Maximization

[Martin Taylor 2007.11.11.23.13]

[From Rick Marken (2007.11.08.0915)]

  Bill Powers (2007.11.08.0656 MDT)--

  Rick Marken (2007.11.07.2230) --

  I think it would be appropriate to acknowledge the late Bill Williams'
priority in analyzing the Giffen effect as a control process.

Yes, I think that would be appropriate.

Though I think it is interesting that, despite this, Williams still
maintained a staunchly conventional, non-control theory approach to
economics as a whole.

Not in the looong discussions he contributed to the ECACS forum, he didn't.

Martin

[From Richard Kennaway (2007.11.13.1736 GMT)]

[From Bill Powers (2007.11.11.0651 MDT)]
I meant that lowering the price of a good alone will not induce a control system to spend more money on a good already being consumed (on a regular basis). The person will spend less, although a slightly larger quantity of the good will be bought. I did specifically say "spend more", not "buy more". If you leave the properties of the control system constant, lowering the price increases the loop gain (by raising the gain of the environmental feedback function, here the ratio of goods obtained to money spent). Raising the feedback gain increases the amount of good obtained and reduces the error, and reducing the error reduces the output of the system, in this case the money the system spends to obtain the good. So while a slightly larger quantity of the good will be bought, the result is to spend less money on it. Check out the Live Block Diagram. Price goes in the environmental feedback function.

Ok, I see what you mean (although the iPhone example doesn't fit, since the perception can only go in jumps).

The rest, I'll have to think further about.

I don't think well of any economists, including Keynes. None of them seems to know anything about control theory, and the ones I hear the most about seem to be concerned mainly with excusing the nasty things done by capitalists. How about giving me an assignment of reading the work of an economist you approve of?

Well, there's David Friedman, who I've recommended before, but you weren't impressed. Maybe someone could try writing a parallel version of his "Price Theory" based on control theory axioms instead, and see where the different theoretical basis forces different predictions.

The proof of the pudding would be finding places where PCT-based economics successfully predicts things other economic theories fail to predict.

···

--
Richard Kennaway, jrk@cmp.uea.ac.uk, Richard Kennaway
School of Computing Sciences,
University of East Anglia, Norwich NR4 7TJ, U.K.

Well, there’s David Friedman,
who I’ve recommended before, but you weren’t impressed. Maybe
someone could try writing a parallel version of his “Price
Theory” based on control theory axioms instead, and see where the
different theoretical basis forces different
predictions.
The proof of the pudding would
be finding places where PCT-based economics successfully predicts things
other economic theories fail to predict.
[From Bill Powers (2007.11.13.1147 MST)]

Richard Kennaway (2007.11.13.1736 GMT) –

I’ll see if the library has that book.[It didn’t: I’ve ordered it from
Amazon.]

Do economic theories predict anything? If so, how often are they right? I
thought they were mostly concerned with explaining events after the
fact.

Best,

Bill P.

[From Bjorn Simonsen (2007.11.13,20:45 EUST)]

From Rick Marken (2007.11.08.0930)

I am sorry for not answering you the same day.

Bjorn Simonsen (2007.11.08,14:40 EUST)–
I think you are too special saying “The Giffen effect will only be seen when
…”. The Giffen effect is seen when a person wishes to buy gold and
weapons.
Really? Could you describe how the effect works with gold and weapons?

I describe below the result of an analysis of how the Giffen effect may result from a wish to buy gold and silver. I don’t explain from scratch. This is of course theoretical.

Look at the graph below.

The Substitution effect will result in lowering demand of weapons (the Giffen good), the good that is bin relative more expensive.This is illustrated by a movement up the difference curve from point A to Point B.

Outlook5.bmp|x

This graph shall show the substitution effect when the consumer’s available capital and the price on Gold (Normal good) is unchanged, and the price for weapons (inferior good) increases.The Substitution effect will result in lowering demand of weapons (the Giffen good), the good which now is relative more expensive, xB < xA.

The purchasing effect (Look at the graph below).

When the purchasing power is reduced, we must put in a new budget line. Let us say that the consumers income, R, divided by the new unit price for weapon is R/p(weapon). Then we can track a new budget line from R/p(gold) to R/p(weapon). xB is to the left of xA because he is able to buy less than xA weapons for the new unit price.

Outlook6.bmp|xagram The diagram above show the indifference curve touches the budget line in A. Then the price on the Giffen good, Weapon, increases. And if we imagine an increase of wages in such a way that we make use of the same indifference line, we move to another point of the indifference curve, B. I have sketched the tangent to the curve in B. This shows the substitution effect and we can see that this effect lower the demanded amount of weapon from x1 to x2. Remember we just imagined an increase of wages equivalent the lowering of purchasing power.

But the increase in weapon price has also a purchasing effect. Therefore I have sketched a new budget line from R/p(gold). It is parallel to the tangent in B, which had the same gradient as the new budget line. And it intersects the x-axis in R/p2(weapon).

The indifference curve for this budget line is U2. The optimum mix of purchases for this individual is the point C where the indifference curve touch the budget line R/p(gold) R/p2(weapon). This optimum mix of purchases is x3,y3. And x3 tells us here that the effect of increase of price for the Giffen good, weapon result in increased demand for weapon.

This is theoretical and the Giffen effect exists when the purchase effect of increased prices on inferior good is greater than the substitution effect, when x3 -x2 > x1 - x2. Most economists say that this effect is never shown.

What’s the controlled variable (the analog of calories) in that case?

  1. y = u(x,y) the utility function.

  2. y - y1 = (y2 - y1)/x2 - x1) * (x - x1) the budget line is known.

1 = 2 and you find the optimum mix of purchases. Different utility functions give different values of optimum mix of purchases.

bjorn

[From Richard Kennaway (2007.11.13.0701 GMT)]

[From Bill Powers (2007.11.13.1147 MST)]

Richard Kennaway (2007.11.13.1736 GMT) --

Well, there's David Friedman, who I've recommended before, but you weren't impressed. Maybe someone could try writing a parallel version of his "Price Theory" based on control theory axioms instead, and see where the different theoretical basis forces different predictions.

I'll see if the library has that book.[It didn't: I've ordered it from Amazon.]

Oops -- I should have mentioned that most of the text is on the web.
http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.htm

···

--
Richard Kennaway

Re: Maximization
[Martin Taylor 2007.11.14.10.21]

[From Richard Kennaway (2007.11.13.0701
GMT)]

[From Bill Powers (2007.11.13.1147
MST)]

Richard Kennaway (2007.11.13.1736 GMT) –

Well, there’s David Friedman, who I’ve
recommended before, but you weren’t impressed. Maybe someone
could try writing a parallel version of his “Price Theory”
based on control theory axioms instead, and see where the different
theoretical basis forces different predictions.

I’ll see if the library has that book.[It didn’t: I’ve ordered it from
Amazon.]

Oops – I should have mentioned that most of the text is on the
web.
http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.htm

Richard Kennaway

Unfortunately, this is what comes up…

Not Found

The requested URL /Academic/Price_Theory/PThy_ToC.htm was not found on
this server.

Martin

Oops – I should have mentioned
that most of the text is on the web.


http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.htm

[From Bill Powers (2007.11.14.0641)]

Richard Kennaway (2007.11.13.0701 GMT) –

There should be an el on the end of that. HTML. It’s OK, the book was
used and I got it for $5 plus shipping. It’s not here yet, of course, so
I’m reading the web version.

It seems so far to be a pretty solid logic-level discussion, with the
basic “insight” being that people have already found the
solution to the system of equations (as I put it) and therefore that the
economic system (any economic system, I take it) can’t be improved.
Everyone has already chosen the weightings for the various goods they
prefer, hence Friedman’s Economic Joke #1:

Econonomist 1 (Seeing a snazzy Jaguar in the dealership window): “I
want one of those!” Economist 2: “No, you don’t.”

The theory is that you always balance the “utilities” of all
the goods you prefer, such as eating food or having health insurance, and
always prioritize everything the way you want it. If economist 1 really
wanted that Jaguar, he would have given up something else to get
it.

As Friedman explains, economics is not about goods and money, it’s about
human preferences. I completely agree with him about that. Money is
simply a human invention that makes one kind of good convertible to
another, as well as making it possible to own the equivalent of a
negative amount of goods (but of course that invention makes a great deal
of difference). What he refers to as “rationality”, as I would
put it, is simply the set of all control systems automatically seeking
equilibrium among all the interacting goals, weighted by loop gain.
Analytical mathematical computation isn’t required, so rationality
doesn’t call for everyone to have passed the calculus or even count
without moving their lips.

So far so good, or so it appears on the surface. But I can already see
the background thoughts that are running this show. Obviously poor people
are poor because the choices they have made had led them to be poor. If
they wanted money more, they would be working harder and giving up the
pleasures of lying around drunk and watching television. You can’t help
them by giving them money, especially not by making them reprioritize
their spending, because they will either fight you or simply relax and
let you take care of them. So you needn’t throw money at that problem,
especially not your own money. Behavior has consequences, and if you
interfere with those consequences you simply teach people that it doesn’t
have consequences, so they’ll go on making the same mistakes and your
do-gooding will be self-defeating. That’s how all the Republicans in the
United States justify their economic position and their lack of interest
in equalities of every kind: equality of opportunity is OK, of course,
very important, but not actual equality of achievement. Actual
achievement would mean having all those riff-raff living next door and
throwing beer cans on your lawn (because – a major premise – human
nature doesn’t change).

This kind of reasoning is easy: you decide what conclusions you would
like to reach, and then invent premises that will get you there. When you
need evidence, you just make up stories about how people will act that
illustrate the point you need to make. In Friedman’s examples, everyone
always acts exactly as they need to to prove that they are always making
their choices rationally. Except, of course, for the exceptions, which
Friedman happily acknowledges, just before deciding that they don’t make
any difference since what he says is true most of the time. He doesn’t
prove it’s true most of the time, he just says it. He has a very
confident way of putting things, so you hardly notice that he’s inventing
his facts.

Methodologically, Friedman’s theory as I see it developing so far, is at
the stage of proposing hypotheses and arguing for their reasonableness.
Since this is all done in words, as far as I’ve read, it lacks rigor, in
that he tries to describe multidimensional interactions by emitting
symbols in a one-dimensional string, which always creates problems. There
are no verbal simultaneous equations.

The next stage in the development, as I see it, would be to convert the
verbal manipulations into a working model or simulation, since the actual
consequences of all these interactions can’t be foreseen through verbal
description alone (Friedman says, however, that you can’t really
understand the mathematical version until you’ve put it into words, which
probably tells us something). And after that, of course, comes the moment
when theoreticians try to act noncholant and unworried: it will be
necessary to find out if people do, in fact, act in the ways predicted
from the theory of rationality. It’s odd that Friedman hasn’t mentioned
that yet. The behavior of the model has to be compared with observations
of real behavior. Without that final critical test, the model remains
hypothetical, and is still quite possibly wrong.

Theoretically, Friedman’s theory has one very big problem, which is that
everything happens at the same level, the level of logic or programs.
Logically, if one line in the supermarket has people in it with fewer
groceries to check out, you will move to that line, so the lines will
always move at the same speed. Never happens for me, but maybe that
doesn’t count. This, Friedman explains, is why it takes just as
long to get from A to B regardless of the route you take. As a sort of
casual side-remark, he does note that there might be other considerations
beside minimizing travel time, but somehow that only helps to prove that
people prioritize their choices rationally, even it it doesn’t prove that
all routes take the same time to travel (which they don’t). That brings
up anti-economist Economist Joke #1:

Economist 1: Let’s go to Billy Berg’s for dinner and catch the floor
show. Economist 2: Oh, nobody goes to Billy Berg’s – it’s too
crowded.

People have goals at many different levels and change their goals as a
means of achieving higher ones. If the highest goal were simply to be
logical, we could stop with rationality theory. But that’s not the
highest level: the next level by my reckoning is principles, which
include things like morality, and the one after that is system concepts,
in which one’s own role is simply one element of a system in which
everyone has a role. At the system concept level, there is no
self-interest in the sense of one individual prevailing over another, but
there is an interest in creating a social system in which everyone,
including one’s own self, has the best chance of survival and happiness.
from the system-concept standpoint, you select principles (including
moral principles) that will lead to such a system if everyone were to
adhere to them. Proponents of status-quo economics hotly deny that morals
have anything to do with economics (meaning, in Friedman’s terms, that
nobody has preferred principles, much less system concepts) and they also
argue that the only way to get a system that works is not to try to
create one (because it already exists). Logically, it may already exist.
Actually, or rather in my opinion, our social principles and shared
system concepts are a mess.

I wonder how economists who agree with Friedman handle the following
point. All the do-gooders and social busybodies trying to ameliorate
suffering and injustice are, in fact agents trying to satisfy their
preferences. They are therefore an intrinsic part of the economy, and are
working to prioritize their preferences just as everyone else is
according to Friedman. If the economy contains these people, it has
already adjusted to their behavior, so there is no reason to tell them to
stop doing what they’re doing. In fact, trying arbitrarily to curtail
their activies is just interfering with the free marketplace. But hold
on, if you’re interfering with the free marketplace, that is because you
give that activity a higher utility than other activities, so that makes
it OK … I don’t think we want to go there. It’s too crowded.

I’ll read on. My expectations are not very high, but my mind is still
open a crack.

Best,

Bill P.

···

Richard Kennaway

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[From Bill Powers (2007.11.14.1002 MST)]

Richard Kennaway (2007.11.13.0701 GMT) –

Some germs of ideas about utility, which I think may be the key
conceptual difference with PCT.

Let’s drop the idea of utility and substitute reference signals and
control systems, and see what happens.

Simple 2-good case, similar to what Friedman starts with. We have a
quantity G1 of good 1 selling at price P1, and a quantity G2 of good 2
selling at price P2. Assume perfect control at first – later we can
relax it to finite-gain control.

The total cost of G1 and G2 is P1G1 + P2G2. If the entire budget B is
spent on these two goods, we get

 B - P2*G2

G1 = ---------

     P1

Plotting G1 against G2, we have

  • G1 = B/P1, G2 = 0
*

G1| *

  • slope = -P2/P1
···
      *
  • G1 = 0, G2 = B/P2

__________*

G2

Friedman uses that budget line. But where do the indifference curves,
convex toward the origin, come from? He says they come from the fact that
the relative value of the two goods changes, so that in the middle the
relative values, or utility, of G1 and G2 are the same, and at the ends,
either G1 becomes worth less than G2 or vice versa. But why is that true?
If you read no more carefully than I did, the reason appears to be that
he created a table of utilities that led to a graph that was convex
toward the origin. His answer would have to be, “Because I assumed
it.” Perhaps you can read more carefully and find out what that
curve is derived from. I didn’t find it.

All right, back to PCT.

G1 and G2 can be interpreted as quantity of goods, which is increased by
purchases of more goods and reduced by depreciation or use. The above
budget line then relates the equilibrium amounts of G1 and G2 under a
particular budget.

The action that keeps either good G near the reference level is a rate of
spending money, and the feedback function in each case is 1/price so
either of the system equations in iterative form would be

G(t+dt) = G(t) + ($/P - D)*dt

where $ is the rate of spending money per unit time,

   D is the amount of G lost or used

per unit time.

   P is the price per unit of G

   dt is the duration of one

iteration

The error signal E is

E = G’ - G where G’ is the reference level for G, and

$ = Ko*E, where Ko is the output gain, (rate of expenditure per unit
error)

That completes a control system for each of the goods, when appropriate
subscripts are added.

Now we need to bring in the budget constraint.

Let’s define a store S of money in the environment from which the dollars
are extracted to pay for G1 and G2. Let W be a wage income in dollars per
unit time, in which case

S(t+dt) = S(t) + (W - $1 - $2)*dt

S will remain positive as long as the cumulative expenditures on the
goods are not greater than the cumulative wages. Think of S as a savings
account in a bank (but we’ll ignore interest for the time being – it
would be introduced to the model here).

We can introduce a second level of control by proposing that there is a
control system concerned with the magnitude of S, the savings balance,
that acts by adjusting the reference levels for G1 and G2 in the same
direction, and a second control system for the mix of goods on hand,
which also acts by adjusting G1’ and G2’ but in opposite
directions.

If savings get too low, the first system reduces both G1’ and G2’. This
reduces the expenditures and allows the wages to build the savings back
up.

We need some other criterion for adjusting the relative reference
signals, such as obtaining more G2 than G1, indicating some preference
for G2 over G1. Let’s just say without getting into the reasons why that
the second controlled variable is the excess of G2 over G1:

diff = G2 - G1, which is to be maintained at a reference level diff-prime
or diff’. Alternatively, this could be a ratio.

The action As of the savings-controlling system is

Es = S’ - S

As := Koa*E

The actiom Ad of the difference-controlling system is

Ed = diff’ - (G2 - G1)

Ad = Kod*Ed

Finally, the connection from level 2 to level 1 is

G1 := As + Ad and

G2 := As - Ad

I think what I’ll do now is stop and let someone else (Richard??) take it
on from here.

Best,

Bill P.

[From Bill Powers (2007.11.14.1606 MST)]

Richard Kennaway (2007.11.13.0701 GMT) –

I just realized something about Friedman’s discussion of using a common
measure of dollars to measure value. One of the reasons he says we can do
this is that different goods can all be judged in terms of their utility.
What occurred to me that this is circular: simply to say that all goods
have utility is to assert a common measure to begin with, so the step of
converting to dollars doesn’t add anything. You could convert it to feet
if you wanted, if feet were a medium of exchange.

It’s hard to measure the utility of a hammer because that depends on the
context and the level of perception you’re thinking of. A hammer is very
useful for poinding nails in or removing them. It’s also good for holding
down papers in a wind. It also has utility as a murder weapon. If you
don’t specify the higher purposes, the idea of utility is completely
ambiguous: how to you compare the utility of a hammer used for calling a
meeting to order with the utility of soap for getting clean? In PCT we
recognize these as independent dimensions of experience; in utility
theory there are no orthogonal variables.

Best,

Bill P.

[Martin Taylor 2007.11.14.20.59]

[From Bill Powers (2007.11.14.1606 MST)]

Richard Kennaway (2007.11.13.0701 GMT) --

I just realized something about Friedman's discussion of using a common measure of dollars to measure value. One of the reasons he says we can do this is that different goods can all be judged in terms of their utility. What occurred to me that this is circular: simply to say that all goods have utility is to assert a common measure to begin with, so the step of converting to dollars doesn't add anything. You could convert it to feet if you wanted, if feet were a medium of exchange.

It's hard to measure the utility of a hammer because that depends on the context and the level of perception you're thinking of. A hammer is very useful for poinding nails in or removing them. It's also good for holding down papers in a wind. It also has utility as a murder weapon. If you don't specify the higher purposes, the idea of utility is completely ambiguous: how to you compare the utility of a hammer used for calling a meeting to order with the utility of soap for getting clean? In PCT we recognize these as independent dimensions of experience; in utility theory there are no orthogonal variables.

The only time money has a value is in a transaction where it changes hands in exchange for some goods or services. At the moment of the transaction, if it is uncoerced, the person giving money must consider that the lost opportunities implicit in the reduction of the money supply is of less utility than the gain from the acquisition of the goods or services. There's no need for a multidinesional scale.

What is happening in PCT terms is a resolution of various possible conflicts in each party. The action of handing over money is part of the feedback loop of some controlled perception(s) for which the error is reduced by the acquired goods or services; the provider of the goods or services uses the money acquired to reduce error in some other perception. In both cases, the actions reduce the person's ability to control other perceptions; the buyer has less to spend on other stuff, the seller has less stuff to sell or less time and effort to give to other projects.

"Utility" is only a relative and marginal measure, in this way of looking at it. It's a way of saying where the balance is found among the different conflicts in each party. It would not work at all if the control systems in conflict were linear. it could mean whether the need to keep paper from flying away by using a hammer to hold it down wins the conflict in the person with the hammer over a desire for more money that might be provided by someone wanting to buy the hammer for $1000 to bang in a nail. What the hammer is to be used for is irrelevant to a measure of its utility, if utility is considered as a measure of "transactability".

Martin

The only time money has a value
is in a transaction where it changes hands in exchange for some goods or
services. At the moment of the transaction, if it is uncoerced, the
person giving money must consider that the lost opportunities implicit in
the reduction of the money supply is of less utility than the gain from
the acquisition of the goods or services. There’s no need for a
multidinesional scale.
[From Bill Powers (2007.11.15.0126 MDT)] –

Martin Taylor 2007.11.14.20.59 –

I don’t think a person “must” consider lost opportunities,
whether they arise from spending money or losing the use of something one
owns. Most of the time we don’t even think of them, and we can never
consider them all. There is an infinity of lost opportunities –
everything you might have done but didn’t – and figuring their costs is
largely a matter of finding plausible ones to declare as income tax
deductions. I don’t think anyone really goes through life computing what
they have lost because they chose to turn left rather than turn right or
fall over backward or whistle Yankee Doodle. Opportunity costs are
fictitious, or worse, they’re a symptom of paralyzing indecision that
keeps one from acting. I’ve experienced that myself, in adolescence, and
have seen other adolescents going through it: if I decide on one career,
what other exciting possibilities will I then not be able to pursue? I’m
not saying that nobody ever considers lost opportunities, but that it’s a
sign of immaturity or worse problems if that occupies a major part of
one’s time.

What is happening
in PCT terms is a resolution of various possible conflicts in each party.
The action of handing over money is part of the feedback loop of some
controlled perception(s) for which the error is reduced by the acquired
goods or services; the provider of the goods or services uses the money
acquired to reduce error in some other perception. In both cases, the
actions reduce the person’s ability to control other perceptions; the
buyer has less to spend on other stuff, the seller has less stuff to sell
or less time and effort to give to other
projects.

While I’m sure a prudent person goes through some period of indecision
before making a major expenditure when there are many things desired at
the same time and a tight budget, the normal course is immediately to
resolve the conflict, or to become organized so it happens only once.
When I buy lunch, I don’t agonize over which item on the menu will give
me the most pleasure at the lowest cost, though I have known a few people
who did, and it spoiled their lunches. Really to consider all the
opportunity costs would take literally forever. I “consult my
stomach” and buy the first thing that appeals, not worrying
afterward about what might have tasted better, or whether I should have
bought a book or seen a movie instead.
This whole issue of choices is mostly in the imagination. If we had to
make a choice every time we can imagine that there is a choice to be
made, we’d all be nervous wrecks and never do anything. The people who
worry about this, I suspect, are mainly accountants who have greedy
bosses who will berate them about every penny they might have saved the
company, or as I said, those who are charged with the task of minimizing
taxes. Or people who have been heavily criticized or mocked for
innocently spending a dime more than they had to. You see this in
automobile ads on televison. “You spent how much on that car?
I got mine at Downtown Motors for …”. Advertisers love human
frailties like dithering over opportunity costs.

Mostly what we do, and feel smartest for doing, is have it all. I buy
lunch and buy a book and see a movie (though not
simultaneously), and furthermore I save some money, too, so I can do such
things later. Yes, there are constraints, but I most energetically deny
that we solve the equation by considering all possible alternatives. We
control in multiple dimensions at the same time, and resolve conflicts on
the fly, if necessary by flipping a coin. Usually there is no conflict at
all, no choice, between using my right hand to open the car door and
using it to cut my throat, even though if I do the one, I can’t be doing
the other at the same time. We do as many things at the same time as we
can manage, and normally don’t concern ourselves over what we might have
been doing instead. Actually, upon giving it some thought, we can all
realize that we’re doing many more things at the same time than we’re
conscious of doing. They get done, like sitting upright while you read
this, but automatically.

“Utility”
is only a relative and marginal measure, in this way of looking at it.
It’s a way of saying where the balance is found among the different
conflicts in each party. It would not work at all if the control systems
in conflict were linear. it could mean whether the need to keep paper
from flying away by using a hammer to hold it down wins the conflict in
the person with the hammer over a desire for more money that might be
provided by someone wanting to buy the hammer for $1000 to bang in a
nail. What the hammer is to be used for is irrelevant to a measure of its
utility, if utility is considered as a measure of
“transactability”.

All right then, I’ll trade you my hammer with the soft rubber head, plus
a dollar, for yours with the nice heavy steel head, because if a hammer
is a hammer, you should be indifferent about which hammer you use to nail
things together. It’s not the transactability of things that gives them
value to us, but their usefulness in helping us accomplish what we want
to see done. Nothing has any transactability in itself; that’s not a
physical property of anything. After I’ve hit my thumb three times with
my hammer I’d give it to you for two cents. But my dad’s old beat-up
paint-streaked hammer I wouldn’t sell to you for a hundred dollars. A
thousand, maybe, if I really needed the money. Value starts with
perceptions and reference levels. The ONLY value something has is the
reference level we set for it – for reasons having nothing to do with
the thing itself. The search for value is a wild goose chase without
control theory. In fact, that’s why the Chinese are so interested in PCT
– they see in it the solution to all the philosophical problems of
“axiology” – the study of value. Economics hasn’t found that
solution; it seems to have found only a bookkeeper’s nightmare.

How about carrying my partial model on a bit further? It has money and
goods in it, and perceptions and reference signals, and maybe some
insights to be gained by seeing how it would work. It’s very obvious that
money spent for one thing can’t be spent for another, but so what? The
only way to find out so what is to put one’s assumptions into a model and
see what it does, which is hardly ever exactly what you imagined it would
do.

Best,

Bill P.

[From Bjorn Simonsen (2007.11.15,11:25 EUST)]
From Bill Powers (2007.11.14.1002 MST)]

But where do the indifference curves, convex toward the
origin, come from? He says they come from the fact that
the relative value of the two goods changes, so that in the
middle the relative values, or utility, of G1 and G2 are the
same, and at the ends, either G1 becomes worth less than
G2 or vice versa. But why is that true?

Most economists who present indifference curves have chosen a substitution relationship between the two goods in such a way that the more the consumer already consumes of one of the goods the more of this good he is willing to give to acquire a unit of the other good.(The law about decreasing substitution fraction).

The marginal substitution fraction, -(delta y1/delta x1), describes this.

I found in my old textbook other indifference curves like:.(I think the names explain their effect)

Outlook7.bmp|x

The reference curves can be represented for the sake of calculation by the south west quarter of the circle curve or the ellipsis curve.

I think one reason for economists to use the convex toward the origin indifference curve is their wish to later explain the Price-quantity effect, which is basis for many economic effects as monopoly and different fees.

bjorn

Most economists who present
indifference curves have chosen a substitution relationship between the
two goods in such a way that the more the consumer already consumes
of one of the goods the more of this good he is willing to give to
acquire a unit of the other good.(The law about decreasing substitution
fraction).
From Bill Powers (2007.11.15.1601 MST)]

Bjorn Simonsen (2007.11.15,11:25 EUST) –

How did they come to that relationship? Did they derive it from some
other basic theory? Or was it determined by observing people making
choices?

Best,

Bill P.

{From Erling Jorgensen (2007.11.16 0900 EST)]

Bill Powers (2007.11.15.1601 MST)

I probably shouldn't do this until I have time to spell
the idea out more fully, which I was hoping to get to this
weekend. But your question to Bjorn raises the point again
in my mind.

How did they come to that relationship? Did they derive it
from some other basic theory? Or was it determined by observing
people making choices?

This is tangential to the actual discussion of Maximization.

You are asking about theories that feed off themselves,
without a lot of corrective action from the environment.
Sounds like: building an internal model [not in the
science-testing sense of a simulation that actually has
to generate working dynamics], having some loose parameters
that are vaguely tied to what one thinks might be out in
that environment, and testing one's output by feeding it
back into the model itself!, not the environment (or only
secondarily into the environment, to see if one might
loosely want to modify those parameters).

In my mind's eye, I'm describing (perhaps unfairly, perhaps
not) the diagram of a Kalman filter. When you raised your
query not too long ago about whether anyone thinks the Kalman
filter shows up as a way to model something in a living
organism, I went back to look at some diagrams & postings
from Hans Blom & others, which occurred about 12 years ago
on CSGNet. (I think the posts I looked at were from May 1995,
but I couldn't find any online archive of CSGNet going back
more than a year.)

My thought at that time, & a few weeks ago when you revived
the issue, was agreement that perhaps the model of a Kalman
filter is an elaborate version of the so-called "imagination
switch" of HPCT. It's not really set up that way, but it
may sort of work to control in one's imagination via a mental
model (which is the way Modern Control Theory seems to use
that word).

I'm starting to wonder whether control via a Kalman filter,
which is pretty far removed from effective corrective action
from the actual environment, might be a first-approximation
way to model System Concepts. We don't have any working
model (in the scientific sense) of that level of the hierarchy
anyway, largely because we don't have models of perceptual
input functions below it that could constitute the perceptions.
But a Kalman filter does have these place holders, called
parameters, available for the so-called (by MCT) "modeled
dynamics" of the environment, which could be thought of as
the interacting components of a System. Those parameters can
be added willy nilly, to cover all kinds of internal systems
one might want to think one perceives. And when you think
about it, people's system concepts are remarkably impervious
to actually changing if one doesn't want them to change. Yes,
this is true of any other controlled perception, (we call it
distrubance-resistance). But the degree of insulation from
the environment of one's system concepts is quite stunning --
ask any partisan about the obviously wrong concepts of the
other side. Couldn't the structure of a Kalman filter, which
deliberately removes the environment's influence on the
controlled perception itself (!), & only keeps an indirect
possibility that a few of the parameters of the model could
be adjusted if one so chose -- couldn't that arrangement
be a first-approximation working model of a System Concept
control system?

That's the kernal of the idea. I haven't thought through the
implications sufficiently as yet, to know if it has any merit.

All the best,
Erling

In my mind’s eye, I’m describing
(perhaps unfairly, perhaps

not) the diagram of a Kalman filter. When you raised your

query not too long ago about whether anyone thinks the Kalman

filter shows up as a way to model something in a living

organism, I went back to look at some diagrams & postings

from Hans Blom & others, which occurred about 12 years ago

on CSGNet. (I think the posts I looked at were from May 1995,

but I couldn’t find any online archive of CSGNet going back

more than a year.)
I’m starting to wonder whether
control via a Kalman filter,

which is pretty far removed from effective corrective action

from the actual environment, might be a first-approximation

way to model System Concepts.
We don’t have any working

model (in the scientific sense) of that level of the hierarchy

anyway, largely because we don’t have models of perceptual

input functions below it that could constitute the perceptions.

But a Kalman filter does have these place holders, called

parameters, available for the so-called (by MCT) "modeled

dynamics" of the environment, which could be thought of as

the interacting components of a System. Those parameters can

be added willy nilly, to cover all kinds of internal systems

one might want to think one perceives. And when you think

about it, people’s system concepts are remarkably impervious

to actually changing if one doesn’t want them to change. Yes,

this is true of any other controlled perception, (we call it

distrubance-resistance). But the degree of insulation from

the environment of one’s system concepts is quite stunning –

ask any partisan about the obviously wrong concepts of the

other side. Couldn’t the structure of a Kalman filter, which

deliberately removes the environment’s influence on the

controlled perception itself (!), & only keeps an indirect

possibility that a few of the parameters of the model could

be adjusted if one so chose – couldn’t that arrangement

be a first-approximation working model of a System Concept

control system?
[From Bill Powers (2007.11.16.1103 MDT)]
Erling Jorgensen (2007.11.16 0900 EST) –
Hans Blom, not Oded Maler! Thank you very much. Now I should apologize to
Oded.
It would work at any level, wouldn’t it? But I’m learning more about the
Kalman Filter, because I feel a bit threatened by it. Google it and
you’ll get over a million hits. A lot of people think it’s
important.
What I’m finding is that it’s basically a way to predict the next state
of a system given very uncertain and noisy information about it. It gets
so complicated mathematically that I can’t see through to the underlying
logic of this approach. But the idea that the information is very noisy
makes me think this can’t be useful for a model of organisms: look around
and ask how noisy your experiences of the world are. It looks pretty
darned noise-free to me. Of course at higher levels, particular from
logic on up, there may be much more uncertainty, but you couldn’t prove
that by listening to Rush Limbaugh. There’s nothing inherently
noisy about logic, principles, or system concepts, though of course
reorganization introduces random changes and not all perceptual input
function work perfectly. But randomly noisy? I can understand “badly
organized,” but where the randomness comes from I can’t
imagine.

We can’t get away from mental models, because we undeniably use them. But
mainly we use them when we have plenty of time, and very few of them seem
automatic and quick the way a control system is. I hope Richard K.takes
up this subject, because I’m not feeling well-enough equipped to handle
it.

I’m in limbo on these subjects right now. I have to understand the KF
better than I do, but it’s the kind of subject that I just hate to get
sucked into by tediously unpicking the math and getting obsessed with it.
My short-term memory for symbol definitions isn’t up to it, either. I
think I need a vacation, but then I’m on a sort of permanent vacation
anyway. A vacation from my vacation?

Best,

Bill P.

Re: Maximization
[Martin Taylor 2007.11.16.14.58]

[From Bill Powers (2007.11.15.0126 MDT)]

Martin Taylor 2007.11.14.20.59 –

The only time money has a value is in a
transaction where it changes hands in exchange for some goods or
services. At the moment of the transaction, if it is uncoerced, the
person giving money must consider that the lost opportunities implicit
in the reduction of the money supply is of less utility than the gain
from the acquisition of the goods or services. There’s no need for a
multidinesional scale.

I don’t think a person “must” consider lost opportunities,
whether they arise from spending money or losing the use of something
one owns. Most of the time we don’t even think of them, and we can
never consider them all.

Two points: (1) I can see how you interpreted my use of
“must” as a constraint on the person involved in the
transaction, but I didn’t intend it that way. I meant it as an obvious
inderence from the Analyst’s viewpoint, as in “it must be true
that”. (2) Do you never think, when considering buying something
“Can I afford it?” “Can I afford it” is to
“consider that the lost opportunities implicit in the reduction
of the money supply is of less utility than the gain from the
acquisition of the goods or services.”

This whole issue of choices is mostly in
the imagination.

I’d say “necessarily” in the imagination, rather than
“mostly”.

If we had to make a choice every
time we can imagine that there is a choice to be made, we’d all be
nervous wrecks and never do anything.

What DO you mean by having to “make a choice”? I have a
choice right now to stop typing and go next door to listen to the news
report that I almost can hear on the radio. It doesn’t make me a
nervous wreck that I choose to sit and type. Nor did it make me a
nervous wreck that I considered for about 6 weeks before deciding to
upgrade my Mac’s hardware rather than buying a new iMac. And soon I
will choose to stop typing and go and make some teas. Or maybe I am a
nervous wreck and I won’t make the tea?

Mostly what we do, and feel smartest for
doing, is have it all. I buy lunch and buy a book and
see a movie (though not simultaneously), and furthermore I save some
money, too, so I can do such things later.

It’s nice to have sufficient money that you don’t ask yourself
“Can I afford it”. But not everyone has enough to do even
those things you mention, and you yourself have mentioned more than
once that you would like some software or a faster computer that you
can’t afford (presumably because you want money for food or
accommodation or some such triviality). There are conflicts to be
resolved.

Yes, there are constraints, but I
most energetically deny that we solve the equation by considering all
possible alternatives. We control in multiple dimensions at the same
time, and resolve conflicts on the fly, if necessary by flipping a
coin.

Presumably so. I see no relevance to the argument.

Now the nub…

“Utility” is only a relative
and marginal measure, in this way of looking at it. It’s a way of
saying where the balance is found among the different conflicts in
each party. It would not work at all if the control systems in
conflict were linear. it could mean whether the need to keep paper
from flying away by using a hammer to hold it down wins the conflict
in the person with the hammer over a desire for more money that might
be provided by someone wanting to buy the hammer for $1000 to bang in
a nail. What the hammer is to be used for is irrelevant to a measure
of its utility, if utility is considered as a measure of
“transactability”.

All right then, I’ll trade you my hammer with the soft rubber head,
plus a dollar, for yours with the nice heavy steel head, because if a
hammer is a hammer, you should be indifferent about which hammer you
use to nail things together. It’s not the transactability of things
that gives them value to us, but their usefulness in helping us
accomplish what we want to see done.

Of course that’s true when you are not concerned with the
transaction. But I thought your were dealing with economics, and the
measure of “utility” that determines whether transactions
occur. It’s an old philosophers’ trick to use a word in two senses and
argue the one sense in a context that demands the other. Not a fair
trick in philosophy, and obfuscating, here.

Value starts with perceptions and
reference levels.

Right. That’s where the argument starts.

The ONLY value something has is the
reference level we set for it

Not so. The reference level is irrelevant to the value, in either
sense of the term. And where did we switch from “utility” to
“value”. “Utility” in the non-transactional sense
has to do with the way the “something” acts in environmental
feedback loops – as you use it above. “Value” is a vague
term that suggests an equivalence to some measure such as money (a
concept which is reminiscent of the discussion on Stevens’
power-law).

– for reasons having nothing to do
with the thing itself. The search for value is a wild goose chase
without control theory.

I suppose that if you understand PCT to be the basis of all
behaviour, as do you and I both, this is a tautology. The issue is how
to develop the theory into a state in which “value” is a
useful concept. That’s essentially what Bill Williams and I were
worrying over in the various ECACS discussions.

Economics hasn’t found that solution; it
seems to have found only a bookkeeper’s nightmare.

I agree, but then I have the general bias that if an economist
says something, I expect it to be less correct than a random guess. If
“all economists agree”, then to find out why it is wrong may
be easier.

How about carrying my partial model on a
bit further? It has money and goods in it, and perceptions and
reference signals, and maybe some insights to be gained by seeing how
it would work.

Wherein is that unique? All I started to argue was the very
basic, and to me self-evident (which may be a clue that it is wrong)
statement that if you enter a transaction freely and willingly, the
control system for any perception for which the error is decreased is
in conflict with any and all control systems for which the transaction
increases error. Oversimplified, that means that the money handed over
means less to the payer than does the acquisition of the transacted
goods and services, and the reverse is true for the seller. The price
falls somewhere in the band of prices for which this is true. And that
price could be a measure of “value” (though the yardstick is
hardly stable dynamically, or linear statically).

Martin

(2) Do you never think, when
considering buying something “Can I afford it?” “Can I
afford it” is to “consider that the lost opportunities implicit
in the reduction of the money supply is of less utility than the gain
from the acquisition of the goods or
services.”
[From Bill Powers (2007.11.16.1626 MDT)]

Martin Taylor 2007.11.16.14.58 –

I’m not really up for this discussion right now. Just a few
comments.

If course that happens, and it can be painful and anxious experience when
you’re not terribly well off. But most of us reorganize and get some idea
of how much we can spend on which sorts of things, so we don’t have to go
on resolving those conflicts every time we buy something. Economists are
really talking about conflicts, and conflicts indicate that something
isn’t organized right. Most people walk into a supermarket knowing what
they want to buy, and they may compare some prices, but there’s no choice
to make there: if price is the criterion, pick the cheapest. It’s only
when the cheapest one looks like something’s wrong with it that you go
into conflict and have to make a decision. But having made it, you know
what to buy the next time and don’t have to make a choice. Nobody in a
supermarket goes through all the possible choices before deciding what to
buy. That would take centuries. I mean look at the shelves. This can of
tomato soup or that can of tomato soup? This can of tomato soup or that
package of beef brisket? And so on through all the combinations.
Nonsense.

What DO you mean by
having to “make a choice”? I have a choice right now to stop
typing and go next door to listen to the news report that I almost can
hear on the radio.

You also have an infinity of other choices to make at the same time, if
you say that a choice is simply all the other things you could do
instead. You also have a choice of picking up the keyboard and breaking
it across your knee, or getting a gun and firing it into that radio, or
buying 200 shares of IBM, or calling a friend on the telephone. Because
you could in fact have done any of these other things, they become
choices and you have to make a decision about them – according to how
economists talk about making choices. You will never finish making
decisions.

It doesn’t
make me a nervous wreck that I choose to sit and
type.

But if you had seriously considered all the choices you could see as
possibilities, you would still be trying to decide what to do. My point
is that choices are not just possible alternative actions: they are
courses that you actually want to take – not an infinity of
alternatives. What makes them choices is that you actually would like
several alternatives but can’t do them all at the same time. This means
you’re in conflict and have to reorganize something, or if you’re lucky,
activate some learned automatic algorithm designed to make a choice
unnecessary. Take the piece of cake that’s nearest to your hand; then you
don’t have to be in conflict over wanting the biggest one and wanting not
to seem greedy. Those algorithms are very handy, when they exist. They
eliminate the need to make choices or decisions.

Nor did it
make me a nervous wreck that I considered for about 6 weeks before
deciding to upgrade my Mac’s hardware rather than buying a new iMac. And
soon I will choose to stop typing and go and make some teas. Or maybe I
am a nervous wreck and I won’t make the tea?

I’ll say it once more. What would make you a nervous wreck would be to
consider that every time there is a possible alternative to an action,
you have to make a choice. It would make you a nervous wreck because for
every action, you can think of an indefinite number of different things
you might do instead. The alternatives are, logically, potential choices
to be made. But you only have to make a choice if you actually want
several alternatives at the same time, and if they can’t be chosen at the
same time. Only the ones you want can cause conflict; the other logically
possible alternatives are irrelevant. You don’t even consider them. When
you get in your car and drive off toward a store, you don’t even consider
turnimg in the direction away from the store, although every intersection
gives you two or three so-called choices of which way to go. You don’t
make any choices; you just go the right way to get to the store. If you
have to make choices for the route, you’re probably new to the
neighborhood, or you just heard a report that the direct road is closed.
But if you know the territory, you still don’t have to make a choice; you
just take the route that is the next best one. You don’t even consider
taking a longer route. You just, in effect, sort the remaining routes by
length and pick the shortest. What’s to decide?

Mostly what we do,
and feel smartest for doing, is have it all. I buy lunch and buy a
book and see a movie (though not simultaneously), and furthermore
I save some money, too, so I can do such things later.

It’s nice to have sufficient money that you don’t ask yourself “Can
I afford it”. But not everyone has enough to do even those things
you mention, and you yourself have mentioned more than once that you
would like some software or a faster computer that you can’t afford
(presumably because you want money for food or accommodation or some such
triviality). There are conflicts to be resolved.

Yes, the first time, and maybe the second and third time. But when you
really resolve a conflict, you remove its cause and it stops happening.
It only takes a minute to stop and consider how much money you have left
and pick items to buy that add up to less that that amount. There might
be a bit of prioritizing, but most of the decisions are quite automatic.
Half a gallon of milk, a pound of hamburger, frozen peas and corn, and –
is there enough left? – yes, a half-gallon of ice cream. You know right
where everything is and you don’t have to dither about quantities or
prices or compare brands because you got that decided long ago. What
decisions there are to make are simple and are done while you’re
reaching. Of course you have to pity the poor person who is examining
every label on every can or box looking for the last penny off or the
last buy five get six bargain. A tight budget will do that, and it’s
hell. Economists seem to think that everybody has to do that, and that’s
just not true. Most of what people buy is on their shopping lists before
they get to the store, and they go in and buy it. They do a little
impulse buying too, but if they do too much of that they’ll find they
have some choices to make, and the smart ones will reorganize so they
don’t have to make them any more.

I hope I’ve made my point clear. You only have to make a choice when
there’s a conflict. You only have a conflict when you actually want two
or more incompaticle things at the same time. Choices do not exist just
because you can point to alternatives. Most alternatives are ignored, and
by most I mean (infinity minus two) divided by infinity, since there is
always a number of alternatives limited only by the time you take to list
them, and your life expectancy.

Best,

Bill P.

[Martin Taylor 2007.11.17.16.44]

[From Bill Powers (2007.11.16.1626 MDT)]

Martin Taylor 2007.11.16.14.58 --

(2) Do you never think, when considering buying something "Can I afford it?" "Can I afford it" is to "consider that the lost opportunities implicit in the reduction of the money supply is of less utility than the gain from the acquisition of the goods or services."

If course that happens, and it can be painful and anxious experience when you're not terribly well off. But most of us reorganize and get some idea of how much we can spend on which sorts of things, so we don't have to go on resolving those conflicts every time we buy something.

I suppose this ought to lead to a thread on conflict analysis, but I won't do that just yet. I'll just sketch my concept of it, which clearly differs from yours.

Firstly, I'm assuming that a conflict exists when there are two or more perceptions that cannot all be brought simultaneously to their reference values, whether or not any of them are at a given moment being actively controlled.

You appear to be working on the principle that if a perception is not being actively controlled, it cannot be party to a conflict. If so, then we have a difference of definition, which could be resolved by using terms such as "active" conflict, and "hidden" or "covert" conflict.

Economists are really talking about conflicts, and conflicts indicate that something isn't organized right.

Not necessarily so. Resource (degrees of freedom) limitations ensure conflict. Whether the conflict becomes covert because the person decides a particular perception is less worth controlling than another, or whether it remains active, is another quiestion.

You also have an infinity of other choices to make at the same time, if you say that a choice is simply all the other things you could do instead.

We are talking about transactions, here, not about the myriads of things you might do with the money if you refused to buy the offering. The potential conflict for the purchaser is between the controlled perception(s) that might have their error(s) reduced by making the purchase and the controlled perception of the amount of money you have (assuming the reference level to be higher than the amount you do have, which is not the case for all people at all times).

The purchaser will make the purchase if the "marginal utility" (there's the measuring word) of the decreased error is larger that that of the increased error of the controlled perception of the amount of money on haand. The seller will make the sale if the marginal utility of the increased error of losing the good or that derives from the resources expended in providing the service is less than the decreased error in the perception of the money on hand.

I'm sure you will notice that the above is either tautological or circular. What it does is to propose a measure and then to use that measure. The resolution of the circularity is in the PCT resolution of conflict.

In the more general case, you have only a few dozen degrees of freedom for action at any one moment, but myriads of perceptions you could be controlling and for which you have reference values. It is normal and necessary that you choose not to control most of them (which leads to anothe thread, on tolerance, which I have long been thinking of starting). How do you select which perceptions to control actively at any moment? However that happens, it is conflict resolution, making potentially active conflicts become covert. And it comes back to the question of "marginal utility". You control those perceptions that matter most at the moment.

It's not obvious how to determine, as an analyst, what error in perception A will matter as much as a given leve of error in perception B. But it usually seems obvious to the person controlling both A and B. And so it is when perception A is level of money and perception B is one for which the error would be reduced (for the purchaser) by the transfore of goods and services.

...
I hope I've made my point clear. You only have to make a choice when there's a conflict. You only have a conflict when you actually want two or more incompaticle things at the same time.

That is precisely the consideration in any transaction in which both buyer and seller have reference levels for the amount of money on hand that is higher than the amount they have on hand. The buyer would like to keep the money and have the good or service, the seller would like to have the money and not provide the good or service. Both experience internal conflict, and there are two external conflicts in the situation as well (buyer and seller can't both have the money; and they can't both have the good).

Choices do not exist just because you can point to alternatives. Most alternatives are ignored, and by most I mean (infinity minus two) divided by infinity, since there is always a number of alternatives limited only by the time you take to list them, and your life expectancy.

I hope I've made my point clear. If we did not have money, your argument might be more cogent. In a barter transaction, each might be considering (or have previously ocnsidered in imagination) a multitude of alternatives. But when money can represent all those alternatives on a single-dimensional scale, they need not be considered, even by the analyst.

Martin

I suppose this ought to lead to
a thread on conflict analysis, but I won’t do that just yet. I’ll just
sketch my concept of it, which clearly differs from yours.

Firstly, I’m assuming that a conflict exists when there are two or more
perceptions that cannot all be brought simultaneously to their reference
values, whether or not any of them are at a given moment being actively
controlled.
[From Bill Powers (2007.11.18.0530 MDT)]

Martin Taylor 2007.11.17.16.44 –

Why don’t you do that Wiley article Dick Robertson is asking
about?

Yes, this is definitely different, since there is no way to find out if
the perceptions are in conflict without trying to bring them to their
respective reference states. In fact, simply sequencing perceptions can
often do away with the conflict – let the other person go through the
door first, then go through yourself. Is that a conflict under your
definitions anyway?

You appear to be
working on the principle that if a perception is not being actively
controlled, it cannot be party to a conflict.

Yes, that is definitely my concept of a conflict: an active conflict.
Since there are millions of perceptions that are potentially in conflict,
I don’t think there’s any point about talking about “hidden” or
“covert” conflicts. I’d settle for “potential”
conflicts if we could agree than they don’t cause any harm.

Economists are really talking
about conflicts, and conflicts indicate that something isn’t organized
right.
If so, then we have
a difference of definition, which could be resolved by using terms such
as “active” conflict, and “hidden” or
“covert” conflict.

Not necessarily so. Resource (degrees of freedom) limitations ensure
conflict.

Yes, and when the system is organized to try to control more variables
than there are degrees of freedom, the conflict will be observed. That’s
bad organization, and the system will (one assumes) reorganize to correct
that design flaw. Trying to accomplish the impossible is not good
planning.

You also have an infinity of
other choices to make at the same time, if you say that a choice is
simply all the other things you could do instead.
Whether the
conflict becomes covert because the person decides a particular
perception is less worth controlling than another, or whether it remains
active, is another question.

We are talking about transactions, here, not about the myriads of things
you might do with the money if you refused to buy the
offering.

But that’s exactly what you’re talking about. The money is simply a
variable that is affected by more than one controlled variable, creating
a link between them: buying N1 units of one variable when the budget is B
dollars means you can buy only

    B - P1*N1

N2 <= ---------

       P2

units of the other. If you set the reference level for number N2 that
way, N2 can be any number you want in that range: there’s no conflict. If
you believe that people always want to acquire an unlimited numbers of
every kind of good, you’e simply making a false assumption; I can point
right now to at least one person who doesn’t. He’s right here, typing.
Anyone who does want an unlimited amount of any good is necessarily in
conflict as soon as the attempt is made, because that’s impossible. So
that’s a design flaw and the person needs to reorganize. Such a person
would never have enough of anything, and would constantly be wasting his
energy fighting his own conflicting desires, not to mention those of
other people who want the same things in unlimited amounts.

The potential
conflict for the purchaser is between the controlled perception(s) that
might have their error(s) reduced by making the purchase and the
controlled perception of the amount of money you have (assuming the
reference level to be higher than the amount you do have, which is not
the case for all people at all times).

Yes, we agree about that. But such conflicts exist between all controlled
variables; if you expend all your resources trying to bring one variable
to its maximum possible value by any means, whether money is the means or
not, that will prevent your doing the same with any other variable. An
organism organized to behave that way can’t survive.

The purchaser will
make the purchase if the “marginal utility” (there’s the
measuring word) of the decreased error is larger that that of the
increased error of the controlled perception of the amount of money on
hand.

Now you’re talking about the case where the demands are finite and the
gains are low. Such systems are not in conflict; they are simply in
equilibrium, and neither one is at a limit. Both can still correct
errors, though the range of maximum resistance to error is reduced.
Neither one can be a high-gain control system or an integrating control
system, because raising the gain would drive one or both of them to a
limit, and that would be a conflict implying loss of control.

The seller
will make the sale if the marginal utility of the increased error of
losing the good or that derives from the resources expended in providing
the service is less than the decreased error in the perception of the
money on hand.

You will notice that this applies only to the goods actually being
offered and considered for purchase. But it doesn’t involve any conflict
under your terms because both systems can still vary their actions as
needed to oppose disturbances.

I’m sure you will
notice that the above is either tautological or circular. What it does is
to propose a measure and then to use that measure. The resolution of the
circularity is in the PCT resolution of
conflict.

???

In the more general
case, you have only a few dozen degrees of freedom for action at any one
moment, but myriads of perceptions you could be controlling and for which
you have reference values. It is normal and necessary that you choose not
to control most of them (which leads to anothe thread, on tolerance,
which I have long been thinking of starting).

When you say “freedom for action” you imply that there are some
actions you’re not free to take. Why not? Isn’t it because those actions
will be prevented by conflicts, or by hitting limits? Surely there are
more than a “few dozen” degrees of freedom for action at all
levels above, say, configurations (thinking of skeletal d.f.).

How do you
select which perceptions to control actively at any
moment?

Your question gets raised periodically. Several answers are concievable.

One is that, all neural control systems necessarily being one-way, you
turn off a control system of the standard kind by lowering its reference
signal to zero. Since the perceptual signal is inhibitory, no error
signal will ever appear, and thus the system will never act. That
would mean that higher systems can select variables to control simply by
setting nonzero reference levels for them, the rest being left at zero
and thus creating no action under any circumstances.

Another is that higher systems directly reduce the gain of the output
function without altering the reference signal, so even though if is an
error signal, there is no action. In the inverted kind of control system,
where the perceptual signal is excitatory, the reference signal has to be
set to maximum to prevent any action. If the range of the perceptual
signal is larger than the range of the reference signal, however, error
signals can still be generated for very large perceptual signals. Neither
of these solution is quite as nice as the first one.

However that
happens, it is conflict resolution, making potentially active conflicts
become covert. And it comes back to the question of “marginal
utility”. You control those perceptions that matter most at the
moment.

OK, as long as you will admit that the number of covert conflicts is
infinite, or at least equal to the number of all control systems of a
given level factorial. Reorganization continues until conflicts are
resolved, creating a range within which reference signals can be varied
freely and independently without conflict. This can happen, of course,
only if one’s economonic reference signals are organized to stay within
the range that does not cause more than the available money to be spent.
Most of us like to stay well clear of that limit, keeping a pad in
savings to allow for counteracting unexpected disturbances. As long as
that limit is avoided, the quantities of goods purchased are independent
of one another – all that matters is how much of each one you want.
Higher systems learn the practical limits on what lower systems can
effectively be told to want. I don’t think economists have a clue about
that kind of thing.

It’s not obvious
how to determine, as an analyst, what error in perception A will matter
as much as a given leve of error in perception B. But it usually seems
obvious to the person controlling both A and B. And so it is when
perception A is level of money and perception B is one for which the
error would be reduced (for the purchaser) by the transfore of goods and
services.

!!!

I suppose I should delete all my comments up to here, since the
exclamation points indicate where I finally realized something about our
discussion. You are talking strictly about conflicts between different
people. I am talking about those, but more about conflicts within one
person. If I spend all my money on one thing, I can’t spend it on
anything else, so that creates conflicts between different wants that I
have. That has nothing to do with buyers and sellers, except for the fact
that I have to spend money on things to get them. Something similar
happens between buyers and sellers, but that is a matter for negotiation;
no one person can reorganize to resolve a social conflict when
transactions are involved.

My goodness, thinking back over a number of years on CSGnet, I wonder how
many disagreements have come about because of not recognizing which kind
of conflict was being discussed. The equation I wrote above defines the
conditions for avoiding an internal conflict, given that prices are what
they are. N1 and N2 are the reference levels for good 1 and good 2. Given
the prices, higher systems learn to confine the combinations of reference
levels to the ranges that avoid conflict and thus allow continued
control. The prices (and income) determine what those conflict-free
ranges are. When the prices are too confining, conflicts start occurring
even for subsistence levels of N1 … Nn. People start resisting the
prices or searching for alternatives, because they are losing control of
the things important to them. So now interpersonal conflicts between
sellers and buyers begin to arise, and are resolved by people searching
for ways to get what they need without getting into internal
conflict.

I think I’ll stop there to see what you (and Richard K.) think of this
unexpected development.

Best.

Bill P.

[Martin Taylor 2007.11.19.17.38]

[From Bill Powers (2007.11.18.0530 MDT)]

Martin Taylor 2007.11.17.16.44 --

Why don't you do that Wiley article Dick Robertson is asking about?

I suppose this ought to lead to a thread on conflict analysis, but I won't do that just yet. I'll just sketch my concept of it, which clearly differs from yours.

Firstly, I'm assuming that a conflict exists when there are two or more perceptions that cannot all be brought simultaneously to their reference values, whether or not any of them are at a given moment being actively controlled.

Yes, this is definitely different, since there is no way to find out if the perceptions are in conflict without trying to bring them to their respective reference states. In fact, simply sequencing perceptions can often do away with the conflict -- let the other person go through the door first, then go through yourself. Is that a conflict under your definitions anyway?

No. And I won't continue the analysis of conflict here, but I will repeat your message and answer those bits of it in a new thread.

Not necessarily so. Resource (degrees of freedom) limitations ensure conflict.

Yes, and when the system is organized to try to control more variables than there are degrees of freedom, the conflict will be observed. That's bad organization, and the system will (one assumes) reorganize to correct that design flaw. Trying to accomplish the impossible is not good planning.

Since when is reorganization planned? I reserve the rest of this comment for the new thread.

Whether the conflict becomes covert because the person decides a particular perception is less worth controlling than another, or whether it remains active, is another question.

You also have an infinity of other choices to make at the same time, if you say that a choice is simply all the other things you could do instead.

We are talking about transactions, here, not about the myriads of things you might do with the money if you refused to buy the offering.

But that's exactly what you're talking about. The money is simply a variable that is affected by more than one controlled variable, creating a link between them: buying N1 units of one variable when the budget is B dollars means you can buy only

        B - P1*N1
N2 <= ---------
           P2

units of the other.

That's a resource limitation conflict, provided that the reference levels for 1 and 2 are so high as to prohibit solution of this inequality.

If you set the reference level for number N2 that way, N2 can be any number you want in that range: there's no conflict.

Of course. But that's digressing from the point, which is that IF the reference level for money in hand of a buyer and of a seller is to have more than they currently have, then making the purchase increases the error in that perception for the buyer, while reducing it for the seller. Bringing in the goods, with labels 1 and 2, is a red herring. We are concerned only with a transaction involving ONE good or service, and the opposite direction transfer of money.

...

...

It's not obvious how to determine, as an analyst, what error in perception A will matter as much as a given leve of error in perception B. But it usually seems obvious to the person controlling both A and B. And so it is when perception A is level of money and perception B is one for which the error would be reduced (for the purchaser) by the transfore of goods and services.

!!!!!!!!

I suppose I should delete all my comments up to here, since the exclamation points indicate where I finally realized something about our discussion. You are talking strictly about conflicts between different people. I am talking about those, but more about conflicts within one person.

Not true. I am talking about four conflicts, two within and two between people.

If I spend all my money on one thing, I can't spend it on anything else, so that creates conflicts between different wants that I have.

That's true, but it's not the conflict I have in mind. You are talking about potential conflicts at a higher level induced by resource limitation at the level I am talking about. Those higher-level conflicts are outside the realm of my discussion.

That has nothing to do with buyers and sellers, except for the fact that I have to spend money on things to get them.

That they have nothing to do with buyers and sellers is the reason I'm not considering them.

My goodness, thinking back over a number of years on CSGnet, I wonder how many disagreements have come about because of not recognizing which kind of conflict was being discussed.

Lots. But in this case, we seem still not to have resolved this particular case.

Let me restate the way I'm seeing this, calling the seller "S", and the buyer "B".

B is controlling two perceptions (ONLY two in this simplification): the amount of money (MB) available to B, and the quantity of good G owned by B (GB) (I ignore Service, just to simplify the syntax).

S is controlling two perceptions: the amount of money (MS) available to S and the quantity of good owned by S (GS).

We assume that the reference level for the amount of money available is greater than the amount on hand for both B and S, and the same is true of the amount of G. In other words, transferring money from B to S reduces error in S's perception MS while increasing error in B's perception of MB. Similarly for the transfer of good G from S to B.

What are the conflicts here? Within B, the error in the GB perception cannot be reduced without increasing the error in the MB. The MB and GB perceptual contro systems are in conflict. Likewise, within S, the MS and GS control systems are in conflict.

Between buyer and seller, the control systems for MS and MB are in conflict, as are those for GB and GS. In all cases, "conflict" has nothing to do with limits, it has to do with the fact that decreasing the error in one control system MUST increase the error in another.

If the transaction is freely agreed and honestly executed, the conflicts lead to an equilibrium point (or more likely, to a region) of price in which the "value" of G to the buyer is greater than the "value" of the money lost, and the "value" of G to the seller is less than the "value" of the money gained. If those two inequalities can be simultaneously satisfied, a free transaction is possible. If they can't, then "No Sale".

But right there is where the circularity comes in, that you commented with "???". The inequalities are defined in terms of a unit of measure: "value", which then is used to validate the transaction. "Value" as a measure is just a synonym for "utility".

Can "value" or "utility" be defined quantitatively outside the concept of a transaction? Maybe, by referring to the likelihood of reorganization associated with the persistence of error implied by the conflict. But any such quantification depends heavily on the speculative area of PCT, and cannot be considered reliable with our present level of understanding. Qualitatively, something has "utility" if it forms part of an environmental feedback function for some controlled perception, but that's no help in quantifying its utility.

As matters stand, there is simply an assertion that in the equilibrium region of the four conflicts, the obvious inequalities hold (where eMB means error in the buyer'scontrol system for perception of money on hand):

value (delta eMB) < value (delta eGB)
value (delta eMS) > value (delta eGS)

We cannot say much, if anything, about the relative values of the changes in error between the two control systems. If there were no interchange of goods in the transaction, the money transfer might be philanthropy or robbery. We caouldn't tell. What we rely on is that to both parties, the transaction results in an increase in something that we might call "utility" -- equivalent to a reduction in the likelihood of reorganization.

I'll deal with other aspects of your message separately.

Martin