A FUNDAMENTAL SYSTEMS HYPOTHESIS RELATING RESOURCES, RISK, COMPLEXITY AND EXPECTED OUTPUT VALUE
Date
1998-12-01
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Abstract
A working hypothesis is presented and justified, called the Fundamental
Systems Hypothesis, governing all agent-directed systems. The Hypothesis
is concisely expressed by five mathematical relationships, each covering
a specific system aspect, any and all of which can be combined; they relate
expected net output value, resources, environment, risk, complexity of a
resource-sharing procedure, complexity of a precautionary procedure, and
complexity of a monitoring procedure. Although it reduces, to numerical
expressions for specific system circumstances, the main virtue of the
Hypothesis is that it clarifies basic principles and thus helps designers
and operators of systems to reason correctly about systems and avoid serious
error.
There are two risk parameters: positive and negative risk, and the risk
measure can be either conventional standard deviation risk or mean deviation
risk. There are three complexity parameters: resource-sharing complexity,
precautionary complexity, and monitoring complexity. Both resource-sharing
and precautionary complexity are defined as execution times; monitoring
complexity is defined as negative entropy.
The general veracity of this Hypothesis appears such that it could be
considered a Fundamental Law of Systems. The Markowitz-Sharpe-Lintner
relationship between return, capital resources and risk for the subclass
of financial systems is inherent in the Hypothesis. The Hypothesis can be
subjected to experimental test.
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Computer Science