A couple of years ago I visited the Science Museum in London. Of all the wonderful sights there, one item keeps coming to mind: Bill Phillips’ Financephalograph; a “computer” that simulated a nation’s economics using flowing water.

The Financephalograph was built in 1949 by Bill Phillips, an engineer and then student of sociology at London School of Economics (he would later become world famous as an economist for his Phillips Curve).

Here’s approximately how the machine works: At the top of about 1.80 meter high wooden board, there is a fairly large box made of clear plastic containing water. This is the “treasury”. From the treasury, water (i.e. money) flows through pipes to other boxes, representing the various categories that the nation spends its money on, e.g. health care, defense, educational system, etc. Water continues to trickle down the different pipes and boxes on the board, representing the different parts of the economy. From some of the boxes, water is pumped up to the treasury again, representing taxes.

Import and export are represented by water flowing down from the board and new water coming in. To raise a tax percentage, simply increase the speed of the corresponding pump; to increase expenditure on health care, open the tap a little wider. For added clarity the water is colored red.

This piece is so brilliant in its simplicity. When Bill built the Financephalograph, no electronic computer was nearly powerful enough to run simulations this complex. The flowing water, the pumps, pipes, and taps visualize the complexity of economics in a simple and understandable manner. According to a New Scientist article from 2000, the satirical Punch magazine at the time suggested that one of Bill’s machines should be on display in every town hall to teach the ignorant public about economics. Even though Punch’s suggestion was not realized, several models of the computer were built and sent at other British universities, Harvard, the Ford Motor Company and the Bank of Guatemala.

Given the geeky appeal of this machine, incredible little information on it seems to be available on the Web and the Science Museum’s online Gallery Guide contains one very non-informative page on it (and they never responded to the offer I sent after my visit to make a Flash simulation of it if they would send me the blueprints ;-).

The machine on display at the Science Museum is a reconstruction of the original machines, built in 1995. Regardless of that, it is clear evidence to how out of the box thinking can lead to genius solutions. Even today, I think there would be no better way to teach the fundamentals of economics. Whereas understanding “inflation rate” can be very hard, everybody understands the flow of water.

One problem Bill had though: Mopping the floor when inflation rose too high!

Additional link:
When Money Flowed Like Water – Inc. Magazine, Sept 1995