ABSTRACT
John Maynard Keynes was concerned throughout his career with a small set of linked problems namely: inflation, depression, wartime finance, unemployment. Keynes, then, had to imagine an "economy" as a thing that generated phenomena like inflation and unemployment, as a machine with interlocking parts. Keynes imagined a new thing, a national economy linked by flows of money and guided by financial markets. This chapter discusses a physical analogue of the IS-LM model, a hydraulic computer developed in 1949 to model a national economy along Keynesian lines. Keynes thought nationally in the 1930s. The 1936 General Theory theorized a closed economy, paying scant attention to foreign flows. Savings flows into a financial system from which businesses borrow to fund capital investment spending; government spends tax revenue and may also borrow from the financial sector. The Newlyn-Phillips machine was a way of demonstrating the different internal connections and working out how a national economy would behave under Keynesian assumptions.
