# Using PCT to model Economics ( Re: PCT Economics )

[From Shannon Williams (2010.11.09.0700 CST)]

Hi Rick and Martin,

Here is how I would like to proceed:

1. We agree on a physical representations of the flow of money.

I am adding lyricks that describe the money movement of our three
respective solutions. For Rick, I will build a lyrics that describe
taking money from the Rich. For Martin, I will build lyrics that
describe a pyramid of debt and the rception of the payout card. For
myself, I will describe the exec trying to spend his money. This is
my tool to visualize how the money flows. Ideally, you guys could
write a flow diagram or something. Whatever is meaningful for you.
The purpose here is to visualize the flow separate from any goals or
perceptions or complex government shenanigans meant to affect the
flow. Just the flow is all we want. It is just a physical element
on a sheet of paper. It should be like drawing an outline of the blood
circulatory system. You don't need to include the plaque or the red
and white cells. Just: this is blood and this is how it gets back to
the heart. You might note the vessel muscles and backstops, as hooks
used for control. But I expect that you will have a hard enough time
making a simple diagram, so that should be made first. We wrap our
heads around Newton's laws before we tackle Relativity.

2. We agree on a simple physical model of goals that can be added to
our song/diagrams in #1.

step #1, this will be easy.

3. We analyze our models and see what happens

step #2, this will be easy.

What do you think? Or have you lost interest?

Sincerely,
Shannon

[From Rick Marken (2010.11.09.0800)]

Shannon Williams (2010.11.09.0700 CST)--

Hi Rick and Martin,

Here is how I would like to proceed:

1. We agree on a physical representations of the flow of money.

I am adding lyricks that describe the money movement of our three
respective solutions. For Rick, I will build a lyrics that describe
taking money from the Rich.

I think you would be hard put to improve on Dylan's "Too much a
nothin". And, of course, his little comment on money as "speech" in
"It's all right Ma": "Money doesn't talk, it swears".

Ideally, you guys could
write a flow diagram or something. Whatever is meaningful for you.

A diagram of my model of the macro economy, including the circular
flow of money, is in Figure 2 of the paper to which I referred

3. We analyze our models and see what happens

Best

Rick

···

--
Richard S. Marken PhD
rsmarken@gmail.com

[Martin Lewitt Nov 9, 2010 1356 MST]

Richard,

I started reading your paper and got waylaid by the references to Powers earlier work. You don't provide the detail reference at the end of your paper, and there is what appears to be a typo, at least one of the references is to 1966 rather 1996? Do you have a copy of these references that you can forward? I was particularly confused by "leakage", which is unconsumed money income which is also NOT savings. 8% is a surprisingly high amount to be left unexplained. There can't be that many more coins in the couches each year. Has leakage been reduced by the electronic payment systems, direct deposity, checking and credit cards?

The other confusing aspect is the "autoinflator". What is the autoinflator and what is "auto" about it? The federal reserve isn't "auto" but managed. Do the Powers papers clear this up?

regards,
Martin L

···

On 11/9/2010 9:02 AM, Richard Marken wrote:

[From Rick Marken (2010.11.09.0800)]

Shannon Williams (2010.11.09.0700 CST)--

Hi Rick and Martin,

Here is how I would like to proceed:
1. We agree on a physical representations of the flow of money.

I am adding lyricks that describe the money movement of our three
respective solutions. For Rick, I will build a lyrics that describe
taking money from the Rich.

I think you would be hard put to improve on Dylan's "Too much a
nothin". And, of course, his little comment on money as "speech" in
"It's all right Ma": "Money doesn't talk, it swears".

Ideally, you guys could
write a flow diagram or something. Whatever is meaningful for you.

A diagram of my model of the macro economy, including the circular
flow of money, is in Figure 2 of the paper to which I referred

3. We analyze our models and see what happens

Best

Rick

[From Rick Marken (2010.11.09.1630)]

ï¿½[Martin Lewitt Nov 9, 2010 1356 MST]

Richard,

I started reading your paper and got waylaid by the references to Powers
earlier work. ï¿½You don't provide the detail reference at the end of your
paper, and there is what appears to be a typo, at least one of the
references is to 1966 rather 1996? ï¿½Do you have a copy of these references
that you can forward?

Sorry about that. That's a copy of a paper I presented at a meeting of
the CSG some years ago. It was extremely poorly received. The only
reference is to T.C. Powers book "Leakage" which was published in
1996. You can get a copy at Amazon.

http://www.amazon.com/Leakage-Bleeding-American-Treval-Powers/dp/0964712113/ref=sr_1_1?s=books&ie=UTF8&qid=1289348561&sr=1-1

T. C. Powers though he could measure leakage. But I think it's really
just a theoretical notion. T. C. Powers' analysis is not perfect but
it really helped me finally get a good grip on what macroeconomis is
about; what an economy is. It seems like a much better start than I've
seen in any of the economics texts I've read.

Best

Rick

···

--
Richard S. Marken PhD
rsmarken@gmail.com

[Shannon Williams (2010.11.10.1930 CST]

Hi Rick,

money moves'. These assumptions are up for debate. It is not a
picture of just the movement itself. When you have a clear picture it
will be a trivial (but tedious) process to add 10 or 10,000 more.
And there will not be 'leakage' clause when you do it this way. All
of the money is accounted for using words that do not have a 'black
hole' connotation to them.

Do you mind redoing your diagram so that it just shows the movement?
It just shows the water flowing.

Sincerely,
Shannon

···

On Tue, Nov 9, 2010 at 6:31 PM, Richard Marken <rsmarken@gmail.com> wrote:

[From Rick Marken (2010.11.09.1630)]

ï¿½[Martin Lewitt Nov 9, 2010 1356 MST]

Richard,

I started reading your paper and got waylaid by the references to Powers
earlier work. ï¿½You don't provide the detail reference at the end of your
paper, and there is what appears to be a typo, at least one of the
references is to 1966 rather 1996? ï¿½Do you have a copy of these references
that you can forward?

Sorry about that. That's a copy of a paper I presented at a meeting of
the CSG some years ago. It was extremely poorly received. The only
reference is to T.C. Powers book "Leakage" which was published in
1996. You can get a copy at Amazon.

http://www.amazon.com/Leakage-Bleeding-American-Treval-Powers/dp/0964712113/ref=sr_1_1?s=books&ie=UTF8&qid=1289348561&sr=1-1

T. C. Powers though he could measure leakage. But I think it's really
just a theoretical notion. T. C. Powers' ï¿½analysis is not perfect but
it really helped me finally get a good grip on what macroeconomis is
about; what an economy is. It seems like a much better start than I've
seen in any of the economics texts I've read.

Best

Rick
--
Richard S. Marken PhD
rsmarken@gmail.com

[From Rick Marken (2010.11.10.0720)]

Shannon Williams (2010.11.10.1930 CST) --

Hi Rick,

money moves'. ï¿½These assumptions are up for debate...

Excellent point! Actually the first diagram in the paper, on p. 2,
which comes from T. C. Powers book "leakage" is a diagram of the way
money (and the goods and services which it symbolizes" moves, without
any assumptions about how/why it moves in that way. The second diagram
is my model of why it moves that way.

Do you mind redoing your diagram so that it just shows the movement?
It just shows the water flowing.

Again, that's the first diagram. It's a model of "what" happens. The
second diagram is my function model of "how/why" it happens. Note that
leakage is just a variable in the first diagram. If in reality there
is no leakage then that variable can be set to 0 in the "what" model.

Thanks, Shannon. You helped me get a better grip on what I was trying
to do with this modeling effort. T.C. Powers basically proposed a
model of the macro-economy as a circular flow of goods and services,
and the money that represents these things, between an aggregate
producer and consumer. I realized (apparently subconsciously) that T.
C. Powers' circular flow model did not explain how or why this flow
happened. So my H. economicus explains this circular flow as the
result of collective control of goods and services and of balanced
books (keeping the cost of production equal to what is paid back for
that production).

Best

Rick

···

--
Richard S. Marken PhD
rsmarken@gmail.com

[Shannon Williams (2010.11.10.1930 CST) ]

[From Rick Marken (2010.11.10.0720)]

Do you mind redoing your diagram so that it just shows the movement?
It just shows the water flowing.

Again, that's the first diagram. It's a model of "what" happens. The
second diagram is my function model of "how/why" it happens. Note that
leakage is just a variable in the first diagram. If in reality there
is no leakage then that variable can be set to 0 in the "what" model.

OK then. Can you update your model with the new mechanisms of flow
control that we are discussing:

1. Add a mechanism which models money being taken from the Rich and
distributed to the Poor.

2. Add a mechanism which models the federal reserve cutting a check
and sending it to the people.

3. Add a mechanism which models each entity spending all income
recieved above a certain threshold

Sincerely,
Shannon

[From Rick Marken (2010.11.11.0800)]

Shannon Williams (2010.11.10.1930 CST)

Rick Marken (2010.11.10.0720)]

Again, that's the first diagram. It's a model of "what" happens. The
second diagram is my function model of "how/why" it happens. Note that
leakage is just a variable in the first diagram. If in reality there
is no leakage then that variable can be set to 0 in the "what" model.

OK then. ï¿½Can you update your model with the new mechanisms of flow
control that we are discussing:

1. Add a mechanism which models money being taken from the Rich and
distributed to the Poor.

2. ï¿½Add a mechanism which models the federal reserve cutting a check
and sending it to the people.

3. Add a mechanism which models each entity spending all income
recieved above a certain threshold

Sure. Just give me a minute;-)

Actually, I had been planning to substantially change the model (it's
implemented in a spreadsheet at the moment; that's where the data form
the paper came from) so that the composite controller
(producer/consumer) controls Q only rather than PQ (that is, it
controls the goods and services only, not the monetary representation
of these things). I was also going to include a distribution of wealth
function. But all this takes time and given the reception that the
model got from both "real" economists (whose objections I didn't
understand but I think it had to do with not talking about the economy
in the way they were used to talking about it) and control theorists
(who thought I should work from the individual rather than the
population level) I have not been encouraged to continue the modeling.
Now I just like to play with the economic data.

But I will post an idea I had about how to determine what the
distribution of wealth "should be" later today or tomorrow.

Best

Rick

···

--
Richard S. Marken PhD
rsmarken@gmail.com