Old white man of the day

Continuing yesterday’s remarkable story of Bill Phillips. Quote:

Bill was repatriated with his family in New Zealand following Japan?s defeat but […] was woefully thin and quite unwell.? […] Despite his poor health, Bill decided to take up an offer given to many former Commonwealth servicemen in those days ? an opportunity to study at a British university […] and?in the winter of 1946 he began a degree in sociology at the London School of Economics.? A good knowledge of economics was needed in order to study sociology in those days and by 1948, the last year of his undergraduate degree, he had developed a keen interest in it.? Economics at the time was dominated by Keynesian theory ? government intervention and fiscal policies designed to control the ebb and flow of money in the economy.? It would seem absurd that a student who had barely finished his undergraduate degree could come up with a way of modelling such an economy, but that was exactly what Bill did.

In the last year of his undergraduate degree, Bill wrote an economics paper entitled ?Saving and Investment: Rate of Interest and Level of Income?.? Despite his best efforts he could not get anyone at the London School of Economics to read it.? So he showed it to a friend, Walter Newlyn, who had recently been appointed to a position in economics at Leeds University.? By his own admission, Newlyn read very little of the paper but was struck by a diagram Bill had drawn.? The diagram showed the workings of the British economy but it was presented in a way that was akin to a modern computer model.? Of course, there were no computers capable of modelling an economy in the nineteen forties, but that did not stop Bill from building one. End of quote.

Wikipedia tells us that “Phillips scrounged a variety of materials to create his prototype computer, including bits and pieces from war surplus such as parts from old?Lancaster bombers. The first MONIAC was created in his landlady?s garage in?Croydon?at a cost of??400 (equivalent to ?13,000 in 2016).” Quote:

Despite being a hydraulic computer, the MONIAC had some astonishing digital computer qualities.? The flow of money-water through its reservoirs could be manipulated to simulate the effect of changes in economic inputs and outputs ? income, consumption, taxes and expenditure.? Additionally, there were two scrolls of paper at the top of the machine connected to floats that could trace lines up and down like a seismograph, thus recording the ebb and flow of economic activity in real time.? In his book ?Undercover Economist Strikes Back,? Tim Harford notes that the machine could solve nine differential equations simultaneously and that it would be years before digital computers could support models as complex as the MONIAC?s.? [It had an accuracy of ?2%]

Bill was invited to demonstrate his machine at the London School of Economics Robins Seminar in 1949.? It is said that the professors attending this seminar were sceptical and somewhat dismissive of Bill?s academic credentials.? However, their snobbery soon gave way to astonishment as pink water began carousing through the machine?s pipes and reservoirs.? Smoke in hand and pacing incessantly, Bill simultaneously delivered a rousing lecture on Keynesian theory which left the professors speechless and his future career in no doubt.

Tim Harford suggests that the professors attending the Robins Seminar might not have been so astonished had they known more about Bill?s background prior to the lecture.? He writes that; ?Perhaps they would have been less so [astounded] had they known more about Phillip?s unorthodox education ? the differential equations he?d studied by correspondence course; the hydraulic engineering he?d learned as an apprentice; the mechanical scavenging and repurposing he?d picked up on the farm and perfected in the defence of Singapore? and of course his courage.?

Not surprisingly, the MONIAC came to be known as the ?Philips Machine? and Bill was subsequently elevated to the position of assistant lecturer following the publishing of a journal article on it in 1950.? Articles about the machine also appeared in numerous magazines. […] Such was its popularity, versions of the MONIAC were purchased by a diverse range of universities and organisations ? Manchester, Harvard, Oxford and Cambridge Universities, the Ford Motor Company and the Reserve Bank of Guatemala to name a few.

Bill rose from assistant lecturer to senior lecturer in 1952 and was subsequently appointed professor of economics in 1958.? […]? Robert Leeson has more recently pointed out that the work Bill undertook during this period continues to define the field of applied macroeconomics:

?For the last forty years, applied macroeconomics, in so far as it connects the instruments of fiscal, monetary and income policies to the objectives of inflation, unemployment and economic growth has, to a large extent, been a series of footnotes and extensions to the work of Bill Phillips.? […] End of quote.

Bill went on to greater things and developed a graph that came to be known as the “Phillips Curve”.? This was used and sometimes abused by economists that followed Bill. He is quoted as saying,?rather pessimistically; ?had I known what they would do with the graph, I would never have drawn it.?

Bill also developed the “Phillips Formula” which other economists used in their research, many?getting Nobel prizes for work based on this formula but Bill seemed quite unfazed by others getting the glory. Quote:

It is said that Bill Phillips wrote his adaptive expectations formula (above) on an envelope for Milton Friedman, who then gave it to his doctoral student Phillip Cagan.

[…] A contemporary of Bill?s noted that in keeping with his engineering background; ?he wanted to know how systems worked [and was] not much interested in the scholarship of the subject ? who had said what, and when.?? It is little wonder then, that he did not assert his claim to the formula which was instrumental in changing the face of modern economics. ?Nor did he object to Friedman and others using it to advance their own interests.? It was simply not in Bill?s nature to put himself above others or to seek academic kudos. […]

It was while lecturing at the Australian National University that Bill suffered a debilitating stroke which abruptly ended his brilliant career.? Bill and his family immediately moved back to New Zealand so that he could convalesce.? However, against his doctor?s advice, he took up a part-time lectureship at Auckland University.? On the fourth of March 1975, the day after his first lecture, Bill – the inventor and builder of the first computer model of a country?s economy, suffered another stroke and passed away.? He was just sixty years of age.[…] End of quote.

Economist Rex Bergstrom sums up Bill Phillips in this tribute to an old white man of outstanding qualities whose ideas and innovations have had a lasting effect on the world. Quote.

?New Zealanders are proud of Bill not only because of his achievements but because he was very much the kind of man they most admire.? He was unpretentious and on the surface seemed to be an ordinary man and yet, he lived no ordinary life.? He was a modest man but his modesty was based on innate self-confidence.? He achieved greatness but without flamboyance and his reputation rested on what he did, not on any gift of self-advertisement.? He was an eclectic, skilled with his hands as well as his brain and also enjoyed the finest in both Eastern and Western cultures.? Finally and most important, for it is in line with the New Zealand worship of improvisation, he was an innovator.?? End of quote.