Wednesday, June 3, 2009
There's a great piece on the "Phillips machine" in today's New York Times. It's a hydraulic computer that uses water to predicts the ebb and flow of the economy. A New Zealander named Bill Phillips built it in 1949, and copies were sold to Harvard, Cambridge, Ford Motor Company, and the Central Bank of Guatemala(!) The Times site has video of a restored Phillips machine gurgling away.
Not mentioned is a remarkable predecessor, the 1892 price machine of Irving Fisher. (I write about Fisher and his machine in my upcoming book, Priceless.) Fisher was probably the most famous American economist of the Gilded Age. The public first knew him as the author of a best-selling self-help book with the earnest title, How to Live. A successful inventor, Fisher devised an index card system, a precursor of the Rolodex, and made a fortune off of it. From his perch at Yale, Fisher pontificated on the issues of the day. He was for vegetarianism, prohibition, eugenics, and just about every nutty health regimen under the sun.
Like Phillips' machine, Fisher's was based on a simple principle: water seeks its level. The device consisted of a tank of water with a flotilla of half-flooded wooden “cisterns” connected by a system of levers. Adjustments to “stoppers” and levers fed in data on incomes, marginal utilities, and supplies; then prices could be read off scales. The device prefigured, if not parodied, the direction of twentieth-century economics. “Press stopper I and raise III,” read part of Fisher’s instructions for the thing. “I, II, III now represent a wealthy, middle class, and poor man respectively…”
Fisher’s career came screeching to a halt in 1929. Days before Black Monday, Fisher waved aside the volatility that was worrying investors. “Stock prices have reached what looks like a permanently high plateau,” he announced. They hadn’t, and that statement — now perhaps Fisher’s most quoted pronouncement — inevitably turns up in humorous compendiums of Famous Last Words.