I am sure it is correct that there was no third machine, only the earlier machine duplicated and linked by imports and exports. As I said earlier, we students were mere consumers not critiques of this wonderful hydraulic machine but as I worked with Bill over subsequent years we discussed his machine many time. What I am not sure about is whether the linkage was just through a fixed exchange rate or a flexible one. Given how he allowed flows to influence stocks and vice versa, I would not be surprised to learn that his included a flexible rate, one that James Meade, who was Bill’s initial supporter, advocated fervently at that time .
I still think it would be a good idea to see if, other than myself, there are any surviving members of Meade’s seminar who actually worked the machine as I did.
Richard Lipsey
From: Societies for the History of Economics <[log in to unmask]> On Behalf Of Colin Danby
Sent: Friday, November 23, 2018 11:01 AM
To: [log in to unmask]
Subject: Re: [SHOE] Phillips' lost machine
Many thanks for these responses! A couple more notes of clarification.
Did this foreign exchange machine really exist?
The main (LSE) archival evidence for its existence, and for its capacity to handle floating rates is:
(a) a February 6th 1953 letter from James Meade to Andrew Court in which he writes “By far the most important and, from my point of view very exciting, thing which he [Phillips] has done to our machine is to invent and construct a foreign exchange market. This has enabled us to link two machines together so that the exports of one can control the imports of the other either at a fixed or at a variable rate of exchange between the two currencies.” So to be clear, it is this distinct "foreign exchange market" that Phillips devised and built that I'm trying to hunt down!
(b) an undated, but apparently 1950s, lecture outline by Meade in which he moves from one country, to two countries fixed, to two countries floating, with notes about machine settings.
(c) three photographs of the foreign exchange machine in action in Meade's seminar in 1952, set between the two mirror-image one-country machines, in which there is just enough detail so see that it was more complex than the fixed-exchange-rate version that Reza Moghadam and Colin Carter built on Meade’s instructions in 1991.
The 1991 foreign exchange machine, and apparently the 1952 machine, were mechanical rather than hydraulic. In Phillips’ 1950 article he suggested just hooking up the import and export hoses, but there is no record of anyone doing direct hydraulic links. Instead, the key mechanism was a horizontal mechanical linkage that let machines control each others' valves. It's also interesting that the machines did not contemplate direct private financial flows between countries, which does reflect the world of the 1950s.
While in 1991 Meade outlined only the fixed-exchange-rate version, the 1991 Moghadam-Meade correspondence is further evidence that a distinct foreign exchange machine existed! So to be clear: we have good evidence on the design and nature of a fixed-exchange-rate linking machine, but we also have good evidence, noted above, that the original machine could do floating too. I don't want to burrow too far into mechanical details, but that's less obvious and a harder mechanical problem.
Meade’s “Journal of Tour in the United States of America March to September 1952,” also in the LSE archives, provides fascinating context, including his description of explaining the one-country machine to von Neumann who “immediately went off into acute observations on what it could and what it could not do.” A recurrent theme in that journal is Meade’s advocacy for flexible exchange rates and the people he converted (e.g. Hirschman) and those he could not convert (e.g. Friedman). This provides, perhaps, additional context for Meade's interest in demonstrating flexible rates in the classroom.
Thanks, Colin
On Fri, Nov 23, 2018 at 5:27 AM Morgan,M <[log in to unmask]> wrote:
I think maybe this post below got lost somewhere as I did not see it come through onto the list?
Thanks, Mary
Mary S. Morgan,
Albert O. Hirschman Professor of History and Philosophy of Economics, LSE
Fellow of the British Academy, and Overseas Fellow of the KNAW
ERC Narrative science project: https://www.narrative-science.org
Catch Professor Morgan’s 2013 Keynes Lecture here
Leverhulme Trust / ESRC funded “The Nature of Evidence: How well do ‘facts’ travel?”
From: Morgan,M
Sent: 21 November 2018 15:18
To: Societies for the History of Economics <[log in to unmask]>
Subject: RE: [SHOE] Phillips' lost machine
Dear Colin,
Re the name:
Thanks for noting the Newlyn-Phillips name. In fact, I have suggested calling the first machine – the one known the two of them called the Mark I machine – the Newlyn –Phillips Machine because it was so heavily dependent on Newlyn’s economic knowledge and because it was commissioned by Newlyn’s university – Leeds University. That first machine has been restored and is on open display at Leeds. So then it seemed appropriate to call the Mark II machine the Phillips-Newlyn Machine, which was at LSE and has been restored and is on display in the London Science Museum. There is another of this version restored and on display at Cambridge, and most recently one has been restored in Rotterdam(?): possibly Marcel Boumans can say more about that machine. With some rare exceptional times for the Cambridge machine, these machines are static not working.
Re ‘the lost machine’
I am not sure that there was ever a third kind of “foreign exchange machine” – but rather understand from my researches that the link was created by joining up the monetary tanks of a left-hand Mark II machine and a right-hand Mark II machine (?as in the demonstration in 1991?). The two machines in question (I believe) being the LSE one now in the Science Museum and the Cambridge one associated with Meade’s move to Cambridge. Of course, during the life-time of the machines as usable models, the creators lived in a world of fixed exchange rates, so perhaps Meade did not even try to get that arrangement to work on the two machines?
Best,
Mary Morgan
Mary S. Morgan
Albert O. Hirschman Professor of History and Philosophy of EconomicsLSE, Department of Economic History
Visiting Fellow, University of Pennsylvania
Fellow of the British Academy, and Overseas Fellow of the KNAW
ERC Narrative science project: https://www.narrative-science.org
Catch Professor Morgan’s 2013 Keynes Lecture here
Leverhulme Trust / ESRC funded “The Nature of Evidence: How well do ‘facts’ travel?”
From: Societies for the History of Economics [mailto:[log in to unmask]] On Behalf Of Colin Danby
Sent: 19 November 2018 19:23
To: [log in to unmask]
Subject: [SHOE] Phillips' lost machine
Most of you will know of the “Phillips machine,” better called, as Mary Morgan suggests, the “Newlyn-Phillips machine,” a hydraulic model of a national economy. It has a good literature, and while no complete mechanical description has been published, there are a couple of surviving machines one can examine.
But there was another machine. In 1952, Phillips designed and built a mechanical device to link two national-economy machines, at either fixed or floating exchange rates, producing a two-country international economy model. He seems to have done this as a one-off for James Meade, who used it in his LSE seminar from 1952 to 1957.
Linking two machines at a *fixed* exchange rate is fairly simple. This is what was done, on Meade’s instructions, for a 1991 demonstration at LSE. There's good documentation. Linking at a *floating* rate is harder, and it’s not obvious how he did it. Apart from three 1952 photographs, I have found no documentation of the Phillips foreign exchange machine in the LSE archives. The physical device seems lost, as are Phillips’ drawings.
Any suggestions? One possibility might be to find surviving students from Meade’s 1953-57 seminar with good mechanical memories, and I’d be grateful for any leads there. Aside from the purely mechanical part, this connects to Meade’s policy interest in flexible rates during the 1950s.
Thanks, Colin
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Colin Danby
Professor, Interdisciplinary Arts and Sciences
University of Washington, Bothell
(425) 352-5285
[log in to unmask]
The Known Economy: Romantics, Rationalists, and the Making of a World Scale
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