Hydraulic macroeconomics

{{short description|Informal term in macroeconomics}}

File:Phillips and MONIAC LSE.jpg

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.{{cite journal |first=Alan |last=Coddington |year=1976 |title=Keynesian Economics: The Search for First Principles |journal=Journal of Economic Literature |volume=14 |issue=4 |pages=1258–1273 |jstor=2722548 }}{{cite book |first=Alan |last=Coddington |title=Keynesian Economics: The Search for First Principles |location=Boston |publisher=G. Allen & Unwin |year=1984 |isbn=978-0-04-330341-2 }}

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, an economist and creator of the Phillips curve, invented the MONIAC, a hydraulic computer which simulated the British economy.{{cite journal |first=A. W. |last=Phillips |year=1950 |title=Mechanical Models in Economic Dynamics |journal=Economica |series=New Series |volume=17 |issue=67 |pages=283–305 |jstor=2549721 |doi=10.2307/2549721 }}{{cite journal |first=Nicholas |last=Barr |title=The Phillips Machine |journal=LSE Quarterly |volume=2 |issue=4 |pages=305–337 |url=http://eprints.lse.ac.uk/1540/ }}{{cite web |url=http://www.cs.man.ac.uk/CCS/res/res12.htm#e |title=University of Manchester, Bulletin of the Computer Conservation Society }} This is the inspiration for the term. Even earlier, in 1891, Irving Fisher built a hydraulic machine for calculating equilibrium prices.{{cite journal |first=W. C. |last=Brainard |first2=H. E. |last2=Scarf |title=How to Compute Equilibrium Prices in 1891 |journal=American Journal of Economics and Sociology |volume=64 |issue=1 |pages=57–83 |year=2005 |doi=10.1111/j.1536-7150.2005.00349.x |citeseerx=10.1.1.180.2592 }}

Initially, the phrase, "hydraulic macroeconomics", was associated with Keynesian economic models that did not display household or firm optimization.{{cite web |first=Nicolai |last=Foss |title=The Phillips Machine |work=Organization and Market |url=http://organizationsandmarkets.com/2007/11/02/the-philips-machine/ }}