Oldrich Kyn, Pavel Pelikan
Czechoslovak Economic Papers, no. 5, 1965
The fourth chapter deals with 'goal-seeking systems'. This is the term given to systems that react to changes in environment in such a way that they will achieve certain goal or objective. The objective can be a state or modification of the environment or of the system itself.
It is evident that not all the real systems can be considered 'goal-seeking systems'. We can classify real system in the following three groups:
Classifying systems according to these criteria is in certain extent arbitrary. Information is always carried by some physical process, but we may or may not ascribe informational significance to it. The same object can be studied either with or without concepts of information and decision-making. If we do not use the concept of information, but observe only the changes in the physical states of the system, we can describe the motions as cause and effect using laws of physics. The concepts of goal-seeking and causality do not necessarily contradict each other, but are merely two different views of the same reality.
The goal-seeking system can originate in two ways:
The second method needs an environment with abundant energy that contains elements from which such a system can be created. The surplus of energy makes these elements enter into random bonds that are either reinforced or dissolved by further developments. As a result different arrangements of existing elements are sequentially tested for survival. The bonds that arise between elements introduce into the environment qualities that had formerly not existed. As soon as some system is created by chance it can in turn change the probability of creating other systems. The probability of a certain system arising is not directly related to the probability of its disappearing. Thus it could happen that after passage of time some systems would predominate even though when they originated it might have seemed that there was only small probability of that.
The role of chance is very important in the process of spontaneous evolution. Systems that already exist are constantly subject to random influences that affect their organization. In biology these fortuitous changes are called mutations. They occur without any intentions to improve or worsen the existing systems. Nevertheless they are the reason that the systems continuously improve.
The principle of natural selection is also important for the progress of human society. Social progress means the introduction of new technologies of production, new economic relationships, new forms of management and organization, better than the preceding ones. Their novelty lies in the fact that they were unknown before they were introduced. There was no information about them and therefore they could not have been consciously introduced with guaranteed success simultaneously throughout the whole society. Mutations in society are also of a fortuitous nature. No experts can guarantee correct filtration of unfavorable mutations so that only favorable remain. Just recall the gallery of scientists and inventors of genius who were not recognized by their contemporaries. Only when the emergence of random mutations is not prevented can advantages of some new forms be demonstrated in practice and thus be extended to all of society. Every society that wishes to speed up its evolution must make random mutations possible. The new forms must have the possibility of showing their advantages or their shortcomings in practice to be compared with previous forms. This is, of course, not easy because society should also prevent survival of unfavorable mutations that could act as cancer on the organism.
We can divide the systems with goal-seeking behavior into regulating, controlling or organizing systems. If we define system in such a way that regulated, controlling or organizing system are a part of it, then we speak of automatic regulation, control or organization.
For a long time Marxists believed that the automatic or spontaneous processes could lead only to imbalances and anarchy in the economy. They concluded that it would be desirable to suppress automatism and replace it--where possible--with the conscious, centralized direction. The error of this idea is apparent. Reducing automatism leads to growth in size of the central administrative apparatus, making it slow, cumbrous and bureaucratic.
In economic systems goal seeking is often manifested as purposefulness and the goals as economic interests. People form their goals according to their individual tastes and abilities, but also under the influence of the social and economic environment in which they live. They are constrained in their behavior in two ways: by material conditions, and by socio-economic factors. The socio-economic determination enters into the decision-making process usually through the objective function. Therefore we must distinguish between activity that man cannot carry on at all from those which he can but does not perform, because he has no interest in doing so.
There are both similarities and differences between the goals and interests of different people. There exist general interests but also individual deviations from them. If we regard society as a whole we can think of these individual differences as random deviations. The greater the number of people with common or only slightly different interests in a certain group, the closer are their ties and the closer is their cooperation. We can, therefore, observe the formation of group interests in society.
In designing the control of economic systems, it is necessary to reckon with the fact that these systems are made up of people, that is to say, elements that are themselves systems acting not only purposefully, but also consciously. Therefore each control directive is only one of the information inputs, used by the controlled to make a conscious decision. Controlling people means influencing their decision-making in the desired way. The harmony or conflict of interests between the controlling body and the controlled play an important role. If both parties want to reach the same goal it is not necessary to make the controlling directive compulsory. If such a common interest is lacking, the controlling directive must be supplemented by measures that ensure its effectiveness. Among the means employed the most frequent is the use of force.
Sometimes a deliberate distortion of information is used for this purpose. If, for example, the controlling body succeeds in persuading the controlled that carrying out the orders is in their own interest, although it may be only the end desired by the controlling person or body, people can actually be made to act against their own interests. Nationalism, chauvinism, racism, etc., can be misused by some groups of people to induce others to actions that in reality do not serve their interests.
The fifth chapter deals with some economic models. Here it is not a question of a purely cybernetic view of the economy, but of a certain interpretation of models known from the classical economic approach. First, the various possibilities of introducing systems in the national economy are shown, and the resultant possibility of constructing different economic models.
Examples that are discussed next include dynamic models of the market (cobweb) and structural Input-Output models (of the Leontief type). On the first glance the original Leontief structural model includes exclusively physical interactions. There are no flows of information or decision-making processes in the model. It is interesting to note that a Leontief Input-Output model can be interpreted in several different ways:
The chapter continues with the comparisons of some aggregate models of growth that are based on the Marxist concept of the process of accumulation and the Keynesian concept of the multiplier process. The Feldmann-Mahalanobis type of model is also shown in simplified form.
The sixth chapter makes an attempt at a cybernetic view of the national economy, that is, a view of the economy as informational and decision-making structure. The system created for this purpose consists of people who are interconnected by informational flows. The environment consists of other social systems and nature. Nature here is taken to include all the physical things relevant to the economic process, including 'artificial' nature - machinery, buildings, equipment, etc. - that are the product of human productive activity.
By acting on nature, society introduces a certain organization into it. Since this action has some goal, we may speak of society as a system with goal-seeking behavior. Unlike technical systems, which can have a goal that is quite general, without any relation to the existence of the system and its elements, we have here interdependence between the goal, the system itself and its elements.
The goal of a social system, is not just survival of the society as a whole, but it is also survival and well being of individual people, who are the elements of which the social system is composed. Compare it to the relation of human body to cells, the elements of which it is composed. The purpose of the existence of cells can be seen as the preservation of the existence of the human organism; the human organism protects its cells only insofar as they are needed for its life. As opposed to this, the existence of man is an end in itself. Man does not exist for society, but society for man. Society cannot sacrifice a person because it is not needed. In the concept of the needs of society we must include the needs of its members.
If we wish, therefore, to consider society as a system with objective behavior, we must realize that there is here an unusual bond between the goal of society and the elements of which society is composed. Whereas in the case of technical apparatus any structure is suitable if its behavior makes possible the achievement of the desired properties of the system, the demand made on structure in society as a whole is to achieve certain economic results, but must at the same time meet the people's wishes in some way. Therefore not every structure that assures a high social product is a suitable one if it forces people to lead an unpleasant life.
People are the individual units in the structure of a social system. Some of the people stand right on the dividing line between society and nature and, with their work, act directly on nature (productive labor) we can call these people the output elements of society. The others are the internal elements of society and their social role is primarily to receive information, make decisions, and provide information for other people.
People may have very diverse abilities to make decisions. This depends on:
It is obvious that it is not desirable to put people with anti-social goals into important social position even if otherwise their ability to make decisions is excellent. But sometimes it is difficult to choose between a capable worker with unsuitable personal objectives and an incompetent worker whose interests may seem to coincide perfectly with the social goals.
Depending on its place in the structure of the economic system each decision-making position is characterized by its weight and risk.
The risk of decision depends on the amount and kind of information that the decision-making agent obtains. There is not only distortion of information as it is transmitted in the economy, but also a deliberate distortion. Systems that provide information sometimes try to use distorted information to influence the decisions taken by those who receive the information. Therefore a theory of economic information needs more than a statistical theory of information that was elaborated primarily for the needs of communication technique, but it would be necessarily to include also some considerations from the theory of games.
Human capacity to receive and process information is limited. No individual can handle all the types of information needed for a smooth operation of society. Consequently, the whole social control process must be subdivided among various controlling subsystems. For example, we can visualize society as a hierarchy, with the lower base formed by the output elements, and those who make the decisions are placed in upper layers over those who receive and implement the decisions. The base elements send information about the state of nature upward to upper layers of hierarchy. Since each place in the hierarchy has a limited capacity, the amount of information must be gradually reduced. Not all the information collected below can arrive at the highest places. The problem, of course, is how to reduce information without losing what is essential for making decisions. The reduction of information on the way up means that the highest places cannot issue decisions that would contain enough information to eliminate all the uncertainty in the output elements. That is to say, each place in the hierarchy has a certain degree of freedom for independent decisions. The allocation of degrees of freedom within the hierarchy determines what is usually called the degree of centralization or decentralization. High degree of centralization requires large information processing capacity at the upper layers to reduce the risk of centralized decision-making. If there is too much centralization it can easily happen that the costs of transmitting and processing information would be many times higher than the most pessimistic estimates of loss that could occur with an effective reduction of information and a decentralization of a large part of the decision-making.
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