Hydraulic Keynesianism Lives
| Peter Klein |
I believe it was Alan Coddington who coined the term “hydraulic Keynesianism” to describe the typical macroeconomics textbooks of the 1950s, “conceiving the economy at the aggregate level in terms of disembodied and homogeneous flows.” The term also has a great visual quality, bringing forth an image of the economy as a giant machine with pumps and tubes and dials and levers, carefully controlled by wise government planners. (Such a machine was actually built by Bill Phillips of Phillips Curve fame.)
Apparently the Atlanta Fed has produced an educational video, “Money as Communication,” solemnly explaining the vital role of the Federal Reserve System in maintaining price stability. Mike Shedlock provides an amusing point-by-point commentary on the video, which surely ranks among the best of government propaganda films. I especially liked the image below, taken from the video, which neatly encapsulates the Fed’s view of its own role in the economic system.
The woman at the keyboard has the wrong hair color to be Janet Yellen, and the man in the middle has too much hair to be Ben Bernanke, but I’m sure the intended audience — schoolchildren and New York Times reporters — will get the idea.
Update: Here is an earlier post by Nicolai on the Phillips Machine.