Professor Stephanie Kelton (Lunch with the FT, April 18) argues for changing the vocabulary of fiscal and monetary policy in order to overcome resistance to Keynesian policies by taking the stigma out of “deficit” finance. It is important to have the right visual images to accompany this mindset.
At Cambridge in the early 1960s, economics teaching included a striking learning aid in the shape of the National Income Machine, invented by Prof Bill Phillips. This was a large system of glass pipes, around which red water was pumped to simulate the flow of national income, including various valves and controls representing “leakages” through imports, savings, taxes, changes in the velocity of circulation of money and other factors. Any loss of volume or reduction in pressure would have clearly visible effects on the circular flow.
The National Income Machine has, of course, long been superseded by computer-based modelling of the economy.
But those such as myself who were exposed to the machine need no convincing of the importance of maintaining the circularity of purchasing power in these extraordinary times.
Chipping Norton, Oxon, UK
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