A sensation when it was unveiled at the London School of Economics in 1949, the Phillips machine used hydraulics to model the workings of the British economy but now looks, at first glance, like the brainchild of a nutty professor. Where the Bank's team of in-house economists are equipped with state-of- the-art digital computers, the profession's first stab at modelling was very much a do-it-yourself affair with a whiff of the Heath Robinson about it.

The prototype was an odd assortment of tanks, pipes, sluices and valves, with water pumped around the machine by a motor cannibalised from the windscreen wiper of a Lancaster bomber. Bits of filed-down Perspex and fishing line were used to channel the coloured dyes that mimicked the flow of income round the economy into consumer spending, taxes, investment and exports. Phillips and Walter Newlyn, who helped piece the machine together at the end of the 1940s, experimented with treacle and methylated spirits before deciding that coloured water was the best way of displaying the way money circulates around the economy.

But whoops:

By today's standards, the Phillips machine was limited. It made no provision for inflation and, with capital controls in force, had no need to take account of the curse of the modern UK economy - the wild swings in the credit cycle. Professor Brian Henry, a visiting fellow at the National Institute for Economic and Social Research, said: "It was a child of its time. It looked at how the economy could be stabilised when people were worried about the stabilisation of aggregate demand. That is the way things were in the 1950s.

"Things are different now. There is a different financial system and a completely different global economy. But Phillips was a brilliant guy. He came up with interesting ways of providing practical advice on policy."

Even so, Henry says the machine is far more than a museum piece. Today the Bank of England's models are supposed to show how shocks affect the economy and the time it takes for a change in policy to have an effect, precisely the sort of problems that the Phillips machine helped identify. Even with the most up-to-date computers, the Bank is still finding it hard to come up with the right answers.

Indeed, one early demonstration of the machine displayed the difficulties that can arise when monetary and fiscal policy are not synchronised. Phillips asked one of his students to be chancellor of the exchequer and control taxes and spending; the other to be governor of the Bank and control interest rates. Predictably, the policies were uncoordinated and the upshot was that water overflowed on to the floor.

We can't argue with the instruction here, or the sentiment behind it. There is nothing wrong with giving and sacrifice. My argument is with the choice of language. It contains a word and three phrases the common usage of which can be highly misleading. FULL ARTICLE

From Murray Rothbard's Conceived in Liberty: "Maximum-wage control always aggravates a shortage of labor, as employers will not be able to obtain needed workers at the statutory price. In trying to force labor to be cheaper than its price on the free market, the gentry only made it more difficult for employers to obtain that labor." (p. 254, Vol. I, Chapter 31).

Listen to Chapter 31 in MP3 audio format: Economics Begins to Dissolve the Theocracy: The Failure of Wage and Price Controls.

The fact that this is not currently happening can be a result only of government price controls (which prevent prices from rising in needy countries), trade restrictions, or some other government barrier that prevents people from getting what they need. FULL ARTICLE

Particularly noteworthy is the fact that the oil industry has been facing a thirty years [sic] moratorium on exploring new fields within the United States. According to the president of Shell Oil, John Hofmeister, the US is dependent on the order of over 60% of its overall consumption on oil imports. The moratorium, though not mentioned in the clip, I suspect has got a great deal to do with environmentalism. Speaking about sponsoring of international terrorism!

Another fact is that the profit margin of oil companies is about 8% on capital invested. There are other extremely interesting facts in the clip as well.

On the other hand, maybe eulas can be considered a kind of covenant with the user, and we readily accept such restrictions when buying homes, for example. I want to think that the blogger is right but I'm not sure. Thoughts?