Understanding an entire economy – where the money goes, where the tax comes from, how investment and savings work – is hard. Everything is sort of interconnected, and changing one small thing can change the whole system in a complex and unpredictable way. That’s why on the TV news most evenings, expert economists try to explain to us laypeople why our mortgages just went up or why the price of big screen plasma displays is so good at the moment.
Alban William Housego Phillips – call him Bill (b. 1914, d. 1975) decided to make economics more accessible in 1949 when he built the ‘Monetary National Income Analogue Computer’ – also known by the admirable name ‘Financephalograph’. Bill wasn’t a normal economist, and this wasn’t a normal computer (as we currently understand them), this was a machine that used fluid logic. Literally fluid – the machine used pipes and water, moving around in a series of tanks, to model the UK national economy. The water flowing represented money, so you could see money coming in from central treasury, and from other countries. The water flowed through the system between savings, investments and the like with some being syphoned off for taxes. The metaphorical alignment between the monetary system and the water-based machine continued when you could see savings dry up and debts overflowing.
Bill initially built the machine as a teaching aid, to show the workings of the UK economy, but an unexpected thing happened. He discovered his contraption had a very small error rate, and offered an effective way of modelling a very complex system. Long before we even knew what real computer models were, Phillips realised his MONIAC could be used as a simulator: put the right amounts of water into it in the right places, and the output from the computer was actually really useful in predicting the behaviour of the economy. Moving beyond the rough prototype he’d built from old Lancaster bomber aeroplane parts, he made up to 14 water computers, and sold them to diverse places such as Harvard Business School, Istanbul University and the Ford Motor Company. There is a MONIAC machine in our own Reserve Bank at the moment – ostensibly as a visual display of New Zealand ingenuity, but some allege it’s still the computer model they are using.
Bill Housego Phillips – you have to use a middle name like that as often as possible! – was born near Dannevirke. He was quite an adventurer, spending time in China and the Soviet Union as a young man, working as a crocodile hunter and a gold miner, and eventually joining the RAF and fighting in Singapore. Phillips was captured and spent three and a half years as a prisoner of war in Indonesia. There he learned Chinese from other prisoners, and endeared himself to everyone by building secret water boilers to make tea. He powered his boilers by hooking them into the lighting system: the guards would wonder why the camp lights always dimmed around about eight each night. He also repaired and miniaturised a secret radio. After the war, he was awarded an OBE for his military service.
Phillips has been described as the Indiana Jones of economics and exemplifies the classic view of a Kiwi inventor – ingenious, individually gifted, insatiably curious and good with his hands. But he was more than that too; he was a serious academic who contributed to the field of economics, through both the MONIAC and his Phillips Curve – an economic theory that describes the correlation between inflation and unemployment in an economy. Many thought if Phillips had lived longer (he died at the age of 60) he might have been in the running for a Nobel Prize for this theory. Indeed, a number of others who built their research on his publications received Nobel Prizes for their work. Phillips’ research still influences macroeconomic theory today.
Phillips’ is a life story full of adventure, invention, and contribution – not bad for an academic who described his own most famous theory as ‘quick and dirty’ and ‘done in a weekend’. Add ‘humble’ to the list of his attributes.