The Context-Dependency of Human (Economic) Behaviour
Let me start this post by making clear what everybody knows: people behave differently in different kinds of situation, but we can effectively recognise these kinds of situation and use them to understand, and even predict, how to behave and what people will do in these situations. For example we all recognise a lecture and know the social norms, habits, conventions, roles etc. that pertain there. If the lecture is declared finished and coffee or wine served to celebrate something the context has changed and everybody will behave differently.
Perhaps it is the desire to be like physics with universal laws, but economics (like other quantitative social sciences) ignores the context-dependency of human behaviour and cognition. Maybe the fact that people do not only use different information to make decisions in different contexts but seem to decide in different ways, is just too complicated and awkward to acknowledge. It certainly makes understanding and modelling economic behaviour much more difficult!
A classic example of this is how traders behave in bull and bear markets – in the former case they might be seeking to optimise their bonuses (make lots of transactions) and promotion prospects and in the latter trying to keep clients (hence please them) and not be sacked (hence avoid being the worst performer). This is not a question of just using different information to make decisions, but having different goals and making decisions using different algorithms.
More than this, there is ample evidence that other aspects of human cognition are also context dependent, including: memory, language, preferences and perception.
Typically many economic models will try to deal with unmodelled variation in behaviour as if this is some kind of random ‘noise’. However, this is clearly unsatisfactory for many purposes. For example, random noise and context-dependent variation will scale very differently with the size of the system.
The context-dependency of human cognition to be a combination of (A) a rich but ‘fuzzy’ recognition of kinds of situation (B) preferential access to relevant knowledge given this (C) foreground explicit reasoning using that knowledge. One of the problems of this is that (A) is done largely unconsciously and with great fluidity so we are not aware of this (except if we get it wrong).
This context-sensitivity is a very powerful social mechanism in a number of ways, including: (1) kinds of situation can be co-recognised and so people will have access to shared knowledge there (e.g. a lecture) – the more that kind of situation is distinctly recognised the more context-specific technology, norms, expectations, language, habits etc. are developed for it, and so the more recognisable it becomes. This can result in a context becoming socially entrenched. (2) since recognition of context is done on cognitive as well as external queues the processes by which social coordination is achieved can change flexibly with event (e.g. fishing in calm waters and dealing with a storm in the same waters).
The reason that context-dependency has been ignored is its difficulty. Formal modellers might desire that their models are simple and have wide generality – having to included a variety of fundamentally different behaviours for different kinds of situation just makes things hard and messy (and thus unlike those in the physics). Those at the other end – using more qualitative, knowledge-rich approaches, may tend to deal with each case separately – essentially always working within a situation and resisting generalisation – thus avoiding dealing with context-dependency in another way.
However, advances in modelling, big data collection and analysis, and data integration now allows us to start dealing with this ‘inconvenient truth. Ignoring it would be a similar mistake to that of assuming people were rational in the narrow economic sense.
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Truly this is difficult and I don’t think we need additional difficulties in economics right now
If context-dependency *is* a real and significant factor in the economic decision making of actors, how can we not grapple with it? That is like saying we will ignore non-rational decision making since that is also messy. We have to deal with the phenomena we are faced with. The history of economics (certainly the last 50 years) could be characterised as wishing that the subject matter is neater and easier to deal with than it is – and the slow realisation that we have to start from the phenomena and evidence about it rather than an idealisation.
Wake up: economics is not a science of behavior
Comment on ‘The Context-Dependency of Human (Economic) Behaviour’
You say: “Let me start this post by making clear what everybody knows: people behave differently in different kinds of situation, but we can effectively recognise these kinds of situation and use them to understand, and even predict, how to behave and what people will do in these situations.” (See intro)
Yes, everybody knows this already from Popper.
“Thus the situational analysis will comprise some physical things and some of their properties and states, some social institutions and some of their properties, some aims, and some elements of knowledge.” (Popper, 1994, p. 168)
Because you invented a new name for an old chestnut you erroneously think that context-dependency has been overlooked thus far. Just the contrary is true.
“… it is the central point of situational analysis that we need, in order to ‘animate’ it, no more than the assumption that the various persons or agents involved act adequately, or appropriately — that is to say, in accordance with the situation. … Thus there is only one animating law involved … It is known in the literature under the name of ‘rationality principle’, … ” (Popper, 1994, p. 169)
From your examples it is clear that you have not yet realized that economics is not a science of behavior (Hudík, 2011). What you are talking about belongs entirely to the realm of sociology, psychology, anthropology, history, etcetera. Hence, what you and most economists are practicing is a dilettantish variant of Psycho-Sociology.
In marked contrast, theoretical economics deals exclusively with the systemic behavior of the actual monetary economy. Theoretical economics is objective. There are systemic laws but no behavioral laws. Systemic laws, for instance the Profit Law (2015)*, have the same methodological status as physical laws. The Profit Law holds always and everywhere. The economist’s task is to find these systemic laws and this implies to leave all speculations about human behavior to the yellow press.
Does the world expect from economists to find out how people behave? No, this is the proper job of psychology, sociology, anthropology etcetera. Does the world expect from economists to figure out what profit is? Yes, of course, no philosopher, physicist, biologist, or sociologist will ever try to figure this out.
Have economists done their proper job? No. Do you know what profit is? No. Does context-dependency help to find out what profit is? No.
Let me sum up this post by making clear what everybody knows: Is someone who does not understand what profit is a good economist?
Egmont Kakarot-Handtke
References
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Profit. SSRN Working Paper Series, 2575110: 1–18. URL
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575110.
Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Models, Instruments, and Truth, pages 154–184. London, New York, NY: Routledge.
* See https://commons.wikimedia.org/wiki/File:AXEC08.png
Is economics psychology – no. Do most of results of economic behaviour critically depend upon psychology just as biology is founded upon chemistry – yes. Can models ignore factors that are true of human behaviour and hope to understand most economic behaviour – no.
Do I know what profit is – yes. Are there universal profit laws independent of human behaviour – no (contrary to an obscure, unpublished paper by the above). Does context-dependency help to find out what profit is? Depends on what you mean by profit, if this is something that important because it is a goal of humans – yes (if it is an abstract and ultimately disconnected property – maybe not).
As to situation theory, that is something a bit different from context, but that is a long debate, which if Egmont is interested he should join (as I have and published quite extensively on this).
The idea that there may be physics like universal laws nicely insulated from the vaguaries and complexity of human behaviour was a hopeful and plausible one, its just that it is increasingly clear this is a hopeless position.
To Egmont Kakarot-Handke: The claim that psychology/sociology/etc. is irrelevant in economics is an assertion that economic processes are basically self-contained, the internal variable set sufficient to account for the behavior of any of the variables within it. But there are two issues here.
[1] First, where the behavior of the full set of ‘economic’ variables included in one’s model of an economy is NOT sufficiently accounted for by the values/behavior of other variables in the set – – which is to say, where ‘external’ phenomena (e.g., psychological, sociological) are required to complete the behavioral account – – then your contention is wrong.
Unfortunately for you, the burden of proof that such externals are not required is extremely high. As soon as you encounter summary approximations, imperfect correlations, ceteris parabus, and other qualifiers- – which are inevitable in real-world economic systems – – you are obligated to show that the variances in these come only from ‘internal’ values. Of, if you attempt to side-step them by claiming that the self-contained account may not be perfect but nonetheless is ‘close enough’ or ‘as good as we can do’, you are then forced to justify what your criterion is for ‘enough’, or, if you are claiming this is the best that can be done, that including externals wouldn’t ‘do’ better. You are furthermore obligated to prove that ‘externally’-caused divergences (imperfections) can’t, when summed across numerous instances and over time, cumulate to produce major economic events, thereby rendering the external component of the account non-trivial and the self-contained component insufficient.
[2] Second, even were one to contrive an economics that is self-contained, in order for it to be relevant we must know that the variables within it represent what economics is charged to account for. That is, it is still possible to choose variables that, though they neatly interrelate with one another, nonetheless do not refer to what is important in the real world. For example, current theory refers to economic gratification mainly through ‘value’ as measured by price. But the correlation of this metric with actual gratification – – which is ‘psychological’ – – is unestablished, and, where studied, weak. And to say that psychological gratification is not well-enough understood to be measured doesn’t excuse the claim that value-as-price measures it. (There are other problems with this as well – – notably the conclusion that the jaded whims of the super-rich, as realized through their extravagant purchases, generate a ‘gratification’ equal to that of thousands, if not millions, of poor people through theirs.)
It’s time to let go of economics as a stand-alone institution.
Right on Rhonda. It is time to climb out of the box, take off the blinders and embrace the real world.
June 12, 2015
Clearly explained , Mme. Rhonda Kovac.
It’s hardly the first time that the holy grail of “objective” structural “laws” in economics, independent of human behavioural context, has been put in its proper place. It goes right back to Adam Smith’s “Theory of Moral Sentiments” before WEALTH of NATIONS was published. For similar sentiments to Ms. Kovac’s and Mme. Helge Nome’s,from another paradigmal perspective, I would direct the reader to:
“Why Does Aggregative Demand Collapse” Nov. 07, 2014 ? Scroll down to April 10, 2015
by Norman L. Roth. Toronto, Canada.
And,Please GOOGLE:
[1] Norman L. Roth, Markets {2} ] Norman Roth, Economics of Technology
{3} Norman Roth, Economic Theory {4} Norman L. Roth, Current Conception of the Standard of Life {5} Norman L. Roth, RWER
Better still: Read TELOS & TECHNOS. The paradigm that dare not speak its name in the Vaults of Academe or Deterministic-Iron-Law-Ergodica-land.
A farewell to PsySoc economics
Comment on Rhonda Kovac on ‘The Context-Dependency of Human (Economic) Behaviour’
You say: “The claim that psychology/sociology/etc. is irrelevant in economics is an assertion that economic processes are basically self-contained, the internal variable set sufficient to account for the behavior of any of the variables within it.”
This conclusion has obviously not much to do with the argument of my post. Alone from the fact that my proposal for a new heterodox curriculum* includes a paper with the title ‘Essentials of Constructive Heterodoxy: Behavior’ (2015) you can safely conclude that my argument does not amount to the claim that psychology/sociology/etc. is irrelevant. So let us first put aside this windmill.
My core assertions are (i) the task of theoretical economics is to explain how the monetary economy works, and (ii), no way leads from the understanding of individual human behavior to the understanding of the behavior of the economic system.
From this follows that Orthodoxy is a failed approach because it has been built upon a set of behavioral premises. It follows in addition that Heterodoxy is bound to fail if it merely replaces constrained optimization, rational expectations and other green-cheese premises with some behavioral assumptions that are more realistic. With this one remains trapped within the confines of psycho-sociology. What is needed is a radical methodological turnaround.
First of all, it is advisable that economics gets as far away as possible from the so-called social sciences which Feynman has debunked as cargo-cult sciences (see Wikipedia). Their track record has been abysmal and will remain so.
“… there has been no progress in developing laws of human behavior for the last twenty-five hundred years.” (Hausman, 1992, p. 320), (Rosenberg, 1980, p. 2)
The social sciences cannot, as a matter of principle, rise above the level of storytelling.
From all this follows: As a first approximation, one can agree on the general characteristic that the monetary economy is a complex system. However, with the term system one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system the market economy should be characterized more precisely as a complex hybrid system/human entity or sys-hum.
While it is clear that the economy always has to be treated as an indivisible whole, for compelling methodological reasons the analysis has to start with the objective system-component.
Common sense wrongly insists that the hum-component must always be in the foreground. This fallacy compares to Geo-centrism. The economic system has its own logic which is different from the behavioral logic of humans. The systemic logic is what Adam Smith has called the Invisible Hand.
What the agents subjectively think or expect about the relationship of economic variables is immaterial for the understanding of the whole. The agents are caught in parochial realism and have no idea about how the whole fits together. What really counts are the objective structural properties of the economic system. When human behavior and system behavior are not aligned crises result.
Because of this, it is of utmost importance to know how the monetary economy works. Let us face the facts: neither Orthodoxy nor Heterodoxy has a clue. This is the result of more than two hundred years of PsySoc.
Nothing short of a paradigm shift will bring economics out of the dead end. To debunk Orthodoxy is one thing, to successfully replace it with the correct economic theory is quite another thing.
Egmont Kakarot-Handtke
References
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge:
Cambridge University Press.
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Behavior. SSRN Working Paper Series, 2600523: 1–17. URL
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2600523.
Rosenberg, A. (1980). Sociobiology and the Preemption of Social Science. Oxford:
Blackwell.
* See cross-references
http://axecorg.blogspot.de/2015/04/new-curriculum-cross-references.html
you say: “My core assertions are (i) the task of theoretical economics is to explain how the monetary economy works, and (ii), no way leads from the understanding of individual human behavior to the understanding of the behavior of the economic system.”
I would contest both of these.
(i) Your decision about what theoretical economics seems narrow, and is not a description that many would go with but it depends a bit on what you intend by the phrase “monetary economy”. Does it exclude how a particular market works (where human behaviour/cognition will be important)? Does is exclude barter systems and non-monetary internet-based sharing systems? Does it include market where there are a mixture of monetary and social drivers (where long term relationships matter)? Does it exclude the sharing of value within families and communities? If the answer to these is “No” then I am afraid you are just excluding phenomena that do not fit your particular conceptual framework. If the answer is “Yes” then human behaviour and cognition can not be ignored if you are to understand them.
(ii) There is a way from the the understanding of individual human behavior to the understanding of the behavior of the economic system – it is called agent-based simulation. You program the behaviour to be tested into the agents, run the simulation and see the aggregate results. Maybe you are myopically limiting yourself to mathematical models?
No amount of agent-based simulation can lead to the creation of a central bank which has substantial impact on the economy.
The art of start
Comment on Bruce Edwards on ‘The Context-Dependency of Human (Economic) Behaviour’
“I think it is the lack of quite sharply defined concepts that the main difficulty lies, and not in any intrinsic difference between the fields of economics and other sciences.” (von Neumann, quoted in Mirowski, 2002, p. 146 fn. 49), see also (2013)
Therefore, it is of utmost importance to consequently stick to sharp definitions and to stay clear of ambiguity and vagueness. There is already too much wish-wash in economics.
ad (i) First you quote me correctly asserting ‘the task of theoretical economics is to explain how the monetary economy works’ and then you ask ‘does this exclude barter systems.’ The answer is evidently yes. Then you go on asking ‘does it exclude the sharing of value within families and communities?’ Again, the answer is evidently yes. The focus is on the economy we happen to live in and not on issues that belong to the domains of psychology and sociology. Apart from this, to exclude some real-world phenomena at the start means only that they are to be included at a later stage. So nothing of importance is lost.
The economist’s task is to incorporate valid results of PsySoc into his models but not to make ‘a fool of himself’ (Viner, 1963, p. 12) with utility maximization, rationality, bounded rationality, rational expectations, situational analysis and all the rest. Economists have no correct theory of human behavior, neither do they have a correct theory of how the monetary economy works, and it is for the latter defect that economics is a failed science. As long as Heterodoxy is preoccupied with PsySoc it will share the cheerless fate of Orthodoxy.
ad (ii) You say: “There is a way from the the understanding of individual human behavior to the understanding of the behavior of the economic system – it is called agent-based simulation.”
Generally speaking, a simulation is the proper tool of economic analysis but this has already been said in the paper you dismissed as obscure, obviously without reading it. However, a simulation presupposes the definition of the structural properties of the monetary economy. Hence, not any simulation will do. Here is the correct version.*
“A simulation as defined by the four structural axioms and the probability distributions is a well-defined mathematical object just like a system of equations. While they are formally on the same footing, both mathematical objects yield different kinds of outputs: the system of equations yields a solution vector, a simulation yields a bundle of paths. This bundle has a counterpart in reality.” (2015, p. 5).
In sum: every economic analysis must start with the definition of the objective structure of the monetary economy because it is this structure, a.k.a. reality, that determines the outcome of individual and collective human action. The monetary economy is the meta-context of every partial analysis. To start with a specific behavioral assumption means to get off at the wrong foot and to end up eventually in the scientific woods. Orthodox economics is a cautionary tale. Heterodoxy is expected to do much better.
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL http://ssrn.com/abstract=2207598.
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Behavior. SSRN Working Paper Series, 2600523: 1–17. URL http://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2600523.
Mirowski, P. (2002). Machine Dreams. Cambridge: Cambridge University Press.
Viner, J. (1963). The Economist in History. American Economic Review, 53(2): pp. 1–22. URL http://www.jstor.org/stable/1823845.
* For the full picture see also the cross-references
http://axecorg.blogspot.de/2015/04/new-curriculum-cross-references.html
“It is of utmost importance to consequently stick to sharp definitions and to stay clear of ambiguity and vagueness.” This is admirable, and certainly desirable wherever possible. But the purpose of economics is human well-being, which is psychological (‘psysoc’) in nature. Also, the behavior of human agents in economic systems is governed to a good extent by psychological factors. Saying that we must look to ‘structural’ considerations instead because they are precise, whereas psychological ones are vague, does not address the problem. No ‘structural’ explanation, no matter how precise its variables, can give a proper account of a ‘monetary system’ unless it also explains the relationship of that system’s behavior to psychological and social phenomena, however vague and imprecise these are. Otherwise, there is no point to making such an explanation or to having such a system.
I also would challenge the comprehensiveness of your portrait of the social sciences as wholly unscientific, invalid gibberish. There is no doubt, as you say, that they have produced overall disappointing results, and definitely lag far behind the ‘hard’ sciences. Still, there are areas where precision can be found in them and headway has been made. Irrespective of that, if there is where the purpose of economics lies, then there is where we must go. Too, we are never going to bring clarity and precision into the social sciences if we dismiss those at the outset as impossible.
Heterodoxy at the crossroads
Comment on Rhonda Kovac on ‘The Context-Dependency of Human (Economic) Behaviour’
Science can be seen as either a means to an end or an end in itself. It is pretty obvious that the Classics had a political agenda and used economic theory for pushing it. Marx’s main theme was the power struggle in all its historical forms and theoretical economics was only insofar of importance as it gave scientific support to what in the strict sense has been sociology/political science/history.
What the Classics and Marx had in common was the claim that they were doing science. This claim has been rebutted with rather convincing arguments. The same holds true for Walrasian and Keynesian economics.
So it is a bit misleading to speak of economics without qualification. There is political economics and theoretical economics. Political economics pushes an agenda, theoretical economics figures out how the actual economy works. Theoretical economics is judged according to the well-defined scientific code true/false and nothing else.
In the history of economic thought political economics has been dominant and more or less successful in hijacking theoretical economics. As a result we have a lot of small-scale practical know-how and many dubious generalizations but no scientific knowledge about how the actual economic system works. It is plain to economists and non-economists alike that General Equilibrium Theory does not explain the real-world economy in the sense that physics explains the universe. The same holds for Marx’s surplus/profit theory and other approaches. True knowledge is lacking in economics. By consequence, expert advice of economists has no scientific foundation.
You say — let’s call it the Kovac Doctrine — “… the purpose of economics is human well-being, which is psychological in nature.” I think there is no doubt that you treat economics as a means to an end. So you are a political economist in the tradition of Smith or Marx.
I have no qualms with this. My point is: political and theoretical economics are similar on the surface but ultimately incompatible pursuits. Both are legitimate but they follow different procedures and goals. It is important, therefore, to keep them properly apart.
At the moment Heterodoxy is in a mixed state: Orthodoxy is attacked for methodological or political reasons or both. This confusion cannot last. There must be a clear decision between political or theoretical economics.
If Heterodoxy decides for theoretical economics it commits itself to the standards of material and formal consistency and to the goal of a paradigm shift. Theoretical economics does not commit itself to any political goal.
Since science is essentially a journey into the unknown it is unknown at the outset whether a paradigm shift promotes human well-being. It is also entirely unknown at the outset how new scientific knowledge is put into practice. For this reason theoretical economics refrains from any better-world or save-humanity promises.
In sum I think that the Kovac Doctrine and all its implications is acceptable for Heterodoxy as a political movement but not for Heterodoxy as a scientific endeavor.
Egmont Kakarot-Handtke
Perforce coming late to this discussion, it is worth my going back to the beginning. Bruce’s post was about “The Context Dependency of Human (Economic) Behaviour”, but Egmont cited Popper to argue that “situation analysis” takes this for granted in the “rationality principle”, later turning Bruce’s examples into an argument for relevant and unambiguous definitions. I sympathise with the latter but agree with Bruce and Rhonda. Why? Against Egmont, because of long familiarity with philosophical sophistry (in particular that of Adam Smith’s mentor David Hume and the deliberately ambiguous use of undefined terms like “profit” and “theory” to systematically mislead behaviour. In support of Bruce I can add scientific insight as to why situations evolve and rationality develops (i.e. at least starts off less than perfect). Egmont’s (13 June) “the” monetary economy and “individual” human behaviour inevitably rule those out.
Economics was defined by Aristotle (c. 300 bc) as “household management”, which has been around a lot longer than monetary economies. Likewise Aristotle began science with what is still part of it: the recording, study and classification of new discoveries. Bacon (1604) began modern science’s discovering by taking things to bits to see how they worked; if he wrote like a lawyer, it was because he was one. In Christian medieval science the term ‘law’ had referred to ‘natural law’: how God made things work. In the philosophy of science dominant today, the atheist Hume (1740) denied knowledge of anything other than our own perception, interpreting Newton’s method as scientists independently plotting and correlating points, reducing Laws to what scientists and politicians agree on. Yet this leads directly to the assumption that observed variances simply cancel out that Rhoda is objecting to. It cannot explain change and difference and causation and evolution, only describe them in terms of what has (so far) been observed (and not forgotten).
To take off, science actually required very long number representations by repeated (algorithmic) re-use of a very few Arabic numerals, and Descartes’ invention of spatial coordinates at right angles to each other. Where measurement of angles may in theory be dubious, and likewise facilitation of measurement by instruments like telescopes and microscopes, the definition of right angles based on symmetry is absolute, enabling us to distinguish the three dimensions of space and three phases of time. When Egmont seeks to base economic theory on “the objective structural properties of the economic system”, this is all has to start with. He hasn’t yet defined what a system is, or structure, nor accounted for their origins.
Those who believe Hume and Popper are left with a system being predictable variances in sets of numbers, and structure the patterning of symbols. The variances just happen, they are not caused and cannot be corrected. There is no way out of this black hole, this mathematical “attractor” from chaos theory. I for one totally disagree with Egmont’s claim that “theoretical economics deals exclusively with the systemic behaviour of the actual monetary economy”: he hasn’t yet defined what are to be taken as systemic behaviour and money; while independent non-monetary economies still exist, economics historically being about active management of human households. Not just economics but most of academic science has gone wrong. To right it the starting point must be to reject Hume’s rejection of causation and (by implication) communication and reaction, postulating instead a Big Bang creating the energetic directed motion Hume denied because he could not see it, and (by implication) the invisible communication paths and on-going evolution information technology now enables us to detect and mimic.
As I wrote I saw Bruce agreeing with me that Egmont is limiting himself to mathematical models. The point I’ve been trying to make is that the foundations even of mathematical models are not at the level of choice of suitably objective variables but at the deeper level of choice of concepts of both mathematics and the reality which is to be modelled. (I’m not now wanting to criticise anyone, merely to give readers something to think about)
I want to bring this back to context-dependency via conclusions I reached c.1973 after a few years experimenting with the original “algorithmic”, scientifically “typed” computer language Algol-68R. In the earlier version Algol60, all that had been thought necessary to provide for was variables and values. Bertrand Russell’s 1904 theory of “logical types”, eliminating a difficulty in Frege’s “Sense and Reference” logic, had suggested a solution to the introduction of new types of variable (e.g. picture pixels) then becoming important, the mathematical structure of their representation needing to be defined along with procedures necessary for referring to, interpreting and processing them. The new language thus had not two but four levels programming the operation of computer logic circuits: values, variables, modes of interpretation and typed procedure definitions. The name of a variable is thus a reference to its values, but the mode is a reference or index to the type of variable; and indirectly the type of processing is a reference to the mode of interpretation being used. (Conversely the format of a value refers indirectly to the type of processing required for it).
I’ve been discussing a language so far, and note how the four levels occur in English labelled adjectives, nouns, adverbs and verbs, with a few logic words like ‘and’ and ‘or’ guiding our subjective interpretations. But now consider what a computer does! It takes data from other computers (let us allow, including humans); it interprets, processes it and then acts on it, storing it internally and/or re-transmitting it to other computers. For simplicity imagine these computers talk to each other in English. The point I want to make is that for any one computer its context is all the others, and no matter what they are saying, they are talking and reacting not only to adjectives (values) but to variables (nouns), modes (adverbs) and processing information (verbs), i.e. at four levels.
That is only the conceptual half of the objective theory Egmont is looking for! The theory of everything is the three-dimensions plus time-as-a-measure of motion, and in an economy the real structure directing the motion is not just a picture of a situation but the information-carrying communications channels between the computers and the logic circuits within them. Priorities are determined by the motion and true processing by the information format, not subjective meaning. As it can now be shown that neurons are a type of logic switching circuit one simply cannot leave human brains, capabilities and limitations out of the theory without invalidating it. They are part of the communications structure. But the theory is at the level of the “type” of the structural architecture, differentiated by missing levels and not by variables which may or not be present in particular cases. Put those in and one has a model of a particular case, not a theory.
One may say that control is effected by a controller, but the reality in the case of a control system is that the controlling aim may or may not be corrected by PID feedbacks. Fundamentally, in the beginning there is an aim, but no corrective feedback because that takes time; the accumulation of detectable error takes more time, and changing the aim has not yet happened. Going back to context-dependency, the context of control is the system of PID information channels (partly in brains), without provision or awareness of which corrective information cannot flow.
In Aristotelian economics, a child is born with instinctive biological aims; it learns to control its actions, then to direct them to survival, and given time (e.g. in maturity) it may direct them to easier ways of doing things. An economic system begins with the biological aim of “feeding the kids”. Systematic production is followed by timely distribution, and eventually by technological development. The system can function without the technical development, but when the technological development of money changes the aim from feeding the kids to making money, it is no longer an economy and its theory is not that of economics. The PID money-securing system we have developed has now morphed into uncontrolled money-making, dominance of which is ensuring that soon not only the kids who are out of sight will not get fed; we are going out of mind.
In endorsing to Rhonda’s later (June 14) observations, I would like to point out that the disappointing methods of social science are almost entirely Humean. What I find extraordinary is that twentieth century developments, first in linguistics, then in information science, has not led to a rethink of social science as being essentially about communication. Clarity and precision in these are indeed possible, but only in the formal theory. In the presence of freedom and untruth, ‘prediction’ is (as Egmont might put it) an oxymoron.