Book contents
- Frontmatter
- Contents
- List of contributors
- Foreword by Arthur Brown
- Preface by Robert Leeson
- Part I Bill Phillips: Some Memories and Reflections
- Part II The Phillips Machine
- Part III Dynamic Stabilisation
- Part IV Econometrics
- 36 The Bill Phillips legacy of continuous time modelling and econometric model design
- 37 The published papers
- 38 The influence of A.W. Phillips on econometrics
- 39 An appreciation of A.W. Phillips
- 40 Some notes on the estimation of time-forms of reactions in interdependent dynamic systems
- 41 Cybernetics and the regulation of economic systems
- 42 The estimation of parameters in systems of stochastic differential equations
- 43 Estimation, regulation and prediction in interdependent dynamic systems
- 44 The Walras-Bowley Paper
- 45 Estimation of systems of difference equations with moving average disturbances
- 46 The estimation of continuous time models
- 47 Estimation in continuous time series models with autocorrelated disturbances
- 48 Efficient fitting of rational spectral density functions and transfer functions
- 49 The Lucas Critique: did Phillips make a comparable contribution?
- 50 Models for the control of economic fluctuations
- 51 Statistical estimation for the purpose of economic regulation
- 52 The last paper: a foreshadowing of the Lucas Critique?
- References
- Index of names
- Index of subjects
41 - Cybernetics and the regulation of economic systems
Published online by Cambridge University Press: 04 May 2010
- Frontmatter
- Contents
- List of contributors
- Foreword by Arthur Brown
- Preface by Robert Leeson
- Part I Bill Phillips: Some Memories and Reflections
- Part II The Phillips Machine
- Part III Dynamic Stabilisation
- Part IV Econometrics
- 36 The Bill Phillips legacy of continuous time modelling and econometric model design
- 37 The published papers
- 38 The influence of A.W. Phillips on econometrics
- 39 An appreciation of A.W. Phillips
- 40 Some notes on the estimation of time-forms of reactions in interdependent dynamic systems
- 41 Cybernetics and the regulation of economic systems
- 42 The estimation of parameters in systems of stochastic differential equations
- 43 Estimation, regulation and prediction in interdependent dynamic systems
- 44 The Walras-Bowley Paper
- 45 Estimation of systems of difference equations with moving average disturbances
- 46 The estimation of continuous time models
- 47 Estimation in continuous time series models with autocorrelated disturbances
- 48 Efficient fitting of rational spectral density functions and transfer functions
- 49 The Lucas Critique: did Phillips make a comparable contribution?
- 50 Models for the control of economic fluctuations
- 51 Statistical estimation for the purpose of economic regulation
- 52 The last paper: a foreshadowing of the Lucas Critique?
- References
- Index of names
- Index of subjects
Summary
Introduction
One of the problems with which economists have been concerned throughout the last two centuries is the extent to which economic systems are inherently self regulating. During the eighteenth and nineteenth centuries a body of theoretical analysis was built up which showed that, given a reasonable degree of competition, any changes or disturbances which upset equilibrium in any part of the economic system would set in motion ‘forces tending to restore equilibrium’. It seems to have been widely believed that the existence of these inherent ‘equilibrating forces’ would be suf®cient to ensure satisfactory regulation of the system. It is easily shown, however, that the concept of ‘equilibrating forces’ in economics is formally identical with the concept of ‘negative feedback’ in cybernetics and it is an elementary proposition in cybernetics that too much negative feedback causes instability. The forces which economists have called ‘equilibrating’ may therefore, if they are too strong, be dis-equilibrating and far from ensuring satisfactory regulation they may be the cause of unsatisfactory regulation.
In The General Theory of Employment, Interest and Money, Keynes (1936) attacked the argument that economic systems are inherently self-regulating, on the grounds that certain of the ‘equilibrating forces’, notably those acting through changes in interest rates, would under some conditions be very weak or even completely inoperative. He advocated the adoption of deliberate policies for regulating the level of demand with the object of improving aggregative stability.
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- Information
- A. W. H. Phillips: Collected Works in Contemporary Perspective , pp. 385 - 394Publisher: Cambridge University PressPrint publication year: 2000