Visualisations for Understanding Complex Economic Systems

In the history of economics, a few (but famous) analogue systems were built with the purpose of gaining a better understanding of an economics mechanism by creating a visualisation of it. One of the first was Irving Fisher's mechanism, constructed in 1893, consisting of a tank with floating cisterns connected by sticks visualizing a three-good, three consumer economy. More famous and better-known is the Phillips-Newlyn Hydraulic Machine, built in 1949, representing macroeconomics by flows and stocks of coloured water in a system of Perspex tanks and channels. This hydraulic machine became a reference point for developing other less fragile systems to visualise an economic mechanism, namely by simulations run on a computer. The main part of this chapter will discuss FYSIOEN, a computer visualisation of a hydraulic system representing the macro-econometric model MORKMON of the Dutch Central Bank, designed in 1988. FYSIOEN was developed to help users gain understanding of the complex mathematical model by translating it into the visual domain. An analogy usually transfers a familiar mechanism to an unfamiliar domain in order to provide an understanding of the latter. So, in case of the analogues of Fisher, and Phillips & Newlyn, the more familiar hydraulic laws were used to attain understanding of an economic mechanism. The problem with FYSIOEN, however, was that though it was an animation of a hydraulic system, the program was not run by hydraulic laws but by the relations of MORKMON. Several improvements were suggested to make the animation look more real to compensate for the lack of hydraulic laws, but computing facilities at the time limited the possibilities