[From Bill Powers (2004.01.28.1059 MST)]
Martin Taylor 2003.01.28.1024–
Although I do accept much of what
you say, I can’t agree totally,
especially when you deal with the motives of conventinal
economists.
And you DO incorporate abstract concepts. They are just not those
used by the economists against whom you are rebelling.
All concepts are abstract, but some are farther removed from observations
than others. I am starting the Test Bed using abstractions which are as
close as possible to what we can see actually happening in an economy,
not what we imagine to be happening behind the scenes or inside the minds
of entrepreneurs and consumers.
I think your position is more like
that facing Boltzmann. He
understood that the way interactions of huge numbers of atoms or
molecules simplify when dealt with statistically made mechanical
heat
`theory simpler and more accurate than the traditional approaches
to
entropy. Those who kept to conventional theory and treated
Boltzmann
as a crank, as well as those who wanted to change conventional
theory
but didn’t agree with Boltzmann’s approach were all doing their
best
to get and to use a correct and effectively useable theory. I think
the conventional and the heterodix economists are doing the
same.
I do too. My premise is that everyone is doing the best that he or she
can, for the highest reasons he or she wants to satisfy. You can say the
same of me. However, treating people as cranks is not giving them credit
for having high motives and doing the best they can, is it? One could
have sympathized with Boltzmann for bristling a little at having serious
work treated in such a way simply because it differed from what the
then-experts thought.
The question is not whether the motives of orthodox and heterodox
economists are impeccable, but whether their ideas are the best ones for
the subject-matter, One can have the best possible motives and still be
wrong, and the opposite, too. One can also lack the tools actually
required for the job, and so even with the best of intentions and the
most formidable mental prowess, fail to get anywhere. Bill Williams
thinks I am in that position, but he also says that economics, without
control theory, is in that position. Until an unsanctified outsider
points this out.
If
we were concerned only with supply and demand, with the flow of
goods
and services one way and of money-tokens the other way, an economics
model
would not be much more complicated than the Crowd program. It would have
a
lot of components, but they would each be pretty simple. The
complications
come from the fact that some people want to and do use this system
for
purposes other than creating goods and services and making them
available
to consumers.
In other words, they are controlling for other than altruistic
pereptions?
Well, yes, but that doesn’t mean the perceptions the ordinary folk
control for are altruistic, either. Altruism isn’t the point; the point
is whether your interests include achieving what you want at the expense
of other people – we would call it ignoring obvious side-effects. The
point is whether you are specifically trying to achieve a higher position
relative to other people, so it is the contrast that turns you
on. Such a goal can be satisfied equally well by elevating your own
position, and by worsening another person’s position. Both methods are
used.
Surely EVERYBODY who is part of the
economic picture does whatever
they do for purposes ultimately other than "creating goods and
services and making them available to consumers".
“Creating goods and services and making them available to
consumers” is an outcome of the (proper) operation of the basic
economic system; it’s not anyone’s intention. Individuals normally
try to get for themselves the goods and services they want, and to
provide them for dependents and others they deem worth of support.
They’re willing to work a reasonable amount of time to accomplish this,
and many even seek and enjoy the work.
But some people want an extraordinary amount of goods and services, far
more and far more expensive than they could ever get by working, however
long or hard, to produce those goods and services. They also enjoy
intangible benefits such as prestige or status, which to many means also
being able to observe a lack of those benefits in others. These people
manage to get themselves in a position where they control the means of
production and have great influence over the whole social system,
especially those parts of the social system that might lessen their
prospects of staying where they are. And they arrange things so they get
a very large part of the available buying power.
Some non-altruistic goals are innocuous, but some are
pernicious.
The “economic”
variables are just one level of a proper PCT view, regardless of how well
that level will serve as a computational test bed. And what that
implies is that the test bed has to take into account a wide and
changing distribution of reference levels for (for example) the
acquisition of wealth. For example, much, but not all, philanthropy
probably can be accounted for by a conflict in a person who is
lowering (for some perceptually higher-level purpose) the reference
level for acquired wealth.
Very true when we consider the agents, but I think PCT allows us to see
the effects of excessive acquisitiveness and love of power on all parts
of the social system, from education to science to leisure activities to
living accomodations and food supplies. Economists like to think of all
these things as having economic significance, but that is only because
the kind of people we’re talking about have a very large effect on
economic activities – a kind of effect that would not exist except
for them.
Moreover, creating consumer-level
(i.e. individuated) goods and
services is only one means to influence the perception of one’s
wealth. You adduce others that affect the operation of those who do
create individuated goods and services. For example, some people
just
want to see themselves as having power to influence the behaviour
of
others, regardless of what they want to do with that
power.
This is true, but having power requires demonstration, or else it’s just
a harmless illusion, like the use of the TV clicker by the proponent in
“Being There.”
I
think the basic economy is not hard to model or understand, with a
little
careful work. But we have a real problem in understanding the people
who
run this system, and in working out the effects they have on the
great
majority of people who participate in it but have no say in how it’s
run.
The basic problem is that some people want to extract as much from
the
economic system for themselves as they possibly can, without regard
to
either the effect on the system or the effect on other people –
including,
of course, their competitors.
Or, I would add, themselves.
But such people must be incorporated in the test-bed approach if it
is to model what happens in any real economy.
Not in the test-bed, but of course they will be introduced as agents when
we test the complete model. There are agents in Econ004, but their
principal use has been to make sure the bookkeeping remains correct when
the system is exercised (it didn’t at first – the total amount of money
kept creeping upward no matter what was going on).
Defining agents is how I would propose to demonstrate the (hypothesized)
ill effects of having greedy people running the economy. Doing this
requires establishing the Test Bed in order to show how the economy would
operate under a variety of assumptions about the aspirations and desires
of the agents who make it go. The Test Bed concept implies that there is
a basic network of interactions that can be operated according to
different goals and perceptions, much in the way that the rules of a game
set the structure within with different players conduct their strategies.
Some of the rules of the economic game were set by the very ones who now
control it, and we may want to change some of them in the future when we
have a better idea of the properties of the system. But we can leave them
in effect in the Test Bed – for example, the idea of paying interest on
loans and rent for the use of property – to see how they influence the
operation of the system.
When
the Test Bed is finished – when we have a basic model of the
economy
and of the people who simply participate in it by managing, working,
and
consuming – we can turn to the real problem: the effects of
entrepreneurs and financiers on the economy as they try to get control
of
it and turn it to their own personal advantage and the disadvantage
of
everyone else.
Fair enough, as an approach, but how, with that approach, could one
in principle validate the test bed as a model? Its validity would
rest entirely on accepting the elements of which it is constructed,
with no possibility of appeal to real economic data, since those
would be strongly affected (and I think sometimes disastrously so)
by
the side-effects of control by those who influence the results of
individual transactions (e.g. politicians who believe in
conventional
economics to determine taxation policies).
We would validate it by making sure its components actually exist in the
real system and operate in relation to each other as they do in the real
system. This is how we simulate any real system. Remember, there are no
agents in the test bed, no human beings. There are only the rules and the
physical setup, like a chess board and a rule-book before the players
arrive.
It’s not hard to verify that when a good is sold, it (or something
representing it, like a claim check) is physically transferred from one
inventory to another. The relation of that transfer to an inverse
transfer of money, in its simplest form, is that of a counterflow, but in
a more detailed model you could introduce lags and lending/borrowing as
possibilities for some percentage of transactions. And so on through the
model. We simply try to represent the things that actually can happen in
the current economic environment, so if anyone wants them to happen, they
are possible. If you want to introduce an agent who simply gives his
money away, you should be able to do that, for as long as he has any
resources left. If you want to put in an agent who want to accumulate all
the money that exists, you should be able to try that and see what
happens.
In
short, the problem then becomes not a problem of
economics, but one of psychology, sociology, and
politics.
Absolutely!
I hoped you would agree with that.
What remains possible is
macro-economic modelling. For that to be
“correct”, not only the means and variances of the many
variables
must be accounted for, but also the higher-order moments and the
effects on those moments of all the feedbacks inherent in large
randomly-connected networks. But then, isn’t that what conventional
econometric modelling and forecasting attempts to do?
Check out Bruun’s ideas on this. Pure macroeconomic modeling is a pretty
risky enterprise, because you can make the components do anything you
want – you have to make so many “reasonable” assumptions. But
if you start with a micro-model and build up a macroeconomy out of
realistic micro-interactions, the macro model automatically is
constrained by reality, the same reality against which you check the
micro model before setting it loose. We now have affordable computers
that are so fast, with such vast memories, that they can simulate very
complex systems in respectable detail. And by the time we have learned
how to exploit those capabilities, computers will have improved by
another couple of orders of magnitude, and maybe someone will have
replaced the folks at Microsoft so we can expect such desktop
hypercomputers to run more than five minutes between Blue Screens of
Death.
I don’t mean to prevent anyone from taking a different approach to
economic modeling, But it seems, sometimes, that I am expected to get a
lot of permission slips before I will be allowed to pursue my own
approach. I don’t really go along with that.
Best,
Bill P.