How metaphors shape our view of the economy
A Phillips Machine, designed in London by the New Zealand economist Bill Phillips in the 1940s. It simulates the economy with a series of chambers and pipes that pump water around like money.
Kai Ryssdal: The global economy is dense. Complicated. It's a beast to try to explain, quite honestly.
Which is why -- whether you're talking assymetric shock, LIBOR or collatoralized debt obligations -- politicians and pundits and business journalists sometimes turn to metaphors to make their case. You know the kind of thing I'm talking about. 'Engines of growth' or 'green shoots of recovery.'
But words matter, right? So do these words shape what we think about economics? From London, Christopher Werth reports.
Christopher Werth: Since the Industrial Revolution, there's one metaphor that's come to dominate the way we all talk about economics: the idea that the economy is a “machine.”
Tim Leonard is an economist and historian at Princeton University who’s taken a close look at economic metaphors. He says by imagining a machine, it not only implies that the mechanics can break.
Tim Leonard: But they can also be fixed. A machine is something that can be improved. It can be redesigned and regulated.
And at times, economists have taken that “machine metaphor” very literally. At the University of Cambridge, engineering professor Allan McRobie unlocks a giant cabinet that houses the granddaddy of all economic calculators.
Allan McRobie: Do you want to switch it on?
McRobie: Um, just flick that switch and then those two.
Werth: Okay, these two up?
This is the Phillips Machine, designed in London by the New Zealand economist Bill Phillips in the 1940s. It simulates the economy with a series of chambers and pipes that pump water around like money.
McRobie: It all starts with this tank at the bottom, which is basically the total quantity of money in the economy.
That “money” is pumped up into smaller tanks that represent government spending and the banking sector.
McRobie: It then falls down a great big waterfall down the center of the machine.
And theoretically, into the pockets of people like you and me. The point was that economists could open and close valves to test the effect on economic growth before they messed with the taps on the actual economy. If the whole machine thing sounds antiquated, Tim Leonard at Princeton says another age-old metaphor we often turn to is to imagine an ecosystem. You see trees. You hear songbirds.
Leonard: You see squirrels, raccoons. You’ll see an eagle if you look very carefully.
But he says how you view the economy in all of this depends on how you view the forest.
Leonard: One possible interpretation sees nature as harmonious, in balance, self-regulating.
Which, by analogy, might mean the best economic policy is not to meddle with the economy too much.
Robert May: That’s the kind of talk that got us in the mess.
Robert May is an ecologist at Oxford University. He’s been working with the Bank of England to find models in nature that might help stabilize the financial system. And he says he hears bankers use this metaphor all the time.
May: They say just leave us alone and the market will find its equilibrium.
He says what they don't realize is that ecosystems actually experience boom and bust cycles just like economies. That’s why entrepreneur and author Nick Hanauer says an economy, like an ecosystem, needs to be carefully managed.
Nick Hanauer: An unmanaged ecosystem is a jungle, and humans can’t live in jungles because they’re characterized by weeds and predators.
Instead, he says, the metaphor we should use is a garden, one that needs cultivating and watering, especially when the climate doesn't favor growth.
I’m Christopher Werth for Marketplace.