From: Control Systems Group
Network (CSGnet) [mailto:CSGNET@LISTSERV.UIUC.EDU] On Behalf Of Bill Powers
Sent: Sunday, 30 December 2007
Subject: Re: Indifference curves
[From Bill Powers
Gavin Ritz (2007.12.29.16.39)
not a good in the sense that it can be used for a specific purpose (s) (like a
motor car, or a computer) it is a special good in that it is the only good that
qualities (what is valued) can be converted into quantities (but never
perfectly) as qualities can never be fully defined especially in the sensual
If we want to apply PCT to economics, we have to be prepared to junk everything
that people (and especially we ourselves) love and think they know about
economics. This means that we have to be explorers, not defenders or attackers.
Economics has largely been defined by people with a stake in the way things
are, which means that bad logic and missing or non-factual facts are overlooked
as long as an argument gets these people to the conclusion they wanted in the
first place. The usual conclusion desired is “There is nothing wrong with
the way I (or we entrepreneurs) do things.” I think we should avoid promoting
such conclusions before we know they are true.
You say (if I interpret your sentence correctly) that money allows quality (of
goods) to be translated into quantity (of money).
saying is not the quality of goods but a quality (essence, property, or value ie
a quality), is translated to quantity. So the quality can be beauty, or just
some functional quality.
it really do that?
the only thing we have that does that. Money is named after the goddess of prosperity
ancient money endowed a certain god like quality. It obviously still does many
people still believe money is their god, although they may not admit it.
we can follow your ideas any further, we have to know whether thi s
statement is true; if it’s not true, we would be wasting our time by assuming
its truth and going on to explore its implications, since conclusions that
depend on its truth can’t be used to prove its truth. One inconvenient fact
could bring the whole structure of ideas down if you leave any large loopholes.
first has to interpret the specific meaning of my statement before anything
like this can be done.
David Friedman, in his Price Theory, says that money is
the common measure of all value, which I take to mean something like what you
mean by quality. But he can’t define value any more than you can define
we can’t define quality and value which have similar endowments.
on the other hand, offers definitions of both terms, but they wouldn’t please Friedman.
wanted to be seen as physicists, which of course is plain silly.
value of a good, we might say on the basis of PCT, is the reference condition
of a higher-order perception that is a function of the (perception of owning
the) good. For example, the value of a railway ticket is found in the intention
to get off the train in some other place where one wants to be. It is a
higher-order variable that is controlled, in part, by purchasing the ticket.
you make it way too complicated, in PCT you can simply say it’s the intrinsic
Friedman would not like this definition partly because it implies
that one railway ticket is enough, and two would be too many. He is not willing
to admit that there can be enough of any good.
there’s no end ever to any sensual quality and values, that’s what
creates the weaving and un-weaving of our societies ad infinitum.
Friedman would not like this definition also because it implies
that a good can have two different values at the same time.
say, but what I can say is that economics has many flaws in it and many economists
know that hence many of them are looking at other avenues for exploration like Brian Arthur.
the railway ticket not only serves the purpose of getting you to your
destination, it also keeps you from being accosted and embarrassed or even
arrested for trying to travel without a ticket. It also provides you with a
receipt in the form of a punched and dated document showing that you could not
possibly have committed a certain murder. It may also go into your scrapbook
showing that yet another in a set of notable train trips has been ticked off
your list. It could conceivably accomplish all these ends at the same time.
Unfortunately, that means that the ticket could be placed on intersecting
indifference curves, and indifference curves are not supposed to intersect. If
they can intersect, one rather elaborate economic house of cards will collapse.
its ultimate purpose
is to get one from A to B, which is driven by another need, ie the reason one wants
to be at B, a holiday, a conference, visit family or whatever.
process-structures (infrastructure) like a railway system have one primary purpose
and that is to “connect” far flung property so that they can
communicate in all manner of things. (goods, services, communication-postal, protection,
PCT shows how multiple perceptions at one level can EACH contribute to multiple
higher-order perceptions, so that there are multiple scales of value, not just
one. Since there is no one measure of value inside a person,
That I believe
is correct, I have a commercial psychometric tool (I combined the content and
process theories of motivation) called IVA which stands for internal value analysis. And the combinations of values
(qualities) and behaviours are in the order of billions.
instrument actually measures the intrinsic error which is really just a tension
follows that there can be no one scale of value outside the person that is
representable by money. Money, therefore, cannot measure value. It i s
simply a token that can be exchanged for goods, by common consent.
are correct it does not measure value in the sense like an instrument, it
exchanges value. If you take it away we just barter, you can endow the value in
a cockle shell or a cow, money is just a very convenient method of exchange. Money
is a converter and exchanger of value or a quality.
value of what is received in return for the money depends on context.
everything always depend on a context? The sound of my wife’s footsteps
in my home is different to the sound of footsteps of enemy soldiers I would
encounter in a war context.
railway ticket that can save me from the electric chair is worth a lot more to
me than the same ticket needed to fill a blank space in my scrapbook today
rather than next week.
The Mastercard commercial on TV says it all: there are some things that money
can’t buy; for everything else, there’s Mastercard. Even in the
“everything else,” however, what money can buy by way of value varies
a lot even for the same good. The last superbowl ticket is worth more than the
first superbowl ticket to be sold, even if the seats are side by side or the
buyers trade seats. The Reading Railroad is worth lots more if you already own
the other three on the Monopoly board, though its price (if not already bought
by another player) doesn’t change because of that. In fact, if there weren’t
some very good reason for wanting to say that value = money, one might not find
it too hard to discover endless examples to the contrary. It all depends on
whether you’re trying to prove that money can measure value, or are a teeny bit
skeptical and just want to know if it really can.
a currency if one has a very bad human organ (genetically damaged) no amount of
money can replace it (at this point in time anyway). But money can never equal value that means they are one
and the same which of course they are not, money converts qualities to quantities.
like the bell as in Pavlov’s dog’s bell. The ringing of the bell makes the dogs salivate for their food,
not the food. It’s a representation.
human work. Which we can exchange for money, of course never perfectly.
Rick, and anyone else involved here, I suggest that we start by
looking at “marginal utility.” If an increment of some good is worth
more when there are fewer of the good in possession, the implication is that
the more goods you get, the less the “value” of the next increment
will be (the less you will be willing to spend to get more). This idea is used
to predict that indifference curves will be convex toward the origin. But a lot
depends on just how the marginal utility declines as the quantity of the good
If the decline follows a curve like a negative exponential, it is possible that
the desire for more will not ever entirely disappear, though it may get quite
small for very large amounts of goods already in hand. But it is possible that
the decline is such that the desire for more goods goes to zero at some finite
amount of goods, and reverses sign after that. In that case, we have a control
system with a reference condition that defines “enough” of the good,
as well as “not enough” and “too much.”
We have to remember that all statements about supply and demand apply to
populations, not individuals, and that individual characteristics can be quite
different from population characteristics. When we say that marginal demand
decreases gradually as the amount already purchased increases, we do not mean
that in each individual the decrease is gradual. It is possible that each
person acts as a high-gain control system with only a narrow range of goods
over which the effort to get more drops to zero and goes negative. But in a
population, the exact amount of goods at which the drop in demand starts will
be distributed around some mean with some standard deviation, and the standard
deviation will determine how gradual the aggregate change in demand appears.
In fact it is quite possible that over the population the reference levels for
goods follow a distribution like the Poisson, which tails off exponentially. In
a large population, this would lead us to expect that no matter how high the
desire for goods, there will always be a few individuals who desire even more.
Such outliers might even have a very specific idea of how much
“enough” is (say, all the railroad companies west of the
Mississippi), but since there are so few of them they simply contribute to a
decline in marginal utility for the population that looks as if it will never
reach zero. This could lead to the false impression that the human agent always
wants more, when in fact every human agent has a definite idea of
So I think PCT and common sense lead to some serious doubts about Friedman’s
assumptions. If he is right in saying that he is merely informing us about
“How economists think” and is not espousing some oddball deviation
from normal economics, I think we can conclude that normal economics needs some
fairly drastic revisions.