Modest achiever

by Brian Easton / 12 July, 2008
Real economist have (Phillips) curves.

Economists from all over the world are meeting in Wellington over the next couple of weeks to celebrate New Zealander Bill Phillips and the paper he published 50 years ago. This paper introduced what is universally known as the Phillips Curve.

It can be hard for one profession to get across the significance of its giants, except by comparison. So, yes, there are parallels between Phillips and Sir Ed Hillary, including the modest "aw shucks, someone else would have done it anyway" attitude.

What I admired most about Hillary was that he did not stop after his summit of Everest or the rush to the South Pole. He used the leverage of his success to improve the welfare of the Sherpas in Nepal. Hillary probably didn't even think of it this way. It was simply something he could do to make the world a better place.

Phillips was so modest that only his intimates could judge his achievement at the time. He said another economist would have discovered the Phillips Curve - but did not mention he had posited its existence more than four years earlier or that there is a very subtle bit of theory required to identify it.

The Phillips Curve relates the rate of inflation to the amount of activity in the economy. It connects the changes in wages or prices with the level of under-used productive capacity (such as unemployment).

Aw shucks, that is so obvious. But it wasn't; not until he sorted it out. In fact, as a student, he sorted out the conceptual issue for his teachers. There was only a seven-year gap between his first degree and his taking up the prestigious Tooke Chair at the London School of Economics.

To get his notions across, Phillips- built a computer. There were no electronic computers then, so the MONIAC (Monetary National Income Analogue Computer) was a physical representation of an economy whose money flows were represented by water. You can see the very first one (of about a dozen he built) at the Reserve Bank Museum in Wellington, across from Parliament. An exhibition (which I curated) is currently on show there and covers all Phillips' achievements.

Building such machines involved not just careful thought but dextrous manual skills - and Phillips had them. He made gadgets as a boy, redesigned aircraft guns during World War II, mounted a gun on his troopship to stave off strafing planes, and secretly built radio receivers in his Japanese prisoner-of-war camp from whatever he could acquire.

It's the No 8 fencing wire skill that was (and, in some ways, remains) so integral to the New Zealand character. Hillary had it, too; so did Ernest Rutherford.

In this day of billion-dollar atom crackers, we forget both the sheer simplicity of Rutherford's experiments and their extraordinary theoretical depth. Rutherford famously said, "We don't have the money so we have to think." Phillips would have understood.

The Rutherford-Bohr atom is perhaps Rutherford's greatest achievement, but he knew right from the beginning that though it resolved some problems, there were others, and his model would be replaced by an improved version.

Phillips knew that about his theory, too. Apparently, he set out the problem that a decade later led to the "inflation-augmented Phillips Curve" for which Edmund Phelps was awarded the Nobel Prize in Economics in 2006.

Unlike Rutherford and Phelps, Phillips did not become a Nobel laureate; he died too early (in 1975 at age 60) to receive one. But like other very important economists, he will be remembered long after some laureates are forgotten. Most central banks today (including ours) that are concerned with inflation still use an -analysis based on his original insights.

Rutherford is on the $100 note and Hillary on the $5 one.

Phillips should be on one, too. Perhaps on the $200 note - although if we learn from the economic modelling he taught us, it may be very many years before we need it.

Web: www.eastonbh.ac.nz

Latest

Excavated cult-horror film Suspiria is an ambitious failure
98994 2018-11-14 00:00:00Z Movies

Excavated cult-horror film Suspiria is an ambitiou…

by James Robins

Released in 1977, Dario Argento’s campy Suspiria was a landmark in cult horror. Now, director Luca Guadagnino has remade it in a new style.

Read more
Scottish-Bengali crime writer Abir Mukherjee on his 'cultural schizophrenia'
98517 2018-11-14 00:00:00Z Books

Scottish-Bengali crime writer Abir Mukherjee on hi…

by Craig Sisterson

Abir Mukherjee uses India’s painful struggle for independence as the backdrop for his Sam Wyndham detective stories.

Read more
Lunchtime legends: 5 hospo stalwarts on Auckland's restaurant evolution
93848 2018-11-14 00:00:00Z Auckland Eats

Lunchtime legends: 5 hospo stalwarts on Auckland's…

by Alice Neville

Restaurant veterans Chris Rupe, Krishna Botica, Tony Adcock, Geeling Ching and Judith Tabron reflect on the Auckland dining scene.

Read more
Best Auckland BYO restaurants where the food is good too
97751 2018-11-14 00:00:00Z Auckland Eats

Best Auckland BYO restaurants where the food is go…

by Metro

Head to one of these Metro Top 50 Cheap Eats and 50 under $50 restaurants for BYO dining that won't break the bank.

Read more
Get a lesson in mezcal at new Snickel Lane bar La Fuente
99033 2018-11-14 00:00:00Z Auckland Eats

Get a lesson in mezcal at new Snickel Lane bar La …

by Jean Teng

Mezcal was once regarded as a tipple for the lower-class – now it's the hero at new bar La Fuente.

Read more
Forget the love trysts, our relationship with China is a much bigger affair
98673 2018-11-13 00:00:00Z Politics

Forget the love trysts, our relationship with Chin…

by Bevan Rapson

Ross’s tape didn’t stand up his allegations of electoral fraud, but it helpfully drew renewed attention to questions about Chinese influence in NZ.

Read more
Bill Ralston: Simon Bridges looks like a dead man walking
98830 2018-11-13 00:00:00Z Politics

Bill Ralston: Simon Bridges looks like a dead man …

by Bill Ralston

The National Party’s ongoing ructions suggest a long spell in the wilderness lies ahead.

Read more
The history of NZ newspapers would shame the Facebook generation
98735 2018-11-13 00:00:00Z History

The history of NZ newspapers would shame the Faceb…

by Karl du Fresne

In the 19th century, there were more newspapers in New Zealand per head of population than anywhere else in the world says writer Ian F Grant.

Read more