growth in excess of population growth rate), is that the correlations
are meaningless if the relationship between growth and the other
variables are mediated through variables latent to the model.

Trying to derive a linear dynamical system from the economic time series
would probably be more valid than a covariance analysis. Descriptive
statistical models do not seem to have a notion of "causality", where as
a generative statistical model does. The problem of inferring a
generative statistical model from a time series would then seem related
to the problem of determining causal relationships between variables in
the time series being modeled.

The government influences some aspects of fiscal policy such as setting
central bank interest and tax rates. These could be treated as a
feedback control signals and would presumably be a noisy function of
economic and political conditions. Future economic conditions
themselves would be a stochastic function of existing economic
conditions and legislatively determined control parameters (Such as tax
rate and central bank interest rates).
/

···

On Fri, Aug 28, 2009 at 5:30 AM, Brandon Smietana <bjs35@buffalo.edu > <mailto:bjs35@buffalo.edu>> wrote:

rsmarken · August 28, 2009, 11:11pm

[From Rick Mrken (2009.08.28.1610)[

There may be two components of economic growth, one which is negatively

correlated with regulatory barriers to innovation and another which

reflects short term fluctuations in macro-economic conditions. One of

the problems with using a covariance analysis of the relationship

between any type of “growth” (such as growth in productivity or GDP

growth in excess of population growth rate), is that the correlations

are meaningless if the relationship between growth and the other

variables are mediated through variables latent to the model.

Yes, of course. But my questions concerns how economists came up with this notion (of taxes being recessionary) in the first place. Did they see the positive correlation between taxes and growth and the negative correlation between taxes and unemployment rate and go straight to a hierarchical multiple regression analysis with all potential latent variables to find out that the actual relationships were opposite to what was observed? I just can’t believe that would be the case. I think somehow they came up with the idea that taxes are recessionary – based either on anecdotal evidence (“My cousin’s business really went down the toilet when they raised the marginal tax rate”) or theory – and now any evidence that is inconsistent with this view is considered artifactual (the result of latent variables, dynamic factors, etc.). While it’s certainly possible that the relationships seen in my data is artifactual, I would expect economists to be able to tell me immediately what I should do to extract the correct relationships. So far, not a peep;-)

The situation, it seems to me, is kind of the inverse of what we have with repect to PCT and psychology. A fundamental assumption of psychology is that external stimuli cause behavior. This S-R assumption is equivalent to the assumption in economics that taxes cause recession. But the S-R assumption is based on data; it’s easy to observe situations where it clearly looks like stimuli cause behavior: reflexes, every psychology experiment, etc. You have to observe behavior under very special circumstances to see that the S-R assuption is false. One such observation is the zero correlation between cursor (S) and handle movement (R) in a compensatory tracking task (see my tracking demo at http://www.mindreadings.com/ControlDemo/BasicTrack.html). This observation is to the S-R model what the near zero correlation between taxes and growth is to the taxes cause recession model. What’s different is that, in the case of the S-R model I know why psychologists went for it; the data that led to belief in the (false) S-R model is everywhere. But in the case of the “taxes are recessionary” model, I have no idea why ecoomists went for it; the data that led to that belief (whether it’s true or false) is nowhere to be found. The only data I’ve found is data that would lead one to conclude that, at worst, taxes have nothing to do with recession and, at best, might make things better. If the economists based their ideas on data (like the psychologists did) then I would think that their first assmption would have been that taxes are unrelated to recession, just as the psychologists first thought that stimuli cause responses.

Trying to derive a linear dynamical system from the economic time series

would probably be more valid than a covariance analysis.

Maybe. By the way, I think you asked earlied about whether it would be possible to simulate a dynamic system using a linear equation (i think that’s what you asked) and I remember that there was a paper about this in JASA (Journal of the American Acoustical Society) way back in the early 1970s, I believe. It was a little above me but I think it showed that you could put a broadband signal though a properly coded linear equation and get a speech sound; each speech sound would have different coefficients of the linear equation; but I think it showed that you could code a lot of digital signal by discretely varying just a few linear coefficients. I think it’s kind of a reverse filtering process. But you probably already know this stuff and it’s old hat;-)

Best

Rick

···

On Fri, Aug 28, 2009 at 2:51 PM, Brandon Smietana bjs35@buffalo.edu wrote:

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com