Tuesday, October 25, 2016

Photos of Fisher's Physical Macroeconomic Model

Two extremely prominent economists of the past started off their careers by building physical hydraulic models of the macroeconomy--that is, models that shows consumption, saving, investment, and the rest with water flowing through tubes between different containers until it balances at an equilbrium. 

I wrote a few years ago about "Hydraulic Models of the Economy: Phillips, Fisher, Financial Plumbing" (November 12, 2012). There you can find a more detailed discussion of the MONIAC, the Monetary National Income Analogue Computer, created by Alban William Housego (Bill) Phillips (1914-1975), the author of the famous 1956 paper that drew the "Phillips curve" tradeoff between unemployment and inflation, as well as the earlier machine built by Irving Fisher (1867-1947) as part of what Paul Samuelson called the “greatest doctoral dissertation in economics ever written” -- although the compliment was more because Fisher discovered general equilibrium analysis than for his machine. 

Fisher seems to have been influenced in building his hydraulic model of the economy by one of his 
thesis advisers, Josiah Willard Gibbs, a mathematical physicist and engineer who Albert Einstein once called "the greatest mind in American history." Fisher apparently used this hydraulic model as a teaching tool for 25 years, to give students an intuitive sense of how the economy adjusted when various parameters were changed. 

When I wrote about these models a few years back, I found some photographs and existing versions of the Phillips MONIAC, but only schematic drawings of Fisher's machine. But Calla Wiemer recently pointed out to me that there are a couple of historical photos of Fisher's machine at the start of the 1965 volume that republished both Fisher's 1892 dissertation, Mathematical investigations in the theory of value and price and his 1896 book, Appreciation and interest. For geeks-at-heart, here is a picture of the model as constructed in 1893--that is, a nice neat physical machine soon after the dissertation was written. 

And here's a photo of Fisher's model as constructed in 1925. This one looks more like it's been used for classroom for a decade or two.

I pointed out in my 2012 post that there are some currently working versions of Phillips's MONIAC, but I don't know of any currently working versions of Fisher's earlier hydraulic macroeconomic model.