[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

*To*: p--@z--.net*Subject*: psychoceramics: [Re: Economics and Psychology--5:: Emotive Equation]*From*: Peter Hipwell <petehip @ cogsci.ed.ac.uk>*Date*: Thu, 20 Jun 1996 15:34:56 +0100*Sender*: owner-psychoceramics

This was in sci.cognitive, cross-posted to a bunch of other groups. Is it kooky, or is it just typical psychoeconomobabble? Or both? "Fertilizer Positive Utility"? > > > > 13 June 1996 > > > > > > ECONOMICS AND PSYCHOLOGY--5:: Emotive Equation > > > > (Follow-on Article) > > > > > > A Correspondent's Comparison > > of the Emotive Equation With Neoclassical Theory > > - Plus - > > Responses to Questions > > > > > > A USENET reader wanting to determine new results > >permitted by the Emotive Equation has provided an analysis of the > >theory in relation to standard (neoclassical) theory, and offered > >several observations and questions. He has suggested, and I agree, > >that other readers may have the same questions. With the > >correspondent's concurrence I accordingly post his letter with my > >responses. > > Before going to the topic, a few introductory comments > >appear beneficial. > > > > The Emotive Equation represents the expectational > >(intertemporal) plan of the individual, accounting for expected > >uncertainty, emotive mapping of intertemporal utility into real-time > >anticipatory pleasure, and the expected constraints on behavior along > >each of the infinite number of worldlines of the plan. (See Note 1.) > >As could be expected of a comprehensive and coherent theory of > >behavior, the methodology has demonstrated an important new > >explanatory capability. For example, the theory has been shown to > >determine the net marginal return on investment over investment for > >two prominent models of capital -- Solow's Costless Conversion > >Model (1965) and Lange's Two Production Function Model (1935). > >(See E&P-4j and E&P-4p in sci.psychology.theory or > >alt.economics.austrian-school.) Because this theory properly > >(explicitly) accounts for time in its canonical formulation, it can > >realistically model dynamic behavior at all levels > >-- this in contrast to standard (neoclassical) theory wherein the > >incorrect (i.e., direct) assignment of utility to consumables > >undermines time as an essential parameter (e.g., the time constraint, > >arguably indispensable to economics as a science, is precluded). > > > > In the usual format, the correspondent's text is indicated by a > >symbol (>) at the left of each line. Parts of my answers are placed > >within the correspondent's paragraphs, and these insertions are > >identified by enclosing brackets. > > > > ---------------- > > > >>I'm sending this to you directly as newsgroups have the tenor of a > >>thesis defense whereas I just want to understand what you've posted. > >>I know I'm imposing so I don't expect a direct response, but maybe > >>this will be representative of questions that others have also. > >>There are two parts to the following. First I give my understanding > >>of your idea by summarizing the conventional approach and > >>contrasting yours to it. I then ask some questions re specific > >>postings. I'm sure my presentation isn't an exact description of your > >>position, but I hope it's close enough that you will be able to discern > >>from my questions where I'm not following your argument > >>correctly. > >> > >>Let me preface my remarks by noting that, as I use the term here, > >>models that do not differ in their response to stimulus are not > >>different models. That is, even though they may have been derived > >>from different concepts, if they measure the same they are the same. > >>For instance, I would categorize all filters the same (whether analog, > >>digital, or hybrid) if they have identical impulse responses. > >> > >>I start with a premise which I believe is generally held, that a > >>mathematical model of the consumer's decision-making process, i.e. > >>a utility function and associated behavioral rule, are essential to > >>understanding economics as a science. This underpinning goes by > >>many names; choice-theoretic, methodological individualism, or > >>micro-foundations, for instance. It is understood that an individual > >>performs the critical operations of decision-making in a > >>psychological domain -- his mind. The role of the model is to > >>provide a mapping of this unobservable and personal process to a > >>real, that is economic, domain in such a way that the interactions > >>between the individual's decision making and the economic > >>process he participates in, may be observed. > >> > >>For macroeconomic studies, the model is used to evaluate the effects > >>of changes in the economic system, such as prices or wages, and > >>taxes or natural resources (that is, changes to endogenous and > >>exogenous parameters, respectively) by observing the response of > >>the individual and taking it to be representative of all economic > >>agents. The idea being that while the domain where a consumer's > >>decisions are made can't be observed, his response to a stimulus in > >>the economic domain can be and, for an economics study, that is all > >>that is needed. (There is the additional assumption, not at issue here, > >>that agents' effects may be linearly combined to represent the > >>totality.) > >> > >>The neoclassical paradigm is constructed on the assumption that an > >>individual is able to select between alternative bundles of products > >>and services (economic goods) in the context of two types of > >>constraints. One is purchasing power, for instance his income, and > >>the other is information, typically current and past prices. His > >>ordering of available alternatives is called his "preferences" and the > >>utility function and behavioral rule compute the value of these > >>preferences in real terms. The model does this by converting a > >>preference equilibrium condition, i.e. "indifference", to > >>equivalence of goods "at the margin". The overall economic process > >>denominates this equivalence in money terms. > >> > >>As I understand your criticism of this paradigm, you believe that the > >>neoclassical model mis-specifies the basic determinant of the > >>consumer's decision process. It pictures the individual choosing over > >>goods, whereas you believe he chooses over the amount of time he > >>will devote to certain categories of activities -- productive labor, > >>consumption, and leisure. You also hold that an essential element of > >>every decision is a subjective weighting, by the individual, of a > >>decision's future consequences where this subjective weighting is > >>implemented as anticipatory pleasure/displeasure. > >> > >>The questions came up as I attempted to investigate [a colleague's] > >>query regarding what new results obtain from your formulation. It > >>would seem that by changing the choice variable from goods to > >>activities, you have 'endogenized' time which potentially has > >>interesting consequences. Accordingly, I am trying to write the > >>agent's maximization problem in some way that I can look at > >>dynamic programming, the Euler equation, etc. as appropriate. > >>Attempting to state the agent's choice problem I ran into some things > >>I couldn't get a handle on: > >> > >> Re Econ and Psych 3: How does the relation P = dU/dt imply > >>behavior? Taking it as an identity, should I understand it as the > >>agent is a pleasure-seeker; that he maximizes pleasure through those > >>selections that exhibit the maximum utility time intensity? [No, the > >>agent does not seek to maximize intertemporal pleasure. (See > >>below.)] Alternately, do I integrate both sides and consider the agent > >>a utility maximizer where he searches for the best pleasure-time > >>[integration]? [Correct, except emotive mapping participates. See > >>{a}.] > > > >{a} The relation P=dU/dt is analogous to F=ma in physics. The > >latter is a principle of physical reality on which, for instance, the > >Navier-Stokes Equations of fluid mechanics are formulated > >(accounting for the effects of mass density, pressure gradients, shear > >forces, etc.). P=dU/dt is a principle of psychical reality on which the > >Emotive Equation is formulated (accounting for expected uncertainty, > >emotive mapping, and expected constraints). Regarding the questions, > >it is dE=MPdt rather than dU=Pdt that is integrated along the length > >of each worldline of the concerned candidate expectational > >(intertemporal) plan, where M is the Emotive Mapping Function. > >(dU=Pdt represents what the individual expects to experience at > >intertemporal time t on the concerned worldline, while > >dE=MdU=MPdt represents the individual's real-time differential > >pleasure experienced in anticipation of dU=Pdt.) The integral > >expression is written: > > > > z > > E = {} [ M(t) P(t) ] dt > > 0 > > > >(Ignoring worldline probability and the multiplier terms. z represents > >infinity.) Note that the integral of the emotively mapped differential > >utility along each worldline is not maximized independently of the > >individual's expectation along the remaining worldlines of the > >candidate intertemporal plan. The reason is, of course, that worldline > >coincidence -- particularly at and near the start of the intertemporal > >interval -- is an essential property of the methodology. (In this regard, > >as intertemporal time expectedly proceeds, the individual's expected > >activities along each worldline become progressively more unique -- > >i.e., the degree of worldline coincidence diminishes). > > > >>If I take the agent's plan of future time allocations as his choice > >>variable (as discussed in the last paragraph), what is invariant? > >>[(Expectational) worldline occurrence probabilities, emotive > >>mapping functions, P-O-N pleasure functions, and constraints, for > >>the considered plan. See {b}]. May I assume that he has fixed > >>criteria for selecting the path such that, confronted with the same > >>subjective assessment of the probabilities of future states, he will > >>make identical time allocations? [Yes. See {c}.] Also, is the > >>selection conditional on his accumulated experience up to that > >>point? [Yes. See {d}.] If so, does that experience enter objectively > >>or subjectively? [Both objectively and subjectively.] > > > >{b} In the solution process, all unknowns within the control of the > >individual are variable -- future time allocations, differentiable > >capital, differentiable products (factors and consumables), savings, > >etc. Additionally, the seller in the market sets the prices of the > >supplied goods and services in accordance with his overall > >expectational plan, such prices including loan interest (and deposit > >interest). It is seen that the Emotive Equation, in its application, can > >substantively represent economic life, this in contrast to the ill- > >founded (Walrasian) neoclassical theory. > > It is reiterated here that while all individual-controlled > >unknowns are variable, intertemporal utility arises only from the > >integration of pleasure over time -- i.e., utility does not arise > >from the integration of consumable specific utility > >([PLEASURExTIME/GOOD]) over a quantity of the consumable > >(utility is imputed to the good, and not directly assigned.) > >{c} Having expectationally defined the worldlines and time > >allocations of a candidate plan, when confronted with the same > >(expectational) assessment of the worldline probabilities, P-O-N > >pleasure functions, and emotive mapping functions, the individual > >may be assumed to make identical time allocations. > >{d} Expectational plan formation, including the resulting > >anticipatory pleasure, is profoundly dependent on accumulated > >experience (e.g., education, advertising, peer relations, etc.). It is also > >dependent, of course, on the present, real-time physical, mental, and > >emotional condition of the individual. (It may be noted here that the > >rigorous view must be that any departure, however small, from > >expected experience -- i.e., any real-time surprise -- initiates a new > >expectational plan. Of course, we need not be so precise in applied > >theory.) > > > >>(2) Re Econ and Psych -- Emotive Equation: In equations [4] and > >>[5], how are "worldlines" and "plans" distinguished? [See {e}.] Are > >>the worldlines the possible states which the agent assesses but nature > >>selects, while plans are the agent's choice variable? [Yes. See {f}.] > >>Is [4] meant to represent the domain of the agent's choice? [See > >>{g}.] Does he select that plan, k, which maximizes utility, U^I? [He > >>selects that plan which provides the greatest E^I or E^i -- the latter > >>for the socioeconomically interactive individual.] Is the plan k the > >>agent's mechanism for maximizing utility? That is, given probable > >>future state sequences (worldlines) w -- possible states which he has > >>subjectively weighted for probability of occurrence -- does he > >>construct a plan by choosing how he allocates his time in each day > >>for each sequence? [Yes. See {h}.] > > > >{e} Candidate (competing) expectational plans are separate or > >distinct, and each candidate plan has a corresponding (infinite) set of > >coupled worldlines. > >{f} In preparing an intertemporal plan the individual defines the > >corresponding worldlines -- each comprised of a continuous sequence > >of activities, with associated P-O-N pleasure functions, emotive > >mapping functions, and constraints, referred to as a state -- and nature > >specifies which worldline the individual will follow (see Note 2). The > >individual's experience will follow the selected worldline until the > >operative plan is negated by surprise, at which time a new plan is > >initiated. > > {g} The agent determines the expected future into which he or she > >will proceed. This is accomplished by first preparing one or more > >candidate plans, each with a corresponding (infinite) set of worldlines > >with selected activity durations that maximize total intertemporal > >utility as presently evaluated -- i.e., plan anticipatory pleasure. (This > >is done on the basis of the Emotive Equation, Eq. [5] -- not Eq. [4], > >which is an intermediate step in deriving Eq. [5].) To briefly > >elaborate, the individual chooses the candidate plan that provides the > >greatest pleasure in its anticipation. In the market economy, this plan, > >as real-time proceeds, determines when and how long the individual > >will work to acquire money to purchase goods, when the purchases > >are made and the amounts thereof, and the timing and rates of > >consumption/utilization of the goods. All expectationally recognized > >goods, productive and consumptive, receive imputed anticipatory > >pleasure (see Note 3). It is seen that product demand and product > >prices are intertemporal plan dependent. > >{h} It may be understood in applied theory that the worldlines > >(except for activity durations) are first defined -- where the worldlines > >include (expectational) occurrence probabilities, emotive mapping > >functions, P-O-N pleasure functions, and constraint relations -- after > >which the optimal activity durations along all worldlines are > >(simultaneously) determined, along with the corresponding product > >purchases and sales at expected prices, etc. Note that when the > >purchase or sale of one or more integral (nondivisible) products is > >considered, the individual will choose between alternative > >expectational plans. (Note 3.) > > > >>Also, what is the equivalent of the capital-based production in the > >>model of Econ and Psych--4p? That is, what is the mechanism > >>forcing an inter-temporal relationship in the equations? > > > > The mechanism is the individual's expectation that capital > >used in the production of itself and food will be carried over into > >day 2 -- i.e., if there were no expected capital carryover (e.g., w=0), > >the expected day 1 and day 2 activity durations would be independently > >determined. Note that in the case where w=0 the expected normalized > >return on investment at the margin (NMRetI/I) would be zero. > > > >>(3) Re Econ and Psych--4p: In the discussion following the > >>investment formula you seem to suggest that assigning expectational > >>probabilities (the value of "a") should be based on counting, i.e. > >>classical probability theory. Does that mean Bayesian estimation is > >>not valid? I ask this because it would seem the subjective a priori > >>probability belief (the "prior") in a Bayesian formulation is a natural > >>fit to your approach since it combines experience (frequency) with > >>intuition (subjective expectation), plus learning. > > > > It was not intended that any particular understanding of > >expectational probability be adopted, and the Bayesian formulation > >would be suitable. > > > > -------------------------------- > > > > In concluding this post, the reader is referred to newsgroup > >sci.psychology.theory or alt.economics.austrian-school for reposts of > >selected articles in the Economics and Psychology series over the past > >seven months. A list of the posted articles is provided in Note 4 > >below. > > > >Tom Chamberlain, PhD/ME > > > > > >NOTES: > > > >(1) The Emotive Equation, shown below, was introduced to the > >scientific community (via USENET) for the first time in early May. > >This equation, all parameters and terms of which are expectational, > >converts a differential utility (Pdt) at an imaginary time on any given > >worldline into a real-time differential anticipatory pleasure, the result > >being integrated to infinity along the given worldline and summed > >over all worldlines, accounting for emotive mapping M and > >uncertainty f, to produce the pleasure E that the individual receives in > >anticipation of the considered candidate expectational plan. The > >individual is purposeful in his expectational thinking, and determines > >his intertemporal activity durations such that E is maximized (i.e., E > >is an extremum, with dE = 0). Of the candidate intertemporal plans > >that may be considered, the one that provides the greatest anticipatory > >pleasure is chosen. The equation may be written: > > > > EMOTIVE EQUATION > > > > i i z i i > > E = [] {f {} [M (t) P (t)]dt > > k w=1,z kw 0 kw kw > > > > > > ic ic > > + [] ( L F ) } > > c=1,z kw kw > > > >where [] and {} represent the summation and integral signs, z > >represents infinity, and > > > > ic > > F = 0, [Constraints] > > kw > > > >for all individuals i, candidate plans k, worldlines w, and > >constraints c. L is the Lagrange multiplier for the corresponding > >constraint. > > The selected (operative) expectational plan is corroborated by > >actual experience until a new plan is commenced -- the operative plan > >being terminated by surprise (due to an unexpected event, new > >information, or a creative thought or thought process). > > A derivation and discussion of the Emotive Equation > >is provided in E&P-5 (temporarily posted in > >sci.psychology.theory and alt.economics.austrian-school). > > > >(2) All expectational plan worldlines must be coincident at the > >start of the intertemporal interval. It is with the imagined progress of > >intertemporal time that expected uncertainty effects the divergence of > >worldlines. > > > >(3) Imputation of an entity's value is performed by assessing > >anticipatory pleasure for two plans, one with the entity expectedly > >present and the second with the entity expectedly absent (i.e., without > >compensation). The difference between the total anticipatory > >pleasures of the two plans is the measure of the value of the entity to > >the individual. If the entity has an incremental character -- for > >example, as the margin of an infinitely divisible good -- its imputed > >anticipatory pleasure, and value, can be determined as a perturbation > >of the corresponding expectational plan. However, if the entity is > >integral -- a car, for example, or an eye -- one compares the > >anticipatory pleasures of the alternative (possibly radical different) > >expectational plans to arrive at the difference in anticipatory pleasure > >and, equivalently, the entity's (imputed) value. > > > >(4) Selected articles from the "Economics and Psychology" series: > > (Currently reposted in sci.psychology.theory and > > alt.economics.austrian-school.) > > ("Item" denotes a prominent subject in the article.) > > > >E&P-3: Behavioral First Principle. (10-17-95) > >E&P-4: Thinking About The Unthinkable. (11-13-95) > >E&P-4h: Item =Gossenian Approach: An Intuitive Example. > > (12-15-95; Orig.) > >E&P-4j: Item= Costless Conversion Model of Capital. (1-21-96) > >E&P-4m:Item= Modeling of Pure Leisure. (2-4-96) > >E&P-4n: Item= Fertilizer Positive Utility. (2-11-96) > >E&P-4p: Item= Two Production Function Model > > of Capital. (2-28-96) > >E&P-5: Emotive Equation (5-7-96) > >E&P-5a: Addendum (References, Notes, and Appendix) (5-7-96) > > > >(5) One of the challenges in the mathematical modelling of > >economic life is defining a nomenclature that is not so > >burdensome as to be self-defeating. An approach in this regard is to > >use "nested" superscripts and subscripts, e.g., > > > > A-P i > > < Dt > > > [d-1]kw > > > >In this expression, the parameter Dt^A-P (where D signifies the > >Greek symbol "delta") represents the {A}ppliance (i.e., capital) > >{P}roduction activity duration of individual i in day d-1 along > >worldline w of expectational plan k. The carrots serve to separate > >superscript/subscript ensembles thereby aiding comprehension. Note > >that an arbitrary number of terms for the same dkw of i may be > >collected within opposing carrots. > > > >(6) This article has been submitted to sci.psychology.research, > >sci.psychology.theory, sci.cognitive, sci.econ, and > >alt.economics.austrian-school. > > > > > >REFERENCES: > > > >Gossen, H. H. (1854) 1983 _ The Laws of Human Relations and > > The Rules of Human Action Derived Therefrom_. > > Translated by Rudolph C. Blitz with an introductory essay by > > Nicholas Georgescu-Roegen. Cambridge: MIT Press. > > > >Lange, O. 1936 "The Place of Interest in the Theory of > > Production". Review of Economic Studies. 3:159-192. > > > >Solow, R. M. 1965 _Capital Theory and the Rate of Return_. > > Chicago: Rand McNally & Company. > > > > > > > -- > --

- Prev by Date:
**psychoceramics: Kook Alert: Suit filed against Concentric Network** - Next by Date:
**psychoceramics: Politics: Kooks on Kooks** - Prev by thread:
**psychoceramics: Kook Alert: Suit filed against Concentric Network** - Next by thread:
**psychoceramics: Politics: Kooks on Kooks** - Index(es):