Thursday, January 12, 2017

A New View of Macroeconomics


1. Introduction

What would macroeconomics look like in the Resource-Patterns Model of Life (RPM)? My book outline does not address this question. But RPM can model some aspects of macroeconomics as I will picture here with tabletop critters. In many ways RPM clarifies our view of human macroeconomies. The most noteworthy clarification may be the way in which prosperity results from learning new modes of cooperation to exploit large but previously unappreciated resources.

For brevity, I will assume the reader of this post has already digested one of the earlier descriptions of the tabletop critters, such as here or here. In this post I will emphasize principally the differences from that simpler model, adding what can make a model of macroeconomy. Our modeling technique will be the thought experiment, as we have used throughout with the tabletop critters, although in Section 4 we will mention several subjects which arise and promise great opportunities for computerized agent-based modeling.

The major difference here from the earlier models concerns the resources which critters can employ. Previously our critters had to have two resources, both water and sugar, and they had no use for any other resources. Now, while our critters still require a few essential resources they can make use of an array of other resources and they will live better if they can advance to use of those other resources. We will draw a model with ten distinct resources.

Figure 1 introduces the reader to the three symbols used in our figures. Notice that any resource is indicated with a triangle and a particular resource distinguished with a letter, ‘A’ to ‘J’, in the triangle.

Figure 1: Three entities in our model.

On the right hand side in Figure 1 we see a resource with a dashed circle around it. This dashed circle indicates a very important characteristic of a resource, being who “knows” about the resource. We modelers know about the resource since we put it there with expectation that the critters will eventually organize exploitation of it. But the critters have not yet “learned” about the resource enough to organize exploitation. We call this an “unexploited resource”.


2. Critters’ View in the Initial Condition

Figure 2 shows our first view of the initial condition. At this scale and in this timeframe we notice one feature: a population of critters living thinly scattered on the tabletop. Each critter must occasionally replenish its internal storage with each of a few essential resources. A critter dies if this requirement is not met.

Figure 2: A thin and impoverished population of critters.

We intend this initial condition to evoke images of our human past as hunter-gatherers, so we make it possible for a skeletal population of critters to survive by stipulating that fate sprinkles morsels of the essential resources randomly upon the tabletop. Those morsels dropped by fate are too small to be visible in this view. But we modelers should remember that at least some of the critters can survive in this region as long they keep on moving about and feeling for the small, randomly located morsels.


3. Modelers’ View of the Initial Condition

In Figure 3 we see the stage set for growth of an advanced macroeconomy. We have added large unexploited deposits of ten different resources. Those ten we will say constitute all the resources which the critters may require to build and maintain a populous macroeconomy.

Figure 3:The same population with opportunities they do not yet "know about".

Now perhaps these ten substantial resource deposits were present in the critters’ world in Figure 2. But the resources were not shown in Figure 2 because we wanted to show the initial primitive existence; the usual picture of a primitive existence does not recognize the potential productivity which may be seen in that environment by a visitor from an advanced civilization. The critters living in Figure 3 have not advanced any yet from their condition in Figure 2. But the point of the difference between Figures 2 and 3 is to establish in our modelers’ minds the opportunity which lies before our critters.

A few of these large unexploited resource deposits will be of the essential resources which critters require in order to survive; we may name these “life-essential” resources. The remainder of the ten resources may become of value to the critters after the critters have lifted themselves above the threat of starvation; we may name these “prosperity-essential” resources.

We have said that the ten new resources in Figure 3 are unexploited by critters. But to be more complete we may say that the ignorance of the critters concerning these unexploited resources need not be absolute. In this view of the initial condition perhaps some critters in the neighborhood of each of the unexploited life-essential resources have learned the location and return to that location when they need more of that life-essential resource. But no networks of trade in any resource have as yet developed on the tabletop. This is our starting assumption.


4. Modeling Needed to Illuminate the Growth of Cooperation and Productive Habits

Given our initial condition in Figure 3, it should be possible for the critters to grow a wealthy and thriving economy as pictured in Figure 4. I will say more about that Figure 4 end result in the following section. In this section I will mention some of the challenges which our starting point shown in Figure 3 presents to us agent-based modelers who aspire to demonstrate more specifically how the critters can advance to a prospering macroeconomy.

Figure 4: A thriving macroeconomy with resources discovered and exploited.

Obviously the critters could achieve macroeconomic success in short time if we modelers, while working in thought-experiment mode, endow each critter with human-like powers of perception and communication. But that much critter-empowerment cripples our best opportunity to learn from this model. If we work with only minimally-empowered individual critters then we must learn more about what can be accomplished through modes of cooperation among groups of critters. So we should note carefully, when we are working in thought-experiment mode, each new power that we assume the critters can employ (for more about the danger of anthropomorphism see this post). Ideally I would like to accomplish the whole development of the thriving macroeconomy in a computerized agent-based model, because such computerization requires the successful modeler to gain command of a large number of unforeseen and unforgiving facts (See the Introduction in Generative Social Science: Studies in Agent-Based Computational Modeling, 2006, by Joshua Epstein).

Another way in which we will need to limit the power of our individual critters will be in mobility. We do not want our critters to be so mobile within this landscape that an individual could satisfy its wants for all ten resources by traveling to each in succession. If critters were that mobile then they may have little to gain from trade. In the first critters thought-experiment I created this limitation in mobility by asserting simply that the distance between the two essential resources was farther than a critter could travel in its entire lifetime. But in a computerized agent-based model such a limitation would need more detailed specification.

Here is a list of topics that may arise as agent-based modelers strive to empower the critters in just such minimal ways as will enable them, through passage of ample time in the model, to advance from a condition suggested by Figure 3 to the prospering condition suggested by Figure 4.
  • language. What primitive signaling system might enable the simplest mode of trade?
  • money. Might one of the resources have properties that enable its use as a medium of exchange?
  • markets. Will particular locations become habituated meeting spots for traders?
  • investment in educating offspring. Will this give a comparative advantage to a subpopulation?
  • critter-on-critter raiding (cannibalism, theft).
  • moral restraint and law. In response to cannibalism and theft, will we see growth of protective alliances, that is in-groups and out-groups?
  • capital. My thought experiments with tabletop critters have not as yet produced analogs to capital in mainstream economics. Capital is certainly important, but I have only a few ideas on how to start modeling capital in an extension to the tabletop critters model. I welcome suggestions.
For an extended thought experiment on how critters can develop a network of trade between two essential resources, see the draft chapter on The Learning of Rules.


5. Result, a Thriving Macroeconomy

Figure 4 pictures the end result of our present thought experiment. We have a thriving macroeconomy with these features:
  1. The population of critters is much larger than in Figure 3.
  2. The members of this population enjoy a much higher standard of living than before, as evidenced by:
    • Almost no critter dies for want of essential resources. But malnutrition was the dominate cause of death earlier in Figure 2.
    • Individuals are able to get the essential resources they need for mere physical survival with only a small fraction of their available time-cycles.
    • Individuals can spend most of their time seeking fulfillments higher in Maslow’s hierarchy.
  3. The economy draws upon a wide range of resources (all ten in our picture) and not on only the few resources essential for bare survival.
In order to arrive at this favorable end we modelers employ our human powers of imagination and generalization to skip ahead over many difficulties (learning opportunities) such as those listed previously in Section 4. But I hope you might agree that it is reasonable for us to imagine such an end because we can assert that humans have made such an advance in our own history on Earth. We humans have advanced to our present prosperity in a large population from an earlier primitive and poor existence in a small population.


6. Constraints on this Thriving Macroeconomy

We have asserted that the critters’ advance into a thriving macroeconomy must be somehow possible. But we can also reason that the resulting macroeconomy must have certain limitations, which necessarily follow from the initial conditions that we assumed in setting up the Figure 3 starting point.

The prosperity we see in Figure 4 requires the resource deposits of Figure 3. Of course the critters also employed other gifts we modelers have given to them, such as their powers of calculation, perception, and action. But we note the necessity of resources to counter the tendency for some members of some populations to congratulate themselves too much. Some members may believe that their prosperity resulted entirely from their wise action. We modelers know however that both resources and focused behavior were necessary to reach the prosperous outcome.

The practices which enable the critters to achieve prosperity are dictated, for the most part, by the location of resources and the capabilities of the critters. These practices, or rules of social conduct, can not be made up by the critters themselves to satisfy some goal other than prosperity without, it seems, sacrificing some prosperity.

Every resource deposit is finite and may eventually be consumed. So our experiments within this tabletop critters model may in future show depletion of the large deposits (as depicted with triangles). But for the time being there seems to be enough challenge just to model discovery of the means of cooperation to enable critters’ first exploitation of these large deposits.

As a companion to that future aim of modeling resource depletion we may look ahead to modeling discovery of yet more resource deposits. That is, the step which we took from Figure 2 to Figure 3 may be repeated: Once again there may be larger and “deeper” resources awaiting discovery. These may come into “sight” of an adequately advanced set of critters. Our human history suggests such ongoing discovery of resources, the potential uses of which were unrecognized until our technology advanced to a certain level.


7. Concluding Notes

We have looked at a model of one macroeconomy. But our human world contains many macroeconomies, as many it may seem as there are nation states. This suggests a future direction for this research program. Interaction of many macroeconomies may raise the subjects of international trade, trade warfare, and real warfare.

In a related project I have proposed that most of our human wealth exists in the form of institutions, that is in persistent habits and expectations within the human population. That earlier proposal may seem to be challenged by the conclusion now asserted above, that prosperity requires resources. But the more complete view gives credit to both institutions and resources; institutions represent the habits and biases which enable people to exploit resources which are too difficult for individuals acting alone to exploit.

Our human history on Earth tells that we have made tremendous strides in achieving health and wealth for ourselves — while greatly increasing our numbers. Many theories attempt to explain this advance. But I believe there is little consensus favoring any one of these theories, so the door is open for new and improved theories. As such a theory, I offer the RPM and more particularly the model of tabletop critters sketched above. This model gives a framework for new sub-theories to explain particular aspects of human advance. Moreover the overall theory gives agent-based modelers a way to test such sub-theories.

Saturday, December 3, 2016

Insults to Intelligence in The Crown, Netflix TV Series

I have watched the first season of The Crown, a TV series on Netflix. Excellent. It is set mostly in the early years of the reign of Elizabeth II, the current Queen of England, in the 1950s. In ten episodes we see how members of this royal family are required to suppress their individuality. They are required to fulfill traditional expectations, to act in ways that show no imagination or spontaneity. A few of the family members break under these demands, bringing on crushing disapproval, while Elizabeth herself grows into the stifling role.

Why would life do that to us? Why would life, which gave each of us intelligence and imagination, then drop many of us into roles where our individuality can only get us into trouble? An answer can be found in the Resource-Patterns Model of Life, the subject of this blog. Sometimes the work that an individual may contribute to the success of the larger community requires, sadly, few of that individual's capacities. In a given environmental setting, the work-roles which will enable an extended community of us humans to thrive are laid down by that environmental setting. One of these environmentally-determined work roles may require almost continual repetition of only one or two of an individual's abilities, leaving most of the individual's abilities unused and unappreciated.

I believe that point is made clear in the model of tabletop critters. See for instance the last point (number 2) in this post from 2014, and the same point made again amid a longer development in 2015.  It is:
2. The perhaps-surprising fact that millions of critters can live successfully by following only a few simple rules derives from the simplicity of the environmental feature. The rules are simple because the feature (a distance separates the two essential resources) is simple.
But I may be mistaken. While the point seems profound and clear to me, as far as I know no one else has appreciated it. What is lacking in my explanation?


Thursday, October 6, 2016

New paper on Academia.edu

During the past month I have been introduced to academia.edu. Experimenting with that platform, today I posted a new paper there, titled "A Resource-Based Framework for Social Science Modeling". This paper strives once again to summarize, in a single paper, the Resource-Patterns Model of Life.

Tuesday, August 16, 2016

Please Leave Your Anthropomorphism at the Door


1. Know this! The agents in the model can not see what you can see.

In the Resource-Patterns Model of Life (RPM) we work with agents which we call living things (LTs). As we construct an implementation of RPM for some purpose, we give our LTs specific powers of perception and computation. But we give them no more of these “nervous system” capabilities than we have consciously listed.

This point needs emphasis because almost everything that we can gain from RPM requires inadequacy of the LTs as individuals. As individuals the LTs are lucky if they survive in the poorest of ways. What we can learn from the model comes next, from our exploration of the modes of cooperation which may empower the LTs to thrive as groups in spite of their inadequacy as individuals.

We human modelers place abundant resources into the model along with the LTs — but we are crafty about how we introduce these resources into the environment. We place resources in patterns (RPs) designed so that:
  • it will be difficult for our individual (and handicapped!) LTs to make much use of these supplies, but;
  • it is possible for the LTs to make use of these supplies if they can learn ways to cooperate.

With the environment and abilities of the LTs thus designed, now, dear reader, we face a problem which begs for all our human intelligence. What small increments in ability, given to one or more of the LTs, will enable the LTs in time to exploit a given RP?

Our struggle with this problem brings us face to face with problems which resemble the problems we humans face in our social orders. The similarity is this. With both critters (primitive LTs) in a thought experiment and humans in the 21st century, LTs exist in an environment which promises greater prosperity for them if and when they can overcome two problems.
  • Can they develop a way to perceive a large, unexploited, and as yet unperceived RP?
  • How will they go about dividing the tasks and the gains from cooperation?

As our models in RPM become more sophisticated, we will encounter situations in which we begin to imagine correlations between (1) the coordinating activities needed by our critters and (2) our human experiences of language, truth, and consciousness.

Once again, remember this precaution: Keep close watch on your natural anthropomorphism. When we carelessly give unspecified powers to our LTs we rob ourselves of the opportunity to examine how such powers might develop through a mesh of cooperation in a community of LTs.


2. This precaution applies to thought experiments but not to computer modeling.

We should note that this precaution just expressed applies when we are working with agents in thought experiments, but not when we are working with agents in computer models. Previously I have written about this distinction in agent-based models.

When we are working in computer-programmed mode then the exactness required by the code forces us to specify the details of all our assumptions, so we necessarily become aware of those assumptions. This is an advantage of the computer-programming mode. But this advantage has a cost which we may be unwilling to pay.

When we work in thought-experiment mode, we are taking advantage of our brains’ powers of natural language. These powers give us ability to perceive and discuss generalities about which we could never be entirely exact. These powers are especially useful when we are taking our first steps into an unknown realm, into a new science. The ambiguities of natural language enable us to leap over vexing uncertainties which seem irrelevant to our aims in a juvenile science.

The precaution I have expressed above attempts to strike a balance between sloppy thought experiments and impossibly-demanding computer models. I suggest that we can make much good progress while working with thought experiments. But we must be vigilant. We should not allow the agents to have nervous-system capacities which we have not listed in our assumptions.


3. The Resource-Patterns Model of Life is also a model of mind.

When we reflect upon the reasoning in Section 1 above, we see that RPM may model the organization of our human minds. Recall that life on our Earth has advanced — somehow — from an earlier stage in which single-celled organisms were the highest form of life to the present stage in which humans composed of billions of cells appear to be the highest form. That advance of life on Earth probably took place in many steps. Some of those steps may have resembled the steps of advance in RPM made by our small and imperceptive agents. RPM gives us a laboratory, I claim, in which we may learn by analogy about our own internal organization.

Wednesday, July 27, 2016

Emergence and Complexity in the Resource-Patterns Model of Life

During the past 30 years much focus has fallen upon emergence and complexity. In 1995 I got a view of this field when my late good friend Donald R. Rhodes gave me a copy of Complexity: the Emerging Science at the Edge of Order and Chaos, by M. Mitchell Waldrop. I had already taken a few small steps in this area. But the Waldrop book gave me my first awareness that a field had started to organize under the labels: emergence, complexity, and chaos. The Resource-Patterns Model of Life (RPM), the subject of this blog, owes much to that field.

In 1995 I had started to grasp some of Friedrich Hayek's work. Now a post by Emily Skarbek at EconLog, Hayek's Views on Emergence, reminds me that I should show the parallels between the Resource-Patterns Model of Life and those views of Hayek.

Concerning emergence in RPM, recall the starting assumptions of the model:
  • We poor and initially stupid living things (LTs) live in a universe in which there are resources distributed in patterns (RPs).
  • Many of these RPs are vast or complex, such that an individual LT has no hope of exploiting such an RP.
  • Such difficult RPs can be exploited, however, by communities of LTs which have figured out modes of cooperation which enable them as groups, with each individual LT working in a specialty, to exploit the RPs.
But, as it often happens, we LTs do not know where these RPs are until we have discovered them. Often we do not even know what they are until after we have discovered them through our networks of LT-to-LT trade.

So what emerges in RPM is communities of specialized LTs shaped by the preexistent RPs. These communities, as Hayek would say, have been shaped by human action but not by human design. We acted, motivated by self interest and recognizing the benefits of trade, and thereby built industries conforming to the RPs which existed in the environment apart from human design.

What emerges often appears complex, to our initially uneducated perceptions, because we were ignorant of the underlying RPs until our trading networks built industries which conform, by necessity, to the complexity of the underlying RPs.

See my draft Chapter 5, The Learning of Rules.

Tuesday, July 26, 2016

Bias for Collectivism

Last night I watched a great interview, Friedrich Hayek with James Buchanan. (Thanks to Emily Skarbek at Econlog for the post which led me to that 1978 interview.)

A few snippets from that interview confirm my belief that the Resource-Patterns Model of Life RPM leads us beyond Hayek's contribution.

Around 31:08 Hayek says "Our whole knowledge is the knowledge of a pattern, essentially." Hayek does not say more about where the pattern is or how it influences social order. But, I claim, Hayek's pattern equates in RPM to a pattern of resources in the environment, an RP in model's jargon.

Later in that interview around 44:28 Buchanan asks, "How do you explain the revival, so to speak, of sort of Marxist notions, in so much of Europe now and to some extent in this country?"

Hayek replies, "I don't know."

But a researcher who works with RPM can know. RPM offers a definite answer to Buchanan's question:

Because there are resource patterns of which living things have yet to "learn", evolution will often award domination to those populations of LTs disposed to seek orderly cooperation before any pattern is yet known — to those populations disposed to believe that an order must exist and will be found.

While this insight has seemed clear to me for the past 20 years, and while I have been trying to communicate it, few people [0–3] have understood it. So I continue in this blog trying to spell it out more completely. Thank you for your patience with my insufficient descriptions.

Thursday, July 7, 2016

The Limits of Organizational Planning

On July 4, David Henderson at EconLog posted Robert Murphy on Economic Calculation. That post and my three comments (below the body of David's post) may serve for some readers as introduction to the Resource-Patterns Model of Life,  the subject of this Perceived Order blog.