The Powers of Illusion

[From Rick Marken (970117.1330)]

I have been reading "Leakage", the book on economics by Bill's Dad
(T. C. Powers). I am struck by the fact that both Powers, pere and fils,
have made remarkable discoveries by carefully looking at the simplest,
most basic facts about the phenomenon under study. In contrast to the
way many scientists seem to operate these days, the Powers look for
simplicity rather than complexity; they are more interested in solid
facts than in complex theoretical flights of fancy. Through careful
consideration of fact (rather than fancy) both Powers were able to make
discoveries that contradict some fundamental assumptions about how the
phenomenon under study (behavior, the economy) work.

Powers fils, by careful observation of behavior, has shown that behavior
is the control of perception, a fact that contradicts the basic
assumption of conventional psychology -- that perception is the
control of behavior. Through careful observation and modeling, Powers
fils has shown that the appearance of perceptual control of behavior
(that stimuli cause responses or that reinforcements strengthen
responses) is an illusion, a result of looking at the phenomenon of
control from the wrong perspective.

Powers pere, by careful observation of macroeconomic data, has shown
that economic production is driven by consumption, a fact that
contradicts a basic assumption of economics -- that production is
"driven" by the excess income ("investment capital") possessed by the
richest component of the aggregate consumer. Through careful
observation and modeling, Powers pere has shown that the apparent
"driving force" of investment capital" is an illusion, a result of the
failure to look at the most basic macroeconomic data. All the data show
that capital investment is a constant proportion (20%) of the cost of
production, regardless of the level of production.

Both findings have tremendously important implications for how to
make the world a better place for everyone. The fact that behavior is
the control of perception means that approaches to dealing with
individuals though the use of contingent rewards (or punishement) will
only result in conflict. The fact that "investment capital" is leakage
means that approaches to improving the economy by reducing judiciously
applied "taxes on the rich" are bound to ruin the economy and produce
social disintegration by depriving the poorest members of society of the
ability to live a life with hope and dignity.

Of course, the fact that people are perceptual control systems means
that it will be virtually impossible to convince them that they should
revise their beliefs (such as the belief that "rewards must increase the
strength of behavior" or "the rich must not be burdened with taxes or
they won't have any incentive to produce or have enough to invest in
production").

So we'll just have to wait until people are able to convince themselves
(through data and modeling) that behavior is the control of perception
and that excess income is "leakage", not productivity. When they do,
then, as Sam Cooke (a victim of violent conflict himself) said, "What a
wonderful world this would be".

Best

Rick

[From Bruce Gregory (970117.1735 EST)]

Rick Marken (970117.1330)

Powers pere, by careful observation of macroeconomic data, has shown
that economic production is driven by consumption, a fact that
contradicts a basic assumption of economics -- that production is
"driven" by the excess income ("investment capital") possessed by the
richest component of the aggregate consumer. Through careful
observation and modeling, Powers pere has shown that the apparent
"driving force" of investment capital" is an illusion, a result of the
failure to look at the most basic macroeconomic data. All the data show
that capital investment is a constant proportion (20%) of the cost of
production, regardless of the level of production.

I think of the "driving force of investment capital" as the "If
you build it, they will come" school of economics. Outside of
fiction, it is difficult to find examples of capitalists who
construct ballparks in the middle of nowhere for non-existent
teams and fans. Its nice to know that the data supports my
prejudices :wink:

Bruce Gregory