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Detail specificity depends on context: exs – arithmetic & GDP vs GNP September 12, 2011

Posted by larry (Hobbes) in economics, Logic.
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When it comes to applied contexts in some sciences such as economics, there is sometimes a feeling that a discussion is overly detailed.  This is sometimes true. But I would like to use an example from arithmetic to show that this is ultimately the case.  The principle I am working with is the one that stipulates that one should be as simple as one can be but no simpler, a principle that dates at least back to Ockham.

When one sets out the fundamental principles of arithmetic, say those of addition and multiplication, you find statements like these:

x + y = y + x

and

x + 0 = x.

The first says that addition is commutative, that is, that it doesn’t matter in what order you add two numbers together. The second principle says that zero is the identity element for addition – any number added to zero equals itself.

Now, it may be thought that these are obvious and therefore need no explicit representation.  But this would be a misunderstanding of the context these principles operate in.  For example, multiplication is commutative, that is, x * y = y * x.  But division is not commutative, that is, x ÷ y does not equal y ÷ x.  Neither is subtraction commutative.

And zero is not an identity element for multiplication, for x * 0 ≠ x.  The identity element for multiplication is 1.

The reason such strict distinctions must be made is that it is easy to extrapolate incorrectly from one arithmetic operation to another where it won’t work correctly.

Something similar could be said about certain distinctions between certain chemical elements, say U235 and U238. While the difference could be said to be small, it is nevertheless a momentous one. You can make a bomb with one but not the other.

The same goes for a theoretical and applied social science* like economics.  Take the distinction between GDP, Gross Domestic Product, and GNP, Gross National Product, which are two distinct measures of a nation’s economic productivity.  States used to use GNP but changed over time to GDP.

These measures are very similar but in certain contexts one may be preferable to the other.  GNP measures productivity in terms of ownership regardless of where the ownership lies.  For instance, it counts income made overseas as part of the nation’s income.  GDP, on the other hand, measures a nation’s productivity that takes place within its territorial border whether produced by a foreign firm or not.  These two measures can produce different accountings of total output.

The reason given by the Bureau of Economic Analysis for making the change from GNP to GDP, which took place in the early 1990s, was that it made international comparisons more direct and facilitated comparisons among different kinds of economic activities.  Some economists deplore the change from GNP to GDP, contending that the latter is a misleading indicator of actual productivity.  Whether it is or not depends on the context, even if the measures do not differ much in value. US GDP in 2009 was estimated by the BEA at $14.119 trillion and its GNP at $14.265 trillion.  Whether the value itself or the method by which it was obtained is considered significant/meaningful will be largely determined by the context, including the theoretical framework where the interpretation of these and related measures are embedded.

As William James once wrote: in order for a difference to be a difference, it must make a difference. Sometimes the context is all.

For a detailed discussion of various alternatives from one economic perspective, see ALTERNATIVES TO GROSS NATIONAL PRODUCT: A Critical Survey (1998) by Richard England & Jonathan Harris. Whether GDP or GNP are adequate measures of a nation’s economic well-being is another matter.

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* The social sciences are sciences although they are not identical to physics, nor should physics be pursued as an ideal, as happens in the pseudo-field of econophysics.

Two necessary conditions for individual & system welfare: technostructure + obliquity August 28, 2011

Posted by larry (Hobbes) in Uncategorized.
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The two necessary, but not sufficient, conditions I have in mind are technostructure decision-making apparati and obliquitous problem solving strategies.  These two concepts were introduced by John Kenneth Galbraith in The New Industrial State and by John Kay in his article, ‘Obliquity’ (mentioned in a previous post), respectively.  I would argue that both are necessary for an institution to be successful in its welfare promotion in a changing environment.  Both were introduced in the context of organizations, although individuals play a role.  For the sake of simplicity, I will restrict my comments to organizations.

For Galbraith, a corporation’s technostructure is its decision-making component, comprised ideally of individuals from throughout the company.  In his view, when a corporation gets so large that the entrepreneur can no longer keep track of all its activities, then for  the corporation to continue to be viable, power must pass from the entrepreneur to the technostructure.  One prominent example he gives is that of TWA.  When TWA was a relatively small airline, Hughes could effectively control its operations.  However, once the organization had reached a certain size, one individual brain could no longer effectively track all the organization’s activities and the quality of his decision-making declined.  By the time, power had passed from Hughes to TWA’s technostructure, Hughes had almost bankrupted the company.

Power passing from the entrepreneur to the technostructure in large corporations is not the only factor to take into consideration of a company’s viability.  The nature of the decision-making procedures of the organization need to be taken into account as well.  Kay argues that for the most effective and long-term results to obtain, decision-making is best carried out in indirect ways with attention being paid to high-level considerations, such as making the best airline, the best bread, &c.  In particular, if the bulk of a company’s efforts go into the bottom line and not into providing the best for the company and its customers, then the company isn’t acting either in its best interests or that of its customers or investors.  In fact, when a company does this, its profits decline and bankruptcy threatens.  This can happen even when power has passed from the entrepreneur to the technostructure.  Kay provides myriad examples to support his thesis that goals are best pursued indirectly.

When a company’s decision-procedures are directed to the well-being or welfare* of the company, its employees, and its customers, the company will also be doing the best for its investors in the long run as well.  In order for this to be achieved, the decision-making procedures must be indirect and thus not constrained by some sort of procedural straight-jacket.

As can be seen, neither condition by itself can account for the successful well-being of a company. If a company is sufficiently large and power hasn’t passed from the entrepreneur to the technostructure, company decisions will begin to deteriorate.  Similarly, if a company’s decision-making is not geared to its highest goals and implemented in an indirect manner (Kay shows how these fit together), company decision-making begins to deteriorate.  IN other words, if either one of these factors is absent, the company’s decision-making procedures are seriously faulty.  They are individually necessary to the success of the organization.

But are both of them together sufficient for individual and corporate well-being?  It would appear so.  When an organization is small and the technostructure is not needed and the entrepreneur’s decision-making is sufficiently obliquitous, ceteris paribus all should be well.  If the organization is large and power has passed to the technostructure and the technostructure’s decision-making procedures are sufficiently obliquitous, then again all should be well.

Upshot: if a company and its employees exhibit a high degree of well-being, then the decision-making apparatus is appropriately structured and is operating obliquitously.

* The notion of welfare Kay has in mind is that of Aristotle’s conception of Eudaimonia, designating a high degree of fulfillment.

Temple Grandin, animal behavorist and sufferer from autism June 1, 2009

Posted by larry (Hobbes) in Animal Behavior, Philosophy, Psychology.
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Temple Grandin is a remarkable person by any reasonble definition. I have been aware of her work and the insights she has into animal behavior for a number of years. A film of her life and achievements is due to come out this year entitled simply Temple Grandin.

Her achievements are all the more remarkable because she is severly autistic. As terrible as this is, she has been able to utilize her autism in some way to better understand the ways in which animals “see” their world. She is an animal behaviorist at the University of Colorado and a consultant to livestock producers, solving some of their most perplexing problems; she has also designed livestock enclosures and related apparatuses that she contends renders the animals’ treatment more humane. She is also a superb draftswoman.

However, don’t take my word for this. She describes herself in terms of Oliver Sacks’ phrase, ‘an anthropologist from Mars’ and I highly recommend her own writing – the content I found astonishing.

Thinking in Pictures (1995);

Animals in Translation (2005); and the newly published

Making Animals Happy: How to Create the Best Life for Pets and Other Animals (2009).

She has her own web site and there are videos on youtube.

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A critical assessment of Grandin’s thesis, put forward in Animals in Translation, that animals are cognitively much like autistic humans, including a response by Grandin, can be found at http://www.plosbiology.org/article/info:doi/10.1371/journal.pbio.0060042 (“Are Animals Autistic Savants”: 2008).   Grandin contends that humans think narratively with language, while animals, lacking language, think in sensory terms. Animals also attend to details at the expense of the overall picture, which she claims is what those with autism do. The authors disagree with this and contend that animals and humans are not dissimilar in the ways they attend to detail, using data from brain function studies in animals to support their case.

The article is exceedingly interesting and I recommend it without endorsing its conclusions. I am neutral with respect to Grandin’s hypothesis as well. The article and Grandin’s response is a prime example of how scientific discussion should proceed.

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