nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒11‒14
fifteen papers chosen by
Bernardo Batiz-Lazo
University of Leicester

  1. Modern British Retailing in the Late 20th Century: Increasing Value? By Carlo Morelli
  2. Tax collection in Spain in the 18th century: the case of the “décima” By Fernández de Pinedo Echevarría, Nadia
  3. Moral hazard in a mutual health-insurance system: German Knappschaften, 1867-1914 By Timothy W. Guinnane; Jochen Streb
  4. The intellectual origins of WTO : Hull’s and Bidwell’s views on organizing the international trade. By Claude Schwob
  5. Revealing Failures in the History of School Finance By Peter H. Lindert
  6. The Suspension of the Gold Standard as Sustainable Monetary Policy By Elisa Newby
  7. The Dynamics of Capitalism By Scherer, F. M.
  8. Were British Cotton Entrepreneurs Technologically Backward? Firm-Level Evidence on the Adoption of Ring-Spinning. By Ciliberto, Federico
  9. Über die Natur und das Wesen des Geldes – Johann Heinrich von Thünens unveröffentlichter Beitrag zur Geldtheorie By Ludwig Nellinger
  10. The accounting profession and professionist in romania By Bunget, Ovidiu-Constantin; Farcane, Nicoleta; Dumitrescu, Alin-Constantin; Popa, Adina
  11. Families as Roommates: Changes in U.S. Household Size from 1850 to 2000 By Alejandrina Salcedo; Todd Schoellman; Michèle Tertilt
  12. The Global 1970s and the Echo of the Great Depression By Alan M. Taylor
  13. The German elections in the 1870s: why Germany turned from liberalism to protectionism By Sibylle Lehmann
  14. A re-evaluation of ideas, interests and politics in repeal: the case of Belgian corn laws, 1834 -1873 By Maarten VAN DIJCK; Tom TRUYTS
  15. The Foundations of Limited Authoritarian Government: Institutions and Power-Sharing in Dictatorships By Boix, Carles; Svolik, Milan

  1. By: Carlo Morelli
    Date: 2009–10
  2. By: Fernández de Pinedo Echevarría, Nadia (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid)
    Abstract: If we compare the Castilian fiscal system with English, French or Dutch, two basic differences are apparent: in one hand, in England, France and Holland the fiscal system was a mixture of indirect taxes and direct taxes and in the other hand, the financial revolution had been carried out in the 16th century in Castilia (central Spain), when for different reasons national short-term debt was turned into juros - or long-term debt. But the Dutch Republic in the 16th century and England by the end of 17th century and the beginning of 18th century were able to finance wars thanks to an efficient financial revolution. Traditionally, wars have been the excuse to impose new taxes or to reorganize public funds in order to obtain greater economic resources for financing the deficit originated by the war. Since most of the monarchies’ tax expenses stemmed from war, it is no surprise that the conflict known as the Jenkins´ Ear (1739) contributed to increase the deficit and fuelled a debate regarding a tax reform that would augment income and would be collected in a more egalitarian way. The Castilian tax system was based almost exclusively on indirect taxes. The taxation (alcabalas, millones, cientos, tobacco monopolies, customs…) of consumables ensured that whilst some taxes affected primarily rich consumers (for example tobacco), most taxes targeted the masses. Increasing the fiscal charge via indirect taxes seemed like an unfeasible and damaging option for trade and craftwork. This is the reason why there was an attempt to create a direct tax, similar to the Catalan cadastre. One of these attempts prior to the Marquis of the Ensenada’s cadastre was la décima. It was devised as a direct tax but its manner of collection ultimately depended on the willingness of the local cabildos.
    Keywords: Taxation, Spain, Madrid, Indirect/Direct Taxes, 18th Century Tax Collection, War Expenses, Jenkin’s Ear War, The “Décima”
    JEL: N33 E62 H71
    Date: 2009–10
  3. By: Timothy W. Guinnane (Yale University, Economic Growth Center); Jochen Streb (University of Hohenheim)
    Abstract: This paper studies moral hazard in a sickness-insurance fund that provided the model for social-insurance schemes around the world. The German Knappschaften were formed in the medieval period to provide sickness, accident, and death benefits for miners. By the mid-nineteenth century, participation in the Knappschaft was compulsory for workers in mines and related occupations, and the range and generosity of benefits had expanded considerably. Each Knappschaft was locally controlled and self-funded, and their admirers saw in them the ability to use local knowledge and good incentives to deliver benefits at low cost. The Knappschaft underlies Bismarck’s sickness and accident insurance legislation (1883 and 1884), which in turn forms the basis of the German social-insurance system today and, indirectly, many social-insurance systems around the world. This paper focuses on a problem central to any insurance system, and one that plagued the Knappschaften as they grew larger in the later nineteenth century: the problem of moral hazard. Replacement pay for sick miners made it attractive, on the margin, for miners to invent or exaggerate conditions that made it impossible for them to work. Here we outline the moral hazard problem the Knappschaften faced as well as the internal mechanisms they devised to control it. We then use econometric models to demonstrate that those mechanisms were at best imperfect.
    Keywords: sickness insurance, moral hazard, Knappschaft, social insurance
    JEL: N33 N43 H55 H53 I18
    Date: 2009–09
  4. By: Claude Schwob
    Abstract: Unlike the monetary and financial international organizations which where born during World War II and in the immediate post-war years, the WTO was created only in 1994. The GATT negotiated in 1947 was initially conceived as a temporary agreement while waiting for the creation of an International Trade Organization, which was finally never created. Nevertheless as like as in financial matters, some thinkers have built projects on such an organization before and during World War II. Among them there are two Americans: Cordell Hull and Percy Wells Bidwell. This paper compares both projects and investigates whether it can be said that Hull was the spiritual father of the WTO as some of the Cordell Hull Institute papers claim it.
    Keywords: Theory of International Organizations, Bilateralism, Multilateralism, History of International Organizations, International Trade Negotiations, International Trade Organization, World Trade Organization.
    JEL: B10 B20 F02 F13 F53
    Date: 2009
  5. By: Peter H. Lindert
    Abstract: This essay proposes a set of non-econometric tests using data on wage structure, school resource costs, public expenditures, taxes, and rates of return to explain anomalies in which richer political units deliver less education than poorer ones. Both the anomalies of education history, and its less surprising contrasts, fit broad patterns that can be revealed and partially explained using low-tech methods. Over most of human history, contrasts in the output of education were driven mainly by contrasts in the supply of tax support for mass education. Exogenous influences on the demand for, and the private supply of, education played only lesser roles. Pro-growth public education could have emerged a century or two earlier than it did, had the leading countries of Western Europe mustered the political will to fund it. Government underinvestment in mass education is demonstrated for England and Wales between 1717 and 1891. Differences in political support still account for most of today’s education anomalies where the contrasts involve less developed regions. In today’s highest-income settings, however, differences in tax funding lose their previous explanatory power. The postwar shift away from strong effects of school resources calls for a renewed introduction of historical context into the “does money matter†debate.
    JEL: H23 H52 N3 N30 O15
    Date: 2009–11
  6. By: Elisa Newby
    Abstract: This paper models the gold standard as a state contingent commitment technology that is only feasible during peace. Monetary policy during war, when the gold convertibility rule suspended, can still be credible, if the policy maker’s plan is to resume the gold standard in the future. The DGE model developed in this paper suggests that the resumption of the gold standard was a sustainable plan, which replaced the gold standard as a commitment technology and made monetary policy time consistent. Trigger strategies support the equilibrium: private agents retaliate if a policy maker defaults its plan to resume the gold standard.
    Keywords: Time Consistency, Monetary Policy, Monetary Regimes.
    JEL: C61 E31 E4 E5 N13
    Date: 2009–06
  7. By: Scherer, F. M. (Harvard University)
    Abstract: In this chapter, capitalism is viewed as the set of economic relationships that emerged with the rise of the industrial or factory system during the 18th Century. To be sure, there were earlier precedents--e.g., the commercial ventures, local and international, of Venetian and Florentine businessmen during the Renaissance. But here we focus on production in privately owned, often capital-intensive, facilities embodying ever more advanced technologies--a phenomenon whose origins are commonly characterized as the Industrial Revolution. The Industrial Revolution set in motion dynamic forces that will be our primary concern here. Most important among them are technological advances that propelled accelerated economic growth, changes in the structure of enterprise ownership and in the distribution of income among workers and owners, and a tendency toward more or less cyclical fluctuations in economic activity. These will be the "dynamics" on which this essay focuses.
    Date: 2009–10
  8. By: Ciliberto, Federico
    Abstract: I study the slow adoption of ring-spinning in Great Britain's cotton industry at the end of the 19th century, which has been used as evidence of British entrepreneurs' declining efficiency and conservatism (Musson [1959], Aldcroft, [1964], Lazonick [1981, 1981b]). To this purpose I use firm-level data from all of Lancashire's cotton firms over several years. The data are from the Worrall's Cotton Spinners' and Manufacturers' Directories for the years 1885, 1886-1887, 1890, 1894, 1902, and 1910. First, I show that the vertical organization of the industry, with its firms specializing in spinning or weaving, did not act as an impediment to the adoption of the ring-spinning technology, as was argued by Lazonick. In particular, I show the following: i) non-integrated firms were the first to adopt rings in Great Britain; ii) the large majority of firms that adopted rings were incumbents; iii) vertically integrated firms that were spinning only either twist or weft yarn were still in existence in 1910; and iv) only a negligible number of firms changed their organizational structure upon adopting ring spinning. I also show that a large fraction of firms installed very small numbers of ring spindles upon the adoption of ring spinning, suggesting that firms were slowly adopting ring spindles to replace old mule spindles rather than transitioning over to ring spinning at a single point in time. Then, I show that the rate at which vertically integrated firms adopted rings suddenly accelerated after 1902. I interpret this as evidence that British entrepreneurs were fully aware of the technological complementarities between rings and automatic looms. These complementarities could only be fully exploited by vertically integrated firms.
    Keywords: Ring Spinning; Technology Adoption; Cotton Industry; Lancashire; Vertical Integration; Specialization.
    JEL: N63 L67 L22
    Date: 2009–11–10
  9. By: Ludwig Nellinger
    Abstract: The economic works of Johann Heinrich von Thünen include 1,000 unpublished pages of drafts and notes on the basis of which he prepared the second volume of his famous “Isolated State in Relation to Agriculture and Political Economy”. Thünen wrote his texts in the so-called Deutsche Kanzleischrift, a script which can be read today only by specialised histori-ans, rarely by economists. In a first part of a research project of the Thünen-Gesellschaft e.V. 300 pages were transliterated, from which the first 60 pages were reviewed until October 2009. It becomes obvious that Thünen’s work is much more far-reaching than the contributions pub-lished by himself or edited by Schumacher in 1863 and 1875 show. Its bulk was not made accessible until today. This can be easily demonstrated by the content of these first 60 pages, especially those treating monetary questions and preparing Thünen’s theory of capital and interest. Thünen starts his analysis with a description of the diminishing return of money keeping in an enterprise. He considers both the exchange and the stock function of money. He describes the pros and cons of the creation of paper money as a substitute for coins. Thünen is the first economist who develops an extended quantity theory of money by introducing the velocity of money transactions and formulating the correct algebraic formula. He anticipates the famous Newcomb-Fisher equation but with one difference: in Thünen’s opinion the prod-uct of velocity and quantity of money primarily determines the value of circulating capital goods and assets, an argument which has to be understood with the contemporary rural eco-nomic conditions in mind. He analyses the liquidity effect of positive exogenous money shocks. By describing the adap-tation processes in the case of differences between the monetary market interest rate and the real rate of return on capital goods, Thünen presents important mechanisms of Knut Wick-sell’s “Interest and Prices”, which were published 75 years later and still inspire the monetary economists today. In accordance with Henry Thornton, he adequately describes the conse-quences of liquidity preference in the case of uncertain economic situations. In our opinion Thünen’s 1823 contribution is of the same quality as the contributions of the leading monetary theorists in the early 19th century, David Ricardo and Henry Thornton. With respect to the further theoretic development in the nineteenth and twentieth century and from the perspective of modern monetary theory, Thünen’s drafts are an unexpected discov-ery and of particular interest in the current financial and economic crisis. The paper concludes with a preliminary assessment of Thünen’s text in the context of the sec-ond volume of the “Isolated State”, which was published in 1850 and which contains Thünen’s “Theory of Capital and Interest”.
    Keywords: Dogmengeschichte, Kapital- und Zinstheorie, Quantitätstheorie, Verkehrs-gleichung, Geldnachfrage, Liquiditätspräferenz
    JEL: B13 B16 D53 E31 G12
    Date: 2009
  10. By: Bunget, Ovidiu-Constantin; Farcane, Nicoleta; Dumitrescu, Alin-Constantin; Popa, Adina
    Abstract: An overview of the accounting profession’s evolution in Romania can only be a cause for reflection. As far as Romania is concerned, the accounting profession’s development rhythm followed the pace of the economic, social and political development of the country: first, formally speaking, as an association of graduates, subsequently organized as an association of public interest. The character of a liberal profession could occur whenever the market economy worked. The political and social changes of the mid-20th century generated a decrease of the economic importance of professional accounting mechanisms, as well as its position within the socialist system, especially in view of achieving accounting regulation expertise. Actually, the political events of 1989 led to a return to a period interrupted, about 50 years before. But the size and economic specificities were much different. This caused a rethinking of the accounting expert’s position, divisions in the accounting profession (Romanian Body of Experts and Chartered Accountants, Romanian Chamber of Auditors, the Chamber of Tax Consultants, etc.).
    Keywords: accountants; audit; Romanian Chamber of Auditor; Romanian Body of Experts and Chartered Accountants
    JEL: M40
    Date: 2009–11–05
  11. By: Alejandrina Salcedo; Todd Schoellman; Michèle Tertilt
    Abstract: Living arrangements have changed enormously over the last two centuries. While the average American today lives in a household of only three people, in 1850 household size was twice that figure. Further, both the number of children and the number of adults in a household have fallen dramatically. We develop a simple theory of household size where living with others is beneficial solely because the costs of household public goods can be shared. In other words, we abstract from intra-family relations and focus on households as collections of roommates. The model's mechanism is that rising income leads to a falling expenditure share on household public goods, which endogenously makes household formation less beneficial and privacy more attractive. To assess the magnitude of this mechanism, we first calibrate the model to match the relationship between household size, consumption patterns, and income in the cross-section at the end of the 20th century. We then project the model back to 1850 by changing income. We find that our proposed mechanism can account for 37 percent of the decline in the number of adults in a household between 1850 and 2000, and for 16 percent of the decline in the number of children.
    JEL: D1 E1 J11 N30 O1
    Date: 2009–11
  12. By: Alan M. Taylor
    Abstract: The Great Depression ushered in a long era of deglobalization that lasted for many decades. An old conventional wisdom (e.g. Polanyi) argues that the common aspect of this shock across all countries, a deep depression, can explain the large and persistent global shift away from orthodox liberal economic policies—including, for example, the collapse of free trade. Yet there is substantial unexplored variation, since not all countries experienced the same depth of shock in the 1930s. Hence, if the “policy path dependence†argument is correct, we should be able to detect it using this variation. Those countries with deeper slumps ought to have seen policy shifts that were larger and more persistent. A fuller economic history of the reglobalization of the postwar period should confront this question, and we present some preliminary evidence for the path dependence hypothesis.
    JEL: N10 N40 N70
    Date: 2009–11
  13. By: Sibylle Lehmann (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: In 1878 the liberal parties lost enough votes to loose the majority in the parliament which they had defended in the general election just one year before. In this paper, the question of where the voters came from and why the voting changed so crucially within one year are re-examined. The analysis uses a new set of data aggregated at a lower level than those examined by previous stud-ies and makes use of King’s Algorithm, a tool provided by modern political science. The main finding of this paper is that the change towards protectionism was not caused by new, but by floating voters from the agricultural sector.
    JEL: C11 D78 H83 N43
    Date: 2009–10
  14. By: Maarten VAN DIJCK; Tom TRUYTS
    Abstract: Economic interests, the influence of economic ideas and politics have been put forward in the literature as explanations for the British Repeal of the Corn Laws in 1846. In this paper, we will evaluate these competing explanations using the case of the liberalization of Belgian corn tariffs. The Belgian protectionist Corn Laws of 1834 were abolished in different steps between 1845 and 1873. The first part of this paper uses quantitative methods to assess the success of party affiliation, personal interests and the economic profile of the constituencies in predicting voting behavior. Thanks to the detailed censuses of 1846 on agriculture, industry and population, it is possible to typify the economic make-up of the electoral districts in much more detail than in the British case. However, the analysis of roll-call voting proves that party affiliation and personal and constituency economic interests are insufficient to explain the shift towards free trade. The second part of the paper then discusses the role played by political strategy and ideas in the liberalization of corn tariffs, using a qualitative analysis of the debates on tariff policy. The large number of votes over a forty year period allows us to document the relationship between ideas and interests in a new way.
    Date: 2009–09
  15. By: Boix, Carles (Princeton University); Svolik, Milan (University of Illinois at Urbana-Champaign)
    Abstract: Why do some dictatorships establish institutions that are typically associated with democracy, such as legislatures or political parties? We propose a new theoretical model of institutions and power-sharing in dictatorships. We argue that by facilitating power-sharing, political institutions promote the survival of dictatorships. However, authoritarian power-sharing through institutions is feasible only when it is backed by the crude but credible threat of a rebellion by the dictator's allies. Whereas the allies' political opportunities determine the credibility of the threat of a rebellion, institutions alleviate the commitment and monitoring problems that stem from the secrecy in authoritarian governance. We use both historical and large-N data to assess these new predictions about the relationship between political institutions, dictator tenure, and the concentration of power in dictatorships.
    Date: 2009

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