Friday, May 09, 2008


At the Guardian, Larry Elliott on the computer model that once served the Bank of England:
It is 2 metres (7ft) tall, 1.5 metres wide and a metre deep. It runs on water and most of the time it is screened off at the back of a lecture room in Cambridge. But when the nine members of the Bank of England's monetary policy committee announce their latest decision on interest rates today they will owe a debt of gratitude to the computer built in a garage in south Croydon by Bill Phillips - an engineer turned economist from New Zealand - almost 60 years ago.

A sensation when it was unveiled at the London School of Economics in 1949, the Phillips machine used hydraulics to model the workings of the British economy but now looks, at first glance, like the brainchild of a nutty professor. Where the Bank's team of in-house economists are equipped with state-of- the-art digital computers, the profession's first stab at modelling was very much a do-it-yourself affair with a whiff of the Heath Robinson about it.

The prototype was an odd assortment of tanks, pipes, sluices and valves, with water pumped around the machine by a motor cannibalised from the windscreen wiper of a Lancaster bomber. Bits of filed-down Perspex and fishing line were used to channel the coloured dyes that mimicked the flow of income round the economy into consumer spending, taxes, investment and exports. Phillips and Walter Newlyn, who helped piece the machine together at the end of the 1940s, experimented with treacle and methylated spirits before deciding that coloured water was the best way of displaying the way money circulates around the economy.
The altogether alluringly titled Computer Resurrection: The Bulletin of the Computer Conservation Society (hmmm, I am delving back into that once I have more free time, how utterly delightful!) has an article by Doron Swade that includes detailed descriptions and diagrams:
Water is pumped to the top of the machine and cascades down a central column. Taxes, imports and savings are siphoned off into separate loops. Proportions of these rejoin the main flow as government expenditure, exports and investment. The net flow at the bottom of the central column accumulates in a tank. This level represents the working balance required for a given level of economic activity and is duly pumped back to the top of the machine to cascade back down through the system.

The strength of model is in the interactivity of economic factors. Rates of taxation, investment and levels of foreign trade can be altered by setting valves and sluices. More subtly, stocks (represented by the level of water in a tank) control flows elsewhere in the system by automatically altering settings of the valves.
Here is the Science Museum page; here is another good picture. Another interesting essay by Doron Swade can be found here.

Here is a video of the Phillips machine in operation, which unfortunately I do not have time to watch now!

(Link and post title courtesy of Brent, who got it via Marginal Revolution.)

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