“The diagram on the opposite page, similar in plan and purpose to one devised by Mr. M. C. Rorty, represents, in a general way, the circuit flow of money. To find fault with this diagram from an engineering standpoint would not be difficult; neither would it be sensible. All we should ask of these reservoirs and pipes is that they serve the purpose at hand. In the main, subject to certain qualifica qualifications to be made presently, this diagram does serve our purpose. It pictures the flow of money when business is relatively stable.”

Source: The circuit flow of money, 1922, p. 262

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William Trufant Foster13

American economist 1879–1950

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“The circular-flow diagram offers a simple way of organizing the economic transactions that occur between households and firms in the economy. The two loops of the circular-flow diagram are distinct but related. The inner loop represents the flows of inputs and outputs. The households sell the use of their labor, land, and capital to the firms in the markets for the factors of production. The firms then use these factors to produce goods and services, which in turn are sold to households in the markets for goods…”

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“The daily expenditures by consumers for new consumers' goods, upon which business stability largely depends, are determined in part by the total volume of money in circulation, in part by other factors including the frequency with which that money is returned to consumers. The flow of money, therefore, from use in consumption to another use in consumption should not be overlooked in studies of the causes and conditions of business fluctuations. It is the purpose of this paper to describe certain aspects of this circuit flow of money, to raise the question whether it does not deserve more attention that it has yet received in our analyses of business cycles, and to suggest pertinent lines of investigation. Unfortunately, the statistics upon which the most important conclusions concerning this subject must be based are not at hand and are not likely to be for a long time to come. The following discussion will have served its purpose if it stimulates further inquiry in profitable directions and helps to hasten the day when the necessary statistics are available.”

William Trufant Foster (1879–1950) American economist

Source: The circuit flow of money, 1922, p. 460; Early descriptions of the circular flow of income

“A model is a qualitative or quantitative representation of a process or endeavor that shows the effects of those factors which are significant for the purposes being considered. A model may be pictorial, descriptive, qualitative, or generally approximate in nature; or it may be mathematical and quantitative in nature and reasonably precise. It is important that effective means for modeling be understood such as analog, stochastic, procedural, scheduling, flow chart, schematic, and block diagrams.”

Harold Chestnut (1917–2001) American engineer

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“Knowing serves no real purpose, but then, neither does not knowing. Myself, I always prefer knowing to not.”

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“The purpose of this book is to discuss and present evidence for the general thesis that the flow of energy through a system acts to organize that system.”

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William Trufant Foster13

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