Hydraulic macroeconomics

Phillips with MONIAC

Hydraulic macroeconomics is an informal characterization of certain types of macroeconomic study assuming aggregate social wealth (demand or supply) as somewhat smooth, constant and homogeneous. The term was first introduced as Hydraulic Keynesianism by Alan Coddington in classification of theoretical research methodologies in Keynesian Economics.[1][2]

Hydraulics is the science and engineering of the mechanical properties of liquids. Macroeconomics is the study of the performance and structure of an entire economy. Hydraulic macroeconomics is, essentially, a study of the economy that treats money as a form of liquid that circulates through the economic plumbing.

William Phillips, a famous economist and creator of the Phillips curve, invented the MONIAC, a hydraulic computer which simulated the British economy.[3][4][5] This is the inspiration for the term. Even earlier, in 1891, Irving Fisher built a hydraulic machine for calculating equilibrium prices.[6]

Initially, the phrase, "hydraulic macroeconomics", was associated with Keynesian economic models,[7] but more recently came to be used for any dynamic macroeconomic model in mainstream economics. For example, Arnold Kling describes hydraulic macroeconomics thus:

Mainstream macroeconomics is "hydraulic." There is something called "aggregate demand" which you adjust by pumping in fiscal and monetary expansion.[8]

References

  1. ↑ Coddington, Alan (1976). "Keynesian Economics: The Search for First Principles". Journal of Economic Literature. 14 (4): 1258–1273. JSTOR 2722548.
  2. ↑ Coddington, Alan (1984). Keynesian Economics: The Search for First Principles. Boston: G. Allen & Unwin. ISBN 0-04-330341-2.
  3. ↑ Phillips, A. W. (1950). "Mechanical Models in Economic Dynamics". Economica. New Series. 17 (67): 283–305. JSTOR 2549721.
  4. ↑ Barr, Nicholas. "The Phillips Machine". LSE Quarterly. 2 (4): 305–337.
  5. ↑ "University of Manchester, Bulletin of the Computer Conservation Society".
  6. ↑ Brainard, W. C.; Scarf, H. E. (2005). "How to Compute Equilibrium Prices in 1891". American Journal of Economics and Sociology. 64 (1): 57–83. doi:10.1111/j.1536-7150.2005.00349.x.
  7. ↑ Foss, Nicolai. "The Phillips Machine". Organization and Market.
  8. ↑ Kling, Arnold. "An Alternative to Hydraulic Macro". Econlog.
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