Economics, Control Theory, and the Phillips Machine

Abstract

Can the same mathematical control laws that smooth out oscillations in the flight of an airplane also moderate economic cycles of boom and bust? Attempts to bring together the intellectual traditions of control engineering and economics go back at least as far as the hydraulic analog computer of A. W. H. Phillips, circa 1950. Today, economic policymakers remain committed to the ideal of controlling business cycles; it remains an open question whether tools from control theory might help to refine their strategies.