---------- Forwarded message ---------- Date: Mon, 7 Dec 1998 17:27:21 +0000 (GMT Standard Time) From: Roy Davies <[EMAIL PROTECTED]> To: [EMAIL PROTECTED] Subject: Hydraulic Models of the Economy In one of John Turmel's latest postings he quotes a question about hydraulic economic models and gives his opinion of their utility but did not actually answer the question about their origin so I will do that. >> From: [EMAIL PROTECTED] (Lauchlan Mackinnon) >> Date: Sat Dec 5 20:25:27 1998 >> Didn't someone already do this in the UK to illustrate >> circular flow in the economy? It had different coloured >> water that swished around various glass tubes and so >> forth and the students could play with parameters and >> see what happened. I cant remember who or where. LM. > JCT: It makes sense to model a liquidity system in such > a way and am not surprised that it may have been already > done though had it been done right, I'd have assumed that > it would be more prevalent in > economic literature than it seems to be. So I think > there's a greater > likelihood that my plumbing model is a first though I > won't be surprised if it is not. The person who built the hydraulic model of the British economy was A.W.H. Phillips, a New Zealander who after World War II studied economics at the London School of Economics (LSE). He became interested in Keynesian economics but thought that Keynes' interest theory was muddled with confusion between stocks and flows and, according to a biographical in a volume to honour his memory, after setting out the theory in mathematical form he realised that he had the model of a hydraulic system and so proceeded to build one out of perspex in a friend's garage in Surrey. Leeds University became interested and bought the model. James Meade persuaded Phillips to make another one for the LSE and, as interest grew, a modest business emerged and a plastics firm in Finchley manufactured copies of the machine. Oxford, Cambridge, Birmingham, Manchester and Melbourne all bought them and at LSE two were joined together to problems of trade between countries. Among overseas customers were Roosevelt College, Chicago, the Central Bank of Guatemala, and the Ford Motor Company. (Perhaps John Turmel should start selling hydraulic models!). This information is taken from the book: Stability and inflation : a volume of essays to honour the memory of A.W.H. Phillips / edited by A.R. Bergstrom ... [et al.]. Chichester : Wiley for the New Zealand Association of Economists, 1978. ISBN 0-471-99522-3. Today Phillips is probably remembered mainly for the "Phillips Curve", i.e. the theory he put forward in 1958 that there is a regular relationship between the rate of increase in wages and the level of unemployment. Subsequently it was widely believed that unemployment was a cure for inflation. Although most economists would accept that there is some trade off between the two (if enough people lose their jobs worry about losing theirs will make those who are left in work moderate their wage demands) the relationship in later years did not prove to be as regular as it had been for the period Phillips studied. _____________________________________________________________________ Roy Davies | e-mail [EMAIL PROTECTED] | University Library | History of Money URL | University of Exeter | http://www.ex.ac.uk/~RDavies/arian/llyfr.html | Stocker Road | | Exeter EX4 4PT | Financial Thrillers URL | UK | http://www.ex.ac.uk/~RDavies/arian/linda.html | ----------------------------------------------------------------------
