The kink in the US GDP curve

The kink in the US GDP curve and the current recovery looks like it could be treated as a divergence that could be looked at in terms of control theory, analyzed as a feeedback control loop, or the classic proportional-integral-derivative (PID) controller.  This is definitely not a new idea for modeling the economy, as Phillips (of Phillips curve fame) came up with it in the ’50’s inconjunction with his Moniac machine, who linked the use of PID inputs to stabilize an economy as described in the IEEE journal available here.

http://oro.open.ac.uk/7942/1/04064850.pdf

Phillips hydromechanical model of the British economy was very ingenious, and there’s a lot to be said for increased use of this type of analog simulation in economics. As Phillips said in his paper describing the machine, “The hydraulic model will give solutions for nonlinear systems as easily as for linear ones.  It is not even necessary for the relationships to be in analytical form: so long as the curves can be drawn (the relationships driven by interconnected slotted plastic graphs driving valves) the machine will record the correct solutions.” As the flows are visible, it was a great teaching tool.

More good analog economic simulators needed.

John Hulls