# Until I need glasses

[From Rick Marken (2004.02.01.0945)]

The following is an analysis of the U.S. Department of Commerce: Bureau of Economic Analysis quarterly data on gross private investment, gross government investment and GDP growth rate from 4/1/49 through 7/1/02. There are 214 data point in the analysis. The definition of the values used for Gross private investment is as follows:

Gross private domestic investment (1ò40) consists of fixed investment (1ò41) and change in private inventories (1ò46). Fixed investment consists of both nonresidential (1ò42) fixed investment and residential (1ò45) fixed investment. It is measured without a deduction for CFC [consumption of fixed capital] and includes replacements and additions to the capital stock. It covers all investment in fixed assets by private businesses and by nonprofit institutions in the United States, regardless of whether the fixed asset is owned by U.S. residents.

The graph below shows three variables, Ip/GDP (Gross private investment as a proportion of GDP), (Ip+Ig)/GDP (Gross government investment as a proportion of GDP) and dGDP/dt (growth rate each quarter) changing over time. The line for growth rate has been smoothed slightly by filtering to make it easier to see the relationship between growth and investment. Without the filtering, the high frequency components of the time plot of growth rate make the graph hard to read. All statistical calculations, however, were done with the 214 unfiltered quarterly growth rate values.

Visual inspection of the time plots shows that there is a clear relationship between investment and growth rate. Growth goes up when investment goes up and growth goes down when investment goes down. However, the phase relationship between the time plots for growth and investment is difficult to see in the plots. That it, it is difficult to tell whether the growth plot leads, lags or is perfectly in phase with variations in investment.

One way to evaluate the phase relationships between two time series is to do lagged correlations. A lagged correlation is the correlation between one waveform and the time displaced version of another. (I believe the lagged correlation is equivalent to a convolution integral for normalized waveforms). In this case, I correlated the growth plot with time displaced versions of the investment plots (the plot for private and total investment as a proportion of GDP). The results are shown below:

The first column is the number of time units (fiscal quarters in this case) by which the investment plot is displaced relative to the growth plot. For example, -1 means that the investment plot is shifted one time unit back with respect to the growth plot so we are looking at the correlation of investment one quarter earlier with current growth. A shift of -2 means that we are looking at the correlation of investment two quarters earlier with current growth. A shift of 0 means that we are looking at the correlation of current investment and current growth. A shift of 1 means that we are looking at the correlation of investment with growth that occurred one quarter earlier. Similarly, a shift of 2 means that we are looking at the correlation of investment with growth that occurred two quarters earlier

What the results show is that investment follows growth, not vice versa. There is actually a negative relationship between investment and growth (indicated by the negative correlations for lags -1 through -5) that peaks 4 quarters (1 year) before the present (0 lag). That is, up to four quarters prior to the present, current investment levels are increasingly negatively related to subsequent growth levels. As current investment increases, subsequent growth decreases and vice versa.

The largest positive correlation between investment and growth occurs 2 quarters after the present. That is, up to two quarters after the present, current investment levels are increasingly positively related to past growth levels. Current increases in GDP (growth) lead to future (two quarters later) increases in investment. Current decreases in GDP (contraction) lead to future (two quarters later) decreases in investment.

These results make sense from the point of view of a closed loop model of the economy. The aggregate producer would be expected increase production (by increasing investment) to meet demand (the aggregate consumer's purchasing power). The aggregate producer is controlling for getting paid back for what it produces. So it would be expected to vary production (by varying investment) to match expected consumption.

Best regards

Rick

pastedGraphic2.tif (8.07 KB)

pastedGraphic4.tif (60.4 KB)

···

---
Richard S. Marken
Home 310 474-0313
Cell 310 729-1400

[From Bill Powers (2004.02.01.1059 MST)]

Rick Marken (2004.02.01.0945)--

This is a first-class piece of work. The clear relationship between gross
investment and GNP is a nice unbiased analysis, and the demonstration of
the occurrance of growth before investment is a neat discovery that may
help change some minds, or at least the minds of those who put data before
theory.

A caution. If you plot GNP, you will find a lag, because dGNP/dt will lead
GNP. Your use of the derivative is correct, because growth rate is the
change in GNP per quarter, but if someone looks just at GNP, which is
production or consumption per quarter, they could think that is the same
kind of rate. GNP is the rate of production of goods&services per quarter,
in dollars/quarter, so the rate of change of GNP is actually the second
derivative of goods&services, in dollars/quarter/quarter.

It should be possible to get the proportionality factor relating gross
investment and growth. Growth can occur without gross investment, in that
productivity can increase without needing any additional capital equipment,
so we wouldn't expect that the correlation would indicate a perfect
dependence.

I am interested in how investment affects production, becausd the Test Bed
will need a proportionality factor that connects capital investment to
productivity, the multiplier that converts man-hours into goods&services.
It would be only an average estimate, of course, but that would be better
than guessing. The aggregate producer can vary production by hiring and
laying off workers, and also by increasing and decreasing the investment in
capital machinery. Modeling the latter requires knowing how productivity
changes when money is spent on capital equipment.

The second graphic comes out solid black for me, although the first one was
fine. Changing it to a negative shows some faint fuzzy gray rectangles
forming a grid. Can you check it? That's "pastedGraphics2.tif"

Best,

Bill P.

[From Bjorn
Simonsen (2004.02.01,20:50 EuST)]

From
Rick Marken (2004.02.01.0945)

Did you
enclose a double set of text files and an unreadable TIF file? Is it possible to copy your pasted
graphic2.TIF and your pastedGraphic1.TIF in another format?

bjorn

[From Rick Marken (2004.02.01.1345)]

[From Bjorn Simonsen (2004.02.01,20:50 EuST)]

Rick Marken (2004.02.01.0945)

Did you enclose a double set of text files and an unreadable TIF file? Is it possible to copy your pasted graphic2.TIF and your pastedGraphic1.TIF in another format?

I've attached the two images, copies from Excel, as Quicktime files because that's the only format that reveal the matrix below. I'm afraid there are still kind of large files. I tried to make them jpeg but I couldn't seem to do it.

Let me know if you can see both images.

Best

Rick

Untitled 3.qtif (92.9 KB)

Untitled 1.qtif (492 KB)

···

---

Richard S. Marken
Home 310 474-0313
Cell 310 729-1400

[From Bjorn Simonsen (2004.02.01,23:05
EuST)]/smaller>/color>/fontfamily>

[From Rick Marken
(2004.02.01.1345)]

Let me know if you can see both images.

Untitled1.gtif is Ok, but Untitled3.gtif
is a black canvas.

bjorn

[From Rick Marken (2004.02.01.1425)]

Bjorn Simonsen (2004.02.01,23:05 EuST)

[From Rick Marken (2004.02.01.1345)]

Let me know if you can see both images.

Untitled1.gtif is Ok, but Untitled3.gtif is a black canvas.

bjorn

Well, I had to go around Hogan's barn to do it but I think I've got it now. I've pasted it in as a jpeg. Can you see it now?

Best

Rick

Richard S. Marken
Home 310 474-0313
Cell 310 729-1400

[From Bill Powers (2004.02.01.1602 MST)]

Rick Marken (2004.02.01.1425)--

Well, I had to go around Hogan's barn to do it but I think I've got it
now. I've pasted it in as a jpeg. Can you see it now?

YES! The results are wonderful: a change from a correlation of 0.26 with no
lag, to 0.42 with the lag. That's no "subtle hint" of an effect. I'd love
to see the data for two or three other civilizations before really
believing this, but if this is all we have to go on, I'm pretty comfortable
with it. Growth precedes gross investment. We have to remember to keep
saying "gross", until data shows up concerning net investment.

Get hold of "Irfanview", via Google. It's a wonderful graphic viewer that
can read a huge number of formats, and convert them into a huge number of
other formats. Audio and movies, too. Naturally, written by a teenager a
few years ago who has been giving it away free, and has been at the
University of Vienna lately getting even smarter.

Best,

Bill P.

[From Rick Marken (2004.02.01.1800)]

Bill Powers (2004.02.01.1602 MST)--

YES! The results are wonderful: a change from a correlation of 0.26
with no
lag, to 0.42 with the lag.

It's pretty nice stuff, indeed.

Get hold of "Irfanview", via Google.

It's only available for Windows machines. Does anyone know of a similar
tool for Macs?

By the way, the beginning of the year seems to be economics discussion
time on CSGNet. If you go to the CSGNet archives page
(http://listserv.uiuc.edu/wa.cgi?A0=csgnet&D=0&H=0&O=D&T=0) and click
on February 2003, weeks 1 and 2, you will find a nice, substantive
discussion of my H. economicus model and the Testbed (in the "Economics
Blues" thread). I had promised to revise the model based on your
comments at that time but I I never did get to it, perhaps because
the TestBed seemed to be developing as the way to go. But if I can get
myself to focus on modeling (I obviously have a hard time pulling
myself away from masturbating with data) I will try to develop an
improved version of H. economicus based on those year old discussions.

Best regards

Rick

···

---
Richard S. Marken
Home 310 474-0313
Cell 310 729-1400

[Martin Taylor 2004.02.01.2127]

[From Rick Marken (2004.02.01.1800)]

Bill Powers (2004.02.01.1602 MST)--

YES! The results are wonderful: a change from a correlation of 0.26
with no
lag, to 0.42 with the lag.

It's pretty nice stuff, indeed.

Yes, would it be possible for you to extend the table a few more
quarters in each direction (say 8 each way?)

Get hold of "Irfanview", via Google.

It's only available for Windows machines. Does anyone know of a similar
tool for Macs?

Graphic Converter (shareware) <http://www.lemkesoft.com>. JView
(Freeware -- haven't tried it)
<http://www.versiontracker.com/dyn/moreinfo/macosx/14313&gt;

Martin

[From Bill Willliams 2 Feburary 2004 6:00 AM CST]

Rick,

Since you have the data availible there are some measures and relationships you might want to generate and plot.

1) dI/dt

2) C, dC/dt : where C is consumption expenditure

3) S, and dS/dt : where S is savings

4) d(Ip/GDP)/dt

The idea being if you had the rates, and the derivatives of the fundamental componates of aggregate income then it would be possible to set up equations in time rates, and then derivates of the time rates equations.

This would allow a test to be made of whether the fundamental income
relationships are closer to

Y = C + I ( Keynes )

or

Y = C + I + S ( Rick CSG Archive 2003 O2.24. 1500 )

I am leaving out the detail of government surplus or deficit for the sake of simplicity.

Bill williams

[From Kenny Kitzke (2004.02.02)]

<Rick Marken (2004.02.01.0945)>

This looks far more interesting than the previous data and analysis you performed. Thanks.

Unfortunately, I do not have the time to even study it, much less respond, as I am leaving momentarily for a few days to help my son Chris move into his new house.

When I return (not too sure when-probably 2-3 days), I will try to chew on your analysis. Good work.

Kenny

[From Bill Powers (2004.02.02.0701 MST)]

Rick Marken (2004.02.01.1800)--

By the way, the beginning of the year seems to be economics discussion
time on CSGNet. If you go to the CSGNet archives page
(http://listserv.uiuc.edu/wa.cgi?A0=csgnet&D=0&H=0&O=D&T=0) and click
on February 2003, weeks 1 and 2, you will find a nice, substantive
discussion of my H. economicus model and the Testbed (in the "Economics

Bill Williams' remarks in that thread are just as irritating and uninformed
as ever -- this is easier to understand now that we know he never read
TCP's book, but has based all his comments on his memories of one
conversation with TCP after reading a pre-pre-publication manuscript (many
years before publication). Many of his memories are faulty, in particular
his memory that TCP thought Keynes didn't recognize aggregate entities. It
was certain "neo-Keynesians" who said that the economy was just a family
scaled up -- and anyway, that subject never made it into the published
book. That was in a separate TCP paper (never published) that I sent Bill,
but as usual he garbled the references. One can't help wondering how he has
treated the volumes of stuff he has read, or thinks he has read, in the
literature of economics.

I feel like an agent of the ACLU who has been maneuvered into the position
of defending an acknowledged murderer because his human rights have been
violated. I thing TCP was wrong about many things and I do not at all buy
his conclusions about "leakage," but it galls me to see his actual
accomplishments trashed by a careless and opinionated -- and endlessly

I have installed Williams and several others on my Earthlink Spam Blocker
list, so I will no longer have to deal with the most hostile fringe of
too old to put up with it, and should have realized this long ago.

By the way, my main objection to H. Economicus is that there are no H's in
it. There are two abstract control systems that probably don't exist. I
don't think you really believe that somebody is controlling GNP relative to
a reference level for what it should be. Remember the big mistake I made in
dealing with the rat data that Bruce Abbott obtained. I fit a
control-system model to the data and it worked quite well -- and
immediately afterward, Bruce proved that the effect was actually an
artifact due to food-collection time. You can't conclude that a control
system exists just because you can fit a model to the data. Some added
information is needed, and you need to rule out other explanations that
might be better.

Best,

Bill P.

···

I had promised to revise the model based on your
comments at that time but I I never did get to it, perhaps because
the TestBed seemed to be developing as the way to go. But if I can get
myself to focus on modeling (I obviously have a hard time pulling
myself away from masturbating with data) I will try to develop an
improved version of H. economicus based on those year old discussions.

Best regards

Rick
---
Richard S. Marken
Home 310 474-0313
Cell 310 729-1400

[From Bill Williams 2 February 2OO4 8:00 AM CST]

One of the continuing sources of trouble in the economics
threads ever since the question of T.C. Powers' book on
_leakages_ was introduced has been the unwillingness of
T.C. Powers, Bill Powers, or Rick Marken to learn the most
basic concepts before hastily attempting to correct those
they have derided as "credentialized experts."

Consider what [From Bill Powers (2003.02.25.0804 MST)] said
some time ago.

After explaining the "circular flow" and as he says, a
review of the subject of simultaneous equations" Powers
goes to make an obvious blunder.

Powers:

That's the circular flow of money, and the end of the review of
the subject of simultaneous equations.

···

=====================================================================================

We could, at this point, provide for a direct transfer from the
consumer's savings into the entrepreneur's savings, which would
reduce the consumer's reserves and increase those of the
entrepreneur without any corresponding labor or transfer of
goods. That would be an act of investment.

Powers in the above mistakenly is arguing that an "act of
investment" involves a transfer of funds from a consumer's
account ( which would reduce the consumers reserves ) to an
entrepreneur's account ( [which would] increase those of the
entrepreneur['s account]).

Nothing of the sort, of course, takes place. Bill is still thinking
of "the flow of funds" as if it were a physical thing-- which it is
clearly not. He is also apparently thinking of it as sequence in
time which it is not. He really doesn't understand either the notion
of simultaneous equations or the nature of money and credit.

If Bill Powers can't break out an elementary money and banking
text and figure this stuff out he ought to quit. He's just too
arrogant to learn what is expected in the first few weeks
of an elementary freshman level economics course.

What we really need is someone who does teach freshmen level
students. The mistakes you and Rick are making are elementary.
Go get someone to tutor you, I think it may be the only way
you are going to understand this stuff.

In [From Bill Powers (2003.02.25.0804 MST)] you say,

begin
Get a tutor.
Have the tutor assign a text.
repeat
Have the tutor explain what the text contains.
until ( you understand what a savings account is )
end.

Bill

[Martin Taylor 2004,02.02 0939]

[From Bill Willliams 2 Feburary 2004 6:00 AM CST]

I am leaving out the detail of government surplus or deficit for the
sake of simplicity.

Bill,

Some time during the Reagan Presidency, there was a major article in
Science by a person whose name I forget (I think it was Richard or
Robert somebody), but who was either incoming or past President of
the American Economic Association (probably the wrong name, but you
get the idea). It was entitled "The Federal Deficit: How does it
Matter?" or something very close to that. I've been looking for my
copy but I can't put my fingers on it, and the on-line Science
archives don't go back that far.

Do you know of the paper?

As I remember it, he did much the same as what Rick has been doing,
but with different varioables. What he showed was that lack of
deficit led to reduction in GDP (or in the growth rate of GDP--I
forget) and increasing unemployment in the following year. Excessive
deficit was also bad, but a moderate deficit was ideal.

I kept this paper because it seemed like an up to date (at the time)
confirmation of what Bagno said. Bagno used data that ended in around
1950, whereas this paper used data up to the middle years of the
Reagan Presidency. I can't remember what year he started, but it was
20th century. I'd like to get hold of the paper, so as to bring the

Sorry to be so vague. I hope it's enough to jog your memory.

Martin

[From Bill Powers (2004.02.02.0808 MST)]

Martin Taylor 2004,02.02 0939 --

Bravo, Martin, for saying what many of us felt constrained (for some silly
reason, considering what has transpired) not to say. And I agree with you
that one should use a baby-strainer on the bathwater. One reason is that
many things done by businessmen are done _because_ they have read economics
and believe what economists have said. Why else would any company think it
is just as useful to increase productivity by laying off workers as it is
by increasing the efficiency of existing workers and lowering prices?

As to equilibrium in the economic system, I would agree that it is not to
be expected in an economic system defined as it is today, but it is most
certainly to be expected if control systems are in charge of it, as I think
they are. A control system acts until its controlled variables approach its
reference levels, and then it maintains them there. Of course there can be
out-of-equilibrium conditions, but there is always a very strong tendency
to restore equilibrium, though as Kent McClelland showed for conflict
situations, the equilibrium may not be a condition of zero error and zero
effort.

I particularly liked what you said about foundations and superstructure. A
nice thing about physics is that it does have foundations, and anyone
familiar with them can reconstruct the reasoning that leads to its major
conclusions -- it makes no difference whether that person is a famous
physicist or a portrait painter. You don't go around citing authorities or
commentators to support the idea that electrons are deflected by magnetic
fields, or that angular momentum is conserved, or that entropy increases.
Any book that shows how these ideas are arrived at will do -- it's the
ideas that matter, not who said them (though it's nice to give credit to
the first guy to propose an idea).

If it's necessary to amass a lot of quotations in support of an idea, the
idea must be sorely in need of support -- and it won't get it, that way. In
a field that has real foundations, authorities are simply not cited, except
in histories or to provide references to data and methods. But in a field
that's mostly superstructure, authority and consensus are everything, for
there is no way independently to prove or verify any idea.

I think it's possible to start over in economics just as in psychology, by
trying to establish basic relationships and facts that don't depend on who
said they exist, but which anyone can verify. This is like moving from
Catholicism, where the priesthood is interposed between Man and God, to
Protestant religions in which each individual has his own link to God's
URL. Of course in science, belief is supposed to have less influence than
in religion, or that is the ideal. In a true science, as I think of such
things, any individual who thinks straight and learns the basics can arrive
at (temporarily) correct conclusions without any permission from anyone
else, and without having to memorize who said which about what. The most
boring thing about economists is the way they offer endless clever
quotations from famous people as if expecting that everyone who reads them
will understand them the same way and also agree with them -- and without a
shred of evidence that what the clever authority said is true. It's the
same mode of argument I learned as a member of the debating team in high
school. Whoever could cite the most impressive and relevant authorities won.

I do think that an open-minded economist can contribute greatly to
identifying foundational ideas, and I would be quite willing to learn from
such a person (after my fashion, which requires starting by not believing
anything I am told). I will continue the search.

Best,

Bill P.

Re: Until I need glasses
[>From Rick Marken (2004.02.02.0840)]

Martin Taylor (2004.02.01.2127)–

Yes, would it be possible for you to extend the table a few more

quarters in each direction (say 8 each way?)

Here is a graph of the correlations as a function of investment lag/lead in quarters. A vertical line indicates zero lead/lag. I go back 9 quarters and forward 8.

Best regards

Rick

···

Richard S. Marken

Home: 310 474 0313

Cell: 310 729 1400

[From Rick Marken (2004.02.02.0930)]

Bill Powers (2004.02.02.0701 MST)

By the way, my main objection to H. Economicus is that there are no H's in
it. There are two abstract control systems that probably don't exist. I
don't think you really believe that somebody is controlling GNP relative to
a reference level for what it should be. Remember the big mistake I made in
dealing with the rat data that Bruce Abbott obtained. I fit a
control-system model to the data and it worked quite well -- and
immediately afterward, Bruce proved that the effect was actually an
artifact due to food-collection time. You can't conclude that a control
system exists just because you can fit a model to the data. Some added
information is needed, and you need to rule out other explanations that
might be better.

I think this is a completely fair criticism. Again, all I was trying to do
was design virtual, aggregate agents that could control the circular flow
described by TCP, which, of course, takes the circular flow model as ground
truth. If I were starting off from scratch I would have (and will) do the
modeling differently.

Although H. Economicus and the rat model were mistakes, I don't think they
were of no value. The rat model showed, in principle, how a control model
could handle what operant conditioners _think_ they are seeing -- the
control of behavior by reinforcement. The rat model, I think, has value
because it shows how operant behavior can be viewed (and modeled) as
behavioral control _of_ reinforcement. I think H. Economicus shows how, in
principle, aggregate economic behavior can be viewed (and modeled) as
control of good and services.

Best regards

Rick

···

--
Richard S. Marken
Home: 310 474 0313
Cell: 310 729 1400

[From Bill Williams 2 Feburary 2004 1:00 PM CST]

[From Rick Marken (2004.02.02.0930)]

I think H. Economicus shows how, in principle, aggregate economic
behavior can be viewed (and modeled) as control of good and services.

# Or, it could be viewed, and has, as "a giant leap in the wrong
# direction.

# A third alternative is to think of in terms of a jerk-off that
# while intensely self-fulfilling, isn't of much intereset to
# anyone else.

Bill Williams

[From Bill Powers (2004.02.02.0808 MST)]

Martin Taylor 2004,02.02 0939 --

Bravo, Martin, for saying what many of us felt constrained (for some silly
reason, considering what has transpired) not to say. And I agree with you
that one should use a baby-strainer on the bathwater. One reason is that
many things done by businessmen are done _because_ they have read economics
and believe what economists have said. Why else would any company think it
is just as useful to increase productivity by laying off workers as it is
by increasing the efficiency of existing workers and lowering prices?

As to equilibrium in the economic system, I would agree that it is not to
be expected in an economic system defined as it is today, but it is most
certainly to be expected if control systems are in charge of it, as I think
they are. A control system acts until its controlled variables approach its
reference levels, and then it maintains them there. Of course there can be
out-of-equilibrium conditions, but there is always a very strong tendency
to restore equilibrium, though as Kent McClelland showed for conflict
situations, the equilibrium may not be a condition of zero error and zero
effort.

I particularly liked what you said about foundations and superstructure. A
nice thing about physics is that it does have foundations, and anyone
familiar with them can reconstruct the reasoning that leads to its major
conclusions -- it makes no difference whether that person is a famous
physicist or a portrait painter. You don't go around citing authorities or
commentators to support the idea that electrons are deflected by magnetic
fields, or that angular momentum is conserved, or that entropy increases.
Any book that shows how these ideas are arrived at will do -- it's the
ideas that matter, not who said them (though it's nice to give credit to
the first guy to propose an idea).

If it's necessary to amass a lot of quotations in support of an idea, the
idea must be sorely in need of support -- and it won't get it, that way. In
a field that has real foundations, authorities are simply not cited, except
in histories or to provide references to data and methods. But in a field
that's mostly superstructure, authority and consensus are everything, for
there is no way independently to prove or verify any idea.

I think it's possible to start over in economics just as in psychology, by
trying to establish basic relationships and facts that don't depend on who
said they exist, but which anyone can verify. This is like moving from
Catholicism, where the priesthood is interposed between Man and God, to
Protestant religions in which each individual has his own link to God's
URL. Of course in science, belief is supposed to have less influence than
in religion, or that is the ideal. In a true science, as I think of such
things, any individual who thinks straight and learns the basics can arrive
at (temporarily) correct conclusions without any permission from anyone
else, and without having to memorize who said which about what. The most
boring thing about economists is the way they offer endless clever
quotations from famous people as if expecting that everyone who reads them
will understand them the same way and also agree with them -- and without a
shred of evidence that what the clever authority said is true. It's the
same mode of argument I learned as a member of the debating team in high
school. Whoever could cite the most impressive and relevant authorities won.

I do think that an open-minded economist can contribute greatly to
identifying foundational ideas, and I would be quite willing to learn from
such a person (after my fashion, which requires starting by not believing
anything I am told). I will continue the search.

# Bill Powers as he says is continuing his search by closing his mind.

Best,

Bill P.

···

-----Original Message-----
From: Control Systems Group Network (CSGnet) on behalf of Bill Powers
Sent: Mon 2/2/2004 9:46 AM
To: CSGNET@listserv.uiuc.edu
Subject: Re: Until I need glasses

[From Bill Williams 2 Feburary 2004 4:00 PM CST]

[From Bill Powers (2004.02.02.0808 MST)]

Martin Taylor 2004,02.02 0939 --

Bravo, Martin, for saying what many of us felt constrained (for some silly
reason, considering what has transpired) not to say.

# Don't be shy, go ahead and tell us what you think.

···

#
# Give it your best shot.

And I agree with you that one should use a baby-strainer on the bathwater.

# What if there is a shark loose in the bath?
#
# Is it time to put more blood in the water?
#
# Or are we having enough fun as it is?

One reason is that many things done by businessmen are done _because_ they have read economics and believe what economists have said.

# One of the unexpected thing I am finding out is how much genuine respect
# you really have for the capcity of economists to fool nearly everyone
# but your's truely. I never would have expected that you actually do hold
# econmists in such high regard.

Why else would any company think it is just as useful to increase productivity by laying off workers as it is by increasing the efficiency of existing workers and lowering prices?

# Yes, except for the evil influence of the graduates of the Imps Institute,
# business people and labor would be as they say ashole buddies. My spelling
# is really terrible.

As to equilibrium in the economic system, I would agree that it is not to
be expected in an economic system defined as it is today,

# You would probably find Kornae's _Anti-Equilibrium_ really interesting.

but it is most
certainly to be expected if control systems are in charge of it,

# Are you sure of this?
#
# Isn't what is going on currently on the CSGnet the result of the
# interaction of control systems?
#
# In your view do the results obtained thus far provide any confidence that
# it would be possible to manage as much as a dog pound with any
# confidence?

as I think
they are. A control system acts until its controlled variables approach its
reference levels, and then it maintains them there.

# I wonder why Bill feels it neccesary to introduce this innovation into
# the discussion at this point?

Of course there can be
out-of-equilibrium conditions, but there is always a very strong tendency
to restore equilibrium, though as Kent McClelland showed for conflict
situations, the equilibrium may not be a condition of zero error and zero
effort.

# Nor, anywhere close to equilibrium. But the question might be asked
# equilibrium of what? An ant crushed by a steam roller might be said
# to be in a state of equilibrium, but so what?

I particularly liked what you said about foundations and superstructure. A
nice thing about physics is that it does have foundations, and anyone
familiar with them can reconstruct the reasoning that leads to its major
conclusions -- it makes no difference whether that person is a famous
physicist or a portrait painter. You don't go around citing authorities or
commentators to support the idea that electrons are deflected by magnetic
fields, or that angular momentum is conserved, or that entropy increases.

# Now I see the error I made in my last seminar presentation when I said,
# " _a la_ Powers, we can say this concisely as "Behavior is the control of
# perception." Next time I will mend my ways and quote Bruce Gregory who
# said, what I think may be a more useful way of expressing this insight,
# and a more concise statement as well, that "Behavior is controllling."

Any book that shows how these ideas are arrived at will do -- it's the
ideas that matter, not who said them (though it's nice to give credit to
the first guy to propose an idea).

# Don't worry, We will remember you with fondness, and cite you frequently.

If it's necessary to amass a lot of quotations in support of an idea, the
idea must be sorely in need of support -- and it won't get it, that way.

# The experience of the Imps has refuted this misconception. See Lewis
# Carrol, "The Hunting of the Snark." I said it once, I said it twice,
# I said it thrice-- Tis True." Can someone supply a citation for the
# paper that examined the percieved truth value of a position with the
# number of times a subject had been exposed to the argument? I'll try
# to look it up later when I've got more time.

In
a field that has real foundations,

# Economics, unfortunately, is not one of those fields where the foundations
# have been laid. This makes it exciting. Sometimes you get to fly by the seat
# of your pants, and sometimes you get your ass kicked. Sometimes you get to
# experience both on the same day.

authorities are simply not cited, except
in histories or to provide references to data and methods.

# You are assuming a context in which the discussants a can be assumed
# to already familiar with the literature, and the methods.
#
# Where people are determined "know nothings" and blame the "credentialize
# experts for "withholding information" I wouldn't want to be held at fault--
# for disclosing where the secrets have been revealed. Since you everyday
# display more and more evidence that you could benefit from an elementary
# course in econmics, what is a poor imp to do?

But in a field
that's mostly superstructure, authority and consensus are everything, for
there is no way independently to prove or verify any idea.

# The common folk have this institution for resolving issues that generate
# a lot of hot air. It is called a "bet."

I think it's possible to start over in economics just as in psychology,

# Maybe so, but you aren't the guy to do it. If you were the two decades that
# you spent trying would have generated some ideas that would appeal to a
# a wider circle than just Rick.

by
trying to establish basic relationships and facts that don't depend on who
said they exist,

# Aside from Bill Powers.

but which anyone can verify.

# Your notions regarding the philosophy of science are not exactly ones
# that are regarded as up-to-date. Now, people don't say "verify" they
# say the more cautious, "does not refute, or does not falsify.

This is like moving from
Catholicism, where the priesthood is interposed between Man and God, to
Protestant religions in which each individual has his own link to God's
URL.

# Remember, however that, I am to be, at least in formal situations,
# referred to as "the Almighty."

Of course in science, belief is supposed to have less influence than
in religion, or that is the ideal.

# Aren't you fortunate that just by chance you happened to be the son of
# a man who had the most profound insights into ecnomic phenomena. Too bad
# that the world is so wicked his work hasn't gotten a fair hearing. However,
# remember that you are alone in suffering because you are God's son.

In a true science, as I think of such
things, any individual who thinks straight and learns the basics can arrive
at (temporarily) correct conclusions without any permission from anyone
else,

# I think you are really finally catching on. "Learning in the basics."
#
# Do you think we could schedule some time tommorw. We could start with
# the basic facts regarding the structure of a transaction. Followed by
# some of the Imp's magic called "reinforcement" in which you say 5,000
# times "Income equals Expenditure" In a later more advanced course you
# would then move on to an exercise where you say, "Savings equals
# investment." I would have to resort to expodential notation to express
# the number of times you repeat this.

at (temporarily) correct conclusions without any permission from anyone
else,

# I think your parents may have been what is called "overcontrolling."
#
# You seem to think those around you expect you to "Ask first." However,
# to set your ming at ease, I will swear to the following,
#

# I hereby by virtue of the authority granted to me by the provost of the
# Imps Institute grant William T. Powers a limited permission to arrive
# at temporarily correct conclusions in the field of macro economic theory.
# This authorization is extended by the Power vested in me by the chief Imp # himself John Maynard Keynes.

and without having to memorize who said which about what.

# There is, however, a less restrictive clause that should be observed.
#
# Just as long as you can remember what you yourself said yesterday.

The most

# This is another thing that we learn in the Imp's Institute in the
# capstone seminar. And, that is how to lull outsiders into a deep
# sleep by saying things like, "...on the other hand..." or "in
# the long-run" or, well you get the idea. Actually, however, when
# you use these carefully tested phrases, and the magical methods of
# behaviorism, they never get it. And, that is how we keep the ideas
# safe from meddleing by outsiders and being buggered up. It is
# undoubtedly safter to keep such dangerous things safely confined
# to books and hidden away in libraries.

is the way they offer endless clever
quotations from famous people

# But, don't forget the really stupid things said by people no one ever
# heard of. The French molecular biologist Jack Monod was famous for
# quoting obscure statements by his Scotts grandfather. Bill himself
# has established something of a reputation for quoting his father
# Trevor C. Powers. Getting into the spirit of things, I will quote my
# father, who said. "If you're not a pilot, you ain't shit."

as if expecting that everyone who reads them
will understand them the same way and also agree with them -- and without a
shred of evidence that what the clever authority said is true.

# The methodology of the Imps is to first shred everything.
# This is why I can't become too upset when Snips chews holes
# in my tires.
#
# By shreding things at random the secrets of the craft can remain safely # hidden in the books, and stored away in the temples called libraries where # they can not possibly ever be found, ever again. Not at least without the
# aid of mentors who have matured, and found enlightenment in the traditions
# of the inner most sactums of the cult.

It's the
same mode of argument I learned as a member of the debating team in high
school.

# Having once learned it why ever did you forget it?

Whoever could cite the most impressive and relevant authorities won.

# You have a problem with this? Or, is it that you are losing, and have
# a problem with most everything right now?
#
# This whole exposition of yours seems marred by a feeling of exasperation.

I do think that an open-minded economist

# Open-mindedness, is typically regarded by Imps as an ill-adviced approach
# to questions that everyone knows have been settled long ago. All that # "Open-mindedness can possibly lead to is new and vicious mistakes.

can contribute greatly to
identifying foundational ideas, and I would be quite willing to learn from
such a person (after my fashion, which requires starting by not believing
anything I am told).

# The sole exception being what daddy told him.

I will continue the search.

# By-the-Way how is Professor Bruun?
#
# I would think that it would be possible to plug control based agents into
# her model, and I hope that this could be done fairly quickly. Is it too
soon for a progress report?

Bill Willialms