Economic Historians Revive Legacy of Bill Phillips as MONIAC Water Machine Returns to Macroeconomic Spotlight

Bill Phillips built a plumbing-based model of the economy in 1949. Today, his "Phillips Curve" remains a central tool for managing inflation and unemployment.

By: AXL Media

Published: Apr 8, 2026, 4:48 AM EDT

Source: Information for this report was sourced from NPR

The Hydraulic Roots of Macroeconomic Theory

In 1949, an electrical engineer turned economist named Bill Phillips constructed a hydraulic computer in his garage to visualize the flow of the British economy. Using a series of tubs and chambers connected by flowing water, Phillips represented the movement of capital from the Treasury to sectors such as health and education. The machine, which initially drew skepticism from the London School of Economics staff, utilized levers to manipulate taxation rates and government spending. According to economist Richard Lipsey, the demonstration proved so effective that Phillips was immediately offered a position at the institution, cementing the water machine's place in economic history.

Managing the Volatility of Business Cycles

Phillips focused his career on mitigating the inherent chaos of market economies, which are historically defined by a yo-yoing pattern of growth and contraction known as the business cycle. Before the mid-twentieth century, the global economy suffered through frequent "panics" and stock market crashes roughly every two decades. Drawing inspiration from John Maynard Keynes, Phillips explored how government intervention could serve as a counterweight to these cycles. The Keynesian insight suggested that a government should act like a parent moderating a party, lowering spending during periods of irrational exuberance and increasing it during layoffs or investor hesitation.

The Emergence of the Wage Price Spiral

A central component of Phillips's research involved the link between unemployment and inflation, a relationship defined by the bargaining power of the workforce. When unemployment is low, workers are positioned to demand higher wages, which in turn forces companies to raise the prices of goods and services to cover increased labor costs. This phenomenon, known as a wage price spiral, identified a critical tension in economic planning. Phillips spent years looking for a way to quantify this trade-off, eventually gaining access to a dataset containing 100 years of wage and unemployment information from the United Kingdom to test his theories.