Also known as the MONIAC (Monetary National Income Analogue Computer), this hydraulic powered analog computer was invented by economist William Phillips in 1949. It uses fluidic logic to model the workings of a national economy. The computer became famous as a teaching aid in economics courses. (Video of the MONIAC in operation available here)
The model consists of a system of water, tanks, and valves. Colored water is introduced to the system through the tanks. A series of servo mechanisms, pulleys and weights control the valves that affect water flows. Valves can be manually operated to signify changes in interest rate policies, taxes, government spending, and so on. By measuring water flow and depth, paper plotters at the top of the model track total income, exports, imports and interest rates over time.
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The MONIAC represents the economy as linkages of stocks and flows of money[1] (see figure to the right). As historian Nicholas Barr describes, transaction balances are accumulated in the bottom tank. Income (GDP) is pumped up to the center column, where it is spent in different ways. The government sector left of the column charges taxes, which enables government spending. To the right, savings flow into banks that contribute to spending in the form of investment. Below investments, a foreign balances tank stores spending on imports. Earnings from exports are sent back into the economy. This follows the Keynesian equation for equilibrium, which is reached when aggregate production and spending are in balance[2]:
Y = C + I+ G+ (X - M)
where
Y= equilibrium level of income
C= consumption spending
I= local investment
G= government spending
X= foreign purchase of the country exports
M= country purchases of imports
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Nicholas Barr's simplified view of the MONIAC [2]
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The Phillips machine is often framed in parallel to histories of computing. As a technical device, or a device for computation, the machine is not as innovative or impactful as the general-purpose computers made around this time. Instead, the machine is an example of a postwar technology: it reveals solutions and possibilities for a peacetime economy. This proved useful at the end of World War 2, as most countries had optimized for wartime production and had to retrain their population.
Phillips intended this technology to aid exposition and comprehension, not accurate calculation[3]. Philips chose a practical analogy for money in his system: money as water. This suggests a responsible use of the medium, but also a flexible one, as water can be channeled or shaped into many uses. The analogy provided Philips with what Huhtamo calls a topic, a set of formulas that provide rich ‘prefabricated molds of experience’[4]. The MONIAC experience builds on a popular base of money-related metaphors : ‘pumping money into the economy’, ‘dipping into savings’, or ‘sales are trickling in’, to name a few.
More so than money as voltages or numbers, money as water helped the MONIAC emphasize important goals for postwar development. One such goal is stabilization, which is core to Keynesian economics[5]. Keynes saw the recessions and depressions of the time as problems of imbalances in demand. The private sector needed the active intervention of the public sector to resolve imbalances and stimulate the economy. The solution, he wrote, was the active involvement on fiscal policy by the government (increased government spending, for example) and monetary policy by the central bank[6]. When testing economic scenarios, the Phillips Machine can clearly reveal these problems of imbalances, as well as the strategies needed to achieve equilibrium.
Phillips simulates a two-country world economy during a lecture [7].
Another important strategy that the MONIAC exposes is coordination. With the hydraulic model, students and researchers could coordinate policies by opening or closing valves. Barr notes one example, in which the teacher would ask students to increase GDP. One student would manipulate taxation and government spending, while another would increase the bank’s savings and interest rate. A whole class could see how an economy could contract if one policymaker ignored the other. Furthermore, the foreign exchange market in Phillips’ model allowed two MONIACs to be linked together. Faculty and students could then experiment with international coordination. For instance, it is possible to show the effects in the USA of a budget deficit in the Japan, or the effects on both of a trade war[8]. This was important for educating economists in the UK, which was decolonizing and therefore more dependent on foreign trade expertise.
By effectively showing the concepts of stock and flow, and encouraging stabilization and coordination, the Philips computer exposed students to the important issues at stake in a globalized world. Electronic computers would take decades to achieve a similar level of transparency and immediacy in education.
Notes
[1] see Walter Newlyn's Origins of the Machine in a Personal Context, chapter 8 in Leeson, 32-34.
[2] see Ng, page 47 and Nicholas Barr's The History of the Phillips Machine, chapter 11 in Leeson, 100-102, 104-106.
image source: Leeson, page 101 (figure 11.1).
[3] see A.W. Phillips's Mechanical Models in Economic Dynamics, chapter 10 in Leeson, 68.
[4] see Huhtamo, 222.
[5] see introduction to Keynes, Kindle location 327.
[6] see Keynes, Kindle locations 157, 295-318.
[7] source: Leeson, 109.
[8] see Barr in Leeson, 108-109.
References
Erkki Huhtamo, "From Kaleidoscomaniac to Cybernerd: Towards an Archeology of the Media", Leonardo, 3, (1997): p. 221-224.
Keynes, John Maynard . The Essential Keynes. edited by Robert Skidelsky. Penguin Publishing Group, 2016. Kindle Edition.
Leeson, Robert, ed. A.W.H. Phillips: Collected Works in Contemporary Perspective. Cambridge University Press, 2000.
Ng, Tim and Matthew Wright. "Introducing the MONIAC: an early and innovative economic model", Reserve Bank of New Zealand: Bulletin, Vol. 70, No. 4 (2007):46-52.
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