Investment and savings (was Which Bill's the Liar?)

[Martin Taylor 2004.01.23.1633]

[From Bruce Gregory (2004.01.23.1547)]

Actually, no. If you read my entire post carefully (remember,
economics is
serious business) you'll see that this is putting savings under the
mattress
is not necessary in order to keep it distinct from money that is
invested.
The money in your savings account is not equivalent to the money that
is
loaned by banks to investors.

My mistake. We don't agree.

Bruce, sometimes I find your messages puzzlingly terse. Perhaps
that's better than being overly prolix, but there must be a happy
medium somewhere.

I take it that you don't agree with Rick when he says that money you
put in the bank is different from money loaned out by the bank to
investors? Why would you disagree with that?

If it is permissible for the bank to loan out $5 when I put $1 into
my savings, how can the two be equivalent?

I think a more interesting question, though, hangs on the nature of
"investment." So far as I can see, the whole benefit of capitalism as
opposed to anarchy is that when a lot of money can be directed toward
controlling a single person's perceptions, it does more (whether for
good or bad) than when that same pot of money is divided among the
powers of many people to control their sometimes conflicting and
usually orthogonal perceptions. The problem of total state control is
the reverse, in that if the powerfully controlled perceptions are
misdirected, the evil that can ensue is commensurately great. A happy
medium, again--things evolving to be on the edge of chaos rather than
being too rigid or too fluid.

So the "better" question is to ask what constitutes "investment"? Is
it the handing over of one's money to someone or some institution
that coalesces many such contributions toward a single purpose, or is
it gambling, as in playing the stock market, where any influence on
real production of goods and services is a pure side-effect? The
latter seems the more usual use of the term, which I think obscures
the value of investment in the real economy.

Martin

[From Bill Powers (2004.01.23.1612 MST)]

Martin Taylor 2004.01.23.1633--

So the "better" question is to ask what constitutes "investment"? Is
it the handing over of one's money to someone or some institution
that coalesces many such contributions toward a single purpose, or is
it gambling, as in playing the stock market, where any influence on
real production of goods and services is a pure side-effect? The
latter seems the more usual use of the term, which I think obscures
the value of investment in the real economy.

Premature for my purposes, but an interesting comment anyway. At the
moment, I'm interested only in the mechanics of the economy, and use
elementary models of consumer and manager only to exercise the machinery.
What I hope to do is keep everyone honest, especially myself, so when we
speculate about the effects of doing things this way or that way, we can
plug such proposals into the Test Bed and see what happens. What happens if
people slavishly spend some fixed percentage of their income just because
they receive it? What happens if people are offered lower and lower wages
to find the level at which they will choose to work, or not work -- and if
they choose not to work, what is the consequence for them? The Test Bed
will help answer such questions, without any preference for one proposal
over another, and without forcing any one outcome.

I note and appreciate your efforts in this discussion.

Best,

Bill P>

[From Bill Williams 23 January 2004 5:30 PM CST]

[Martin Taylor 2004.01.23.1633]

Bruce, sometimes I find your messages puzzlingly terse. Perhaps
that's better than being overly prolix, but there must be a happy
medium somewhere.

So the "better" question is to ask what constitutes "investment"? Is
it the handing over of one's money to someone or some institution>:that > coalesces many such contributions toward a single purpose, or is
it gambling, as in playing the stock market, where any influence on
real production of goods and services is a pure side-effect? The
latter seems the more usual use of the term, which I think obscures
the value of investment in the real economy.

Defined as Keynes defined it, investment is the purchase of real assets--
that is plant and equipment for use in the production of goods and
services.

I noticed several days ago that Bill Powers after taking Keynes to task
for inconsistency, then described "investment" in terms of purchases of
stocks and bonds. In the Keynesian nominclature what Bill thinks of as
an investment is instead a "speculation"-- the purchase of a finacial
asset with the expectation of gain by way of change in the price of the
asset. This is a distinction that a freshmen student was expected to
keep straight by the time mid-terms came around. No wonder, Bill Powers
finds Keynes confusing.

Bill Williams

Bill Williams

[From Bill Williams 23 January 2004 5:50 PM CST]

[From Bill Powers (2004.01.23.1612 MST)]

Premature for my purposes, but an interesting comment anyway.

A revealing comment. In you assessment of Keynes' inconsistencies
it didn't seem to bother you that you'd switched from the definitions
that Keynes had used, to a different set of definitions. Then you
charged Keynes with the result of your switching definition.

I'm interested only in the mechanics of the economy,

You talk about "mechanics." The economy, however, is concerned
with questions regarding values. Why use the language of
behaviorism or positivism in describing your project? It gives the
impression that you have absolutely no idea of what you actually
want to do.

The Test Bed will help answer such questions, without any preference
for one proposal over another, and without forcing any one outcome.

This is an extra-ordinary interesting claim- absurd, but, interesting.
You are proposing to build a machine that will evaluate various
conceptions without expressing a preference. Can you see that there is
a contradiction involved?

It might be better if you just wrote the code. Discussions such as
this one, in which the definitions keep changing, or the discussion
runs in the absence of definitions have a predictable outcome. In
the past, you've blamed the nearest "expert" because the expert
wouldn't "help." As, I have said before, its a fools errand.

However long you talk about things in this fashion, you are unlikely
to get anywhere. Perhaps if you get the Test Bed running, the results
will be informative.

Bill Williams

[From Bill Powers (2004.01.23.1822 MST)]

Bill Williams 23 January 2004 5:30 PM CST--

Defined as Keynes defined it, investment is the purchase of real assets--
that is plant and equipment for use in the production of goods and
services.

I noticed several days ago that Bill Powers after taking Keynes to task
for inconsistency, then described "investment" in terms of purchases of
stocks and bonds. In the Keynesian nominclature what Bill thinks of as
an investment is instead a "speculation"-- the purchase of a finacial
asset with the expectation of gain by way of change in the price of the
asset. This is a distinction that a freshmen student was expected to
keep straight by the time mid-terms came around. No wonder, Bill Powers
finds Keynes confusing.

Boy, the students must have been pretty confused, especially when they
learned that savings (the same thing as investment, according to Keynes)
"is the purchase of real assets-- that is plant and equipment for use in
the production of goods and services." It would also seem from that
definition that consumers who are not entrepreneurs cannot make
investments, unless you stretch plant and equipment and the other terms
pretty far,

I don't recall taking Keynes to task for inconsistency. I did take him to
task for making blunders in his mathematics, and then trying to justify
them with specious verbal "reasoning."

Bill P.

[From Bruce Gregory (2004.01.23.2103)]

Bill Powers (2004.01.23.1612 MST)

At the
moment, I'm interested only in the mechanics of the economy, and use
elementary models of consumer and manager only to exercise the
machinery.
What I hope to do is keep everyone honest, especially myself, so when
we
speculate about the effects of doing things this way or that way, we
can
plug such proposals into the Test Bed and see what happens. What
happens if
people slavishly spend some fixed percentage of their income just
because
they receive it? What happens if people are offered lower and lower
wages
to find the level at which they will choose to work, or not work --
and if
they choose not to work, what is the consequence for them? The Test Bed
will help answer such questions, without any preference for one
proposal
over another, and without forcing any one outcome.

The outcomes would seem to depend on the references of the individual
consumers. How will these be established "independent of one proposal
over another"?

Bruce Gregory

"Everyone is entitled to his or her own opinions; everyone is not
entitled to his or her own facts."

Daniel Patrick Moynihan

"Everything that needs to be said has already been said. But since no
one was listening, everything must be said again."
                                                                                Andre Gide

[From Bill Powers (2004.01.23.1938 MST)]

Bruce Gregory (2004.01.23.2103)--

The Test Bed will help answer such questions, without any preference for one
proposal over another, and without forcing any one outcome.

The outcomes would seem to depend on the references of the individual
consumers. How will these be established "independent of one proposal
over another"?

Those ARE the proposals that would be tested. Economists are always making
statements about what people want, whether they prefer liquidity over high
interest rates and so on -- the psychology of economics. So to test your
proposal about references of consumers or managers, you state how a person
with these preferences will behave with respect to various economic events
(such as a raise in wages, or an increase in prices), put those predictions
into a model of the agents, and connect the agents to the Test Bed. When
the simulation runs, you will see the results. It is important, of course,
that the Test Bed be detailed enough that those observing the tests will
agree that they are realistic. That's why I want to make sure the elements
of the Test Bed represent a consensus about the mechanics of economics, the
bookkeeping and physics of transactions, under the rules that exist.

Best,

Bill P.

[From Bill Williams 23 January 2004 9:30 PM CST]

[From Bill Powers (2004.01.23.1822 MST)]

Boy, the students must have been pretty confused,

Some of them are, some aren't. Most just want to pass
the course. Actually, it is the professors who are
confused. But concerning the students, there is evidence
that students taking economics classes don't retain
anything for more than a year or so, if they haven't
taken enough courses to qualify for a minor.

especially when they learned that savings (the same thing as investment,
according to Keynes)

Care to give me a page number for this, or is this something your dad
taught you? How much would you like to bet that Keynes actually said
this? In the past I can remember what was put up on the CSGnet Best
of the Net portion of the sight with regard to economic issues -- utter
nonsense but because dear old dad said it, you believed it. Then when
I pointed out that what your dad got out of Keynes was a complete
crock-- your dad's stuff suddenly vanished. No one knew how, or why.
Just another one of life's mysteries.

I don't recall taking Keynes to task for inconsistency.

Is this because his logic was correct, or because it was always wrong.

I did take him to
task for making blunders in his mathematics,

Was this because you confused a mathematical identity with a existential
Identity?

and then trying to justify

them with specious verbal "reasoning."

Note however that your own "reasoning" proceeds by changing the definitions that Keynes assigns to terms and then charging Keynes with the resulting absurdities. You can claim anything you like. Whether what you say is true is an entirely different question.

If you can get your Test Bed developed maybe you can use it to learn some economics. It is clear that in the absence of such educational aids, you are uneducatable.

Bill Williams

[From Bill Williams 24 January 2004 8:10 AM CST]

[ Bill Powers (2004.01.23.1938 MST)] wrote mentiong his aspiration to
build his Test Bed by including a realistic treatment of the

"physics of transactions"

My understanding of a transaction drawn from John R. Commons is that a transaction is a volitional act. Therefore I view the attempt to create a "physics of transactions" as destructive of the direction that I had thought Bill Powers work was headed.

The three great heterodox economists Marx, Veblen and Keynes have each of them been associated in many people's minds with an attempt to move away from physical analologies to an evolutionary or biological conception of the economy. I'm not sure if, when Bill Powers describes his project this way he is likely to alienate most of a potential audience that is critical of orthodoxy. Perhaps he doesn't care. I was troubled by Powers' recent statement that money spent on going to Mars would do more good for the poor than spending teh money directly upon the poor. Mars aside, I'm troubled by where Bill seems to be headed. If Bill wishes to treat the economic process as a mechanistic model, I am sure he will find collaborators. However, if this is this the trend, then I do not believe I will applaud.

See Philip Mirowski _More Heat than Light_ for a critique of "mechanistic" conceptions in economics.

Bill Williams

[From Bill Powers (2004.01.24.0805 MST)]

Bill Williams 23 January 2004 9:30 PM CST--

Enough of this, Bill. I don't want to get dragged in any further. If you
have something to contribute, contribute it. Otherwise, stuff it.

Bill P.

[From Bruce Gregory (2004.01.24.1034)]

[From Bill Powers (2004.01.24.0805 MST)]

Enough of this, Bill. I don't want to get dragged in any further. If
you
have something to contribute, contribute it. Otherwise, stuff it.

You and Rick will be the judges of what is or what is not a
contribution, and who should or should not stuff it. Or am I mistaken?

Bruce Gregory

"Everyone is entitled to his or her own opinions; everyone is not
entitled to his or her own facts."

Daniel Patrick Moynihan

"Everything that needs to be said has already been said. But since no
one was listening, everything must be said again."
                                                                                Andre Gide

[From Rick Marken (2004.01.24.1035)]

Bruce Gregory (2004.01.24.1034)--

Bill Powers (2004.01.24.0805 MST)--

Enough of this, Bill. I don't want to get dragged in any further. If
you have something to contribute, contribute it. Otherwise, stuff it.

You and Rick will be the judges of what is or what is not a
contribution, and who should or should not stuff it. Or am I mistaken?

We are all, individually, the judges of what makes a contribution to
CSGNet. My judgment is often the same as Bill's but not always. I think
that's mainly because Bill P. has far lower criteria for what he is
willing to consider a contribution than I do. This just means that it
usually takes him a bit longer then me to recognize what we eventually
agree is a consistent non-contributor.

Best regards

Rick

ยทยทยท

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

[From Bruce Gregory (2004.01.24.1348)]

[From Rick Marken (2004.01.24.1035)]

We are all, individually, the judges of what makes a contribution to
CSGNet. My judgment is often the same as Bill's but not always. I think
that's mainly because Bill P. has far lower criteria for what he is
willing to consider a contribution than I do. This just means that it
usually takes him a bit longer then me to recognize what we eventually
agree is a consistent non-contributor.

So you meant it when you said Bill is your lapdog. Duly noted.

I can't wait until you finish straightening out economics. I hope your
next application of control theory will be to straighten out the muddle
in fundamental physics.

Bruce Gregory

Best regards

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

"Everyone is entitled to his or her own opinions; everyone is not
entitled to his or her own facts."

Daniel Patrick Moynihan

"Everything that needs to be said has already been said. But since no
one was listening, everything must be said again."
                                                                                Andre Gide

From [Marc Abrams (2004.01.24.1442)]

> [From Rick Marken (2004.01.24.1035)]

> We are all, individually, the judges of what makes a contribution to
> CSGNet. My judgment is often the same as Bill's but not always. I think
> that's mainly because Bill P. has far lower criteria for what he is
> willing to consider a contribution than I do. This just means that it
> usually takes him a bit longer then me to recognize what we eventually
> agree is a consistent non-contributor.

I like this. At least it brings into the open and on the table to all those
who might be interested in 'contributing' to PCT and they must get past the
Mullah's of CSGnet. Sort of like Iran's "democracy". They have a duly
elected parliament that can't do anything, including running for office,
without the 'permission' of the ruling religious council who are self
appointed and who have supreme authority over everything. They can't take
the chance that someone might actually want a bit of freedom and go against
the teachings of Khomeini. Well, I guess being the big fish in a _very_
small pond is better than being a small fish in a big one, eh Rick? btw, how
many people at Rand are currently logged on to CSGnet? Just curious. I know
few people there would have the mental prowess to actually understand PCT
but I'd like to know if you have had any success in getting people
interested in it.

Marc

[From Bill Williams 24 January 2004 7:00 PM CST]

I'd have gotten back to you sooner, but we run semiars on Saturdays--
at least the Economic people hold seminars.

"Otherwise, stuff it."

Bill, I think we have a small communication problem. I'm not your gofer. And, be informed that I haven't worked in the mail room for years. So,
find somebody else to "stuff" whatever it is ..

Bill Williams