domingo, junio 14, 2009

Systems Dynamics Significance of the EWPC Basic Innovation

A key to the EWPC Architecture Framework (EWPC-AF) basic innovation significance is behavioral economics, which is based on Systems Dynamics, has now been found interesting by Len Gould. The following post was made under the EnergyPulse article The Pitfalls of and Opportunities in Electric Power Deregulation written by Harry Valentine, Commentator/Energy Researcher.

Hi again Len, Fred, Jim, Bob, Joe, and Thomas,

Great input Len!

With a lot of respect to you all, contrary to Len's believe, the first of his last two post has great significance to the emergence of the EWPC-AF basic innovation, which I claim should not be consider irrelevant. Thank you Len for bringing behavioral economics to this dialogue. In what follows, please forget what may be perceived as rough by some readers, as I will be quoting old posts.

In December 2006, I posted a message that is found on the GMH post Playing With Fire and Collapse (must see post), in which a behavioral economics argument, exactly the one that Len is suggesting Fred, was posed by Professor Jay W. Forrester, on the need for economics to become a profession, to which Fred made the following comment:

'Dynamics"! Let's see what we've got here, Jose. In my servomechanisms class at UCLA, when I heard that word I brushed the cobwebs out of my eyes. When I hear it in an economics lecture I check my watch and start thinking about being somewhere else. I believe it was Nicholas Kaldor who said that economists use the word dynamics about their own work in order to imply that the statics approach of other ecoomists is yesterdays news. I also heard the word dynamics used a great deal a few years ago in discussions about the oil supply. Pardon my English, but the people using it usually didn't know what they were talking about.

About Professor Forrester. As far as I am concerned, he's both right and wrong in those pronouncements you cite. Any work by e.g. economists, and especially model building, automatically leads into forecasts at one level or another...

The point being made on long term forecasts is critical, because the obsolete business models of the IOUs-AF, to finance Nukes for example under uncertainty, no longer works. Eventually, I think Fred got interested in System Dynamics, as we interchanged some posts that led to the EWPC article Power System Operation Stocks and Flows, which started with:

Thank you Fred,

Your post is very good, as you engage the generative dialogue as I asked.

From what you wrote, I infer that you confirm that Len “. . . is seduced by the early chapters in his econ 101 textbook, and so he didn't bother to read the later chapters, where he might have been informed that regulating [and re-regulating under EWPC as explained below] the electric industry makes a lot of sense.”
I was quoting Fred's words above. With his post now Len seems to have change sides to favor behavioral economics and thus Systems Dynamics.

One of the followers of M.I.T. Prof. Forrester, who is “The creator of the discipline of System Dynamics," Andrew Lo’s comments are quite similar to those of his leader. As an example, Dr. Lo wrote the very timely Systems Dynamics paper Functionality of Banks and Hedge Funds and Contagion Between Financial Institutions that I think Fred and other readers should also be interested in.