New Economics Papers
on Business, Economic and Financial History
Issue of 2010‒02‒20
nineteen papers chosen by

  1. Exits from Recessions: The U.S. Experience 1920-2007 By Michael D. Bordo; John Landon-Lane
  2. In Favor of Rigor and Relevance. A Reply to Mark Blaug By Kurz, Heinz D.; Salvadori, Neri
  3. Manumission in Nineteenth Century Virginia By Howard Bodenhorn
  4. The Strength and Persistence of Entrepreneurial Cultures By Foreman-Peck, James; Zhou, Peng
  5. Does the Structure of Banking Markets Affect Economic Growth? Evidence from U.S. State Banking Markets By Kris James Mitchener; David C. Wheelock
  6. International economic theory and politics: world structure before, during and after the early 21st Century Crisis By Naqvi, Nadeem
  7. The Contributions of Two Eminent Japanese Scholars on the Development of Economic Theories: Michio Morishima and Takashi Negishi By Kurz, Heinz D.
  8. Property Rights and Parliament in Industrializing Britain By Daniel Bogart; Gary Richardson
  9. The Elasticity of Demand With Respect to Product Failures; or Why the Market for Quack Medicines Flourished for More Than 150 Years By Werner Troesken
  10. From Public to Private: Privatization in 1920's Fascist Italy By Germa Bel
  11. A Patchwork Safety Net: A Survey of Cliometric Studies of Income Maintenance Programs in the United States in the First Half of the Twentieth Century By Price V. Fishback; Samuel Allen; Jonathan Fox; Brendan Livingston
  12. Industry and services in growth and structural change in India: some unexplored features By Mazumdar, Surajit
  13. Dissonance and harmony: a study of the recognition of artists in modernistic music in Brussels; 1919-1939 By Boone Ch.; Declerck C.H.; Rao H.; Van Den Buys K.
  14. Corporate social responsibility: One size does not fit all. Collecting evidence from Europe By Argandoña, Antonio; von Weltzien Hoivik, Heidi
  15. Interest Rate Risk and Other Determinants of Post-WWII U.S. Government Debt/GDP Dynamics By George J. Hall; Thomas J. Sargent
  16. BREAKING THROUGH THE SELFFULFILLING PROPHECY OF CSR By Nijhof, André; Zwart, Alex van der; Jonker, Jan
  17. Edgeworth vs. Walras on Equilibrium and Disequilibrium By Franco Donzelli
  18. The Beat of the Economic Heart: Joseph Schumpeter and Arthur Spiethoff on Business Cycles By Kurz, Heinz D.
  19. The monetary mechanics of the crisis By Jürgen von Hagen

  1. By: Michael D. Bordo; John Landon-Lane
    Abstract: In this paper we provide some evidence on when central banks have shifted from expansionary to contractionary monetary policy after a recession has ended—the exit strategy. We examine the relationship between the timing of changes in several instruments of monetary policy and the timing of changes of selected real macro aggregates and price level (inflation) variables across U.S. business cycles from 1920-2007. We find, based on historical narratives, descriptive evidence and econometric analysis, that in the 1920s and the 1950s the Fed would generally tighten when the price level turned up. By contrast, since 1960 the Fed has generally tightened when unemployment peaked and this tightening often occurred after inflation began to rise. The Fed is often too late to prevent inflation.
    JEL: N12
    Date: 2010–02
  2. By: Kurz, Heinz D.; Salvadori, Neri
    Abstract: The paper discusses Mark Blaug’s recent criticisms of “Sraffian economics”. It is shown that none of the criticisms stand up to close examination. Blaug commits a number of elementary blunders and mistakes the mathematical form of an argument for its content. He variously contradicts himself and puts forward bold contentions that cannot be sustained. The paper concludes with an obvious plea for rigor and relevance.
    Keywords: Piero Sraffa;Mark Blaug; General Equilibrium
    JEL: B51 D50 B12 A12 A11
    Date: 2010–02–04
  3. By: Howard Bodenhorn
    Abstract: A long-standing debate concerns the rationality of slave owners and this paper addresses that debate within the context of manumission. Using a new sample of 19th-century Virginia manumissions, I show that manumission was associated with the productive characteristics of slaves. More productive slaves were manumitted at younger ages than less productive slaves. Although more productive slaves were more valuable to slave owners, which might be expected to delay manumission, more productive slaves faced more attractive labor market opportunities outside slavery, which elicited greater effort within slavery in order to buy their way out of slavery. Further, this paper addresses three important and two emergent literatures: the economics of slavery; the economics of stature; and the economics of complexion. The results reveal that height, complexion, and sex were the principal determinants of age at manumission.
    JEL: N3
    Date: 2010–01
  4. By: Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School)
    Abstract: Becoming an entrepreneur requires both motivation and opportunity. Motivation may be determined by collective experience or 'culture', as well as by personality. Whether a culture is conducive or harmful to entrepreneurship can only be established if the influence of institutions that determine opportunity is controlled. The twentieth century United States provides a natural experiment to measure the strength and persistence of entrepreneurial cultures. Assuming immigrants bear the cultures of their birth place, comparison of revealed entrepreneurial propensities of US immigrant groups in 1910 and 2000 will reflect these backgrounds. According to this test North-western Europe, where modern economic growth is widely held to have originated, did not host unusually strong entrepreneurial cultures, rather the reverse in the case for England. The most precocious and durable entrepreneurial cultures were exhibited by those originating from Greece, Turkey and Italy, together with Jews. Max Weber's identification of nineteenth century Catholic culture as inimical to economic development is not born out in the twentieth century by the sustained entrepreneurship of Cubans and Italians. A major cultural change over the century, that by the end had initiated widespread female entrepreneurship, also ensured that this trait systematically responded less strongly to the origin background than did male entrepreneurship.
    Keywords: Entrepreneurship; Culture; Migration
    JEL: D01 J15 J23 J61
    Date: 2009–12
  5. By: Kris James Mitchener; David C. Wheelock
    Abstract: This paper examines the relationship between the structure of banking markets and economic growth using a new dataset on manufacturing industry-level growth rates and banking market concentration for U.S. states during 1899-1929—a period when the manufacturing sector was expanding rapidly and restrictive branching laws segmented the U.S. banking system geographically. Unlike studies of modern developing and developed countries, we find that banking market concentration had a positive impact on manufacturing sector growth in the early twentieth century, with little variation across industries with different degrees of dependence on external financing or access to capital. However, because regulations affecting bank entry varied considerably across U.S. states and the industrial organization of the U.S. banking system differs markedly from those of other countries, we also examine the impact of other aspects of banking market structure and policy on growth. We continue to find that banking market concentration boosted industrial growth. In addition, we find evidence that a greater prevalence of branch banking and more banks per capita increased the growth of industries that rely relatively heavily on external financing or have greater access to external funding sources, while deposit insurance depressed growth in the manufacturing sector. Regulations on bank entry and other banking market characteristics thus appear to exert an independent influence on manufacturing growth in geographically fragmented banking markets.
    JEL: E44 G21 G38 N11 N12 N21 N22 O16 O47
    Date: 2010–01
  6. By: Naqvi, Nadeem
    Abstract: In his Inquiry into the Nature and Causes of the Wealth of Nations Adam Smith (1776) considered the phenomenon of division of labor so enormously significant for the creation of a nation’s wealth that he devoted the first three chapters of his book to an investigation of this process. This is an ongoing process of greater and greater specialization, and there have been episodes of faster pace, and some slower pace, but the process has never stopped so far in human history. However, this process, carried far enough, can eventually results in episodes, sometimes painfully prolonged, in which there emerges a divergence between the distribution of quantities supplied of horizontally-differentiated distinct types of human capital embodied in different persons and distribution of quantities demanded of persons with distinct skills by employers, private or public, or otherwise. This sustained divergence of supply and demand distributions of distinct skill categories may be called Embodied Human Capital Unemployment. This is a phenomenon not seen before in social history, simply because specialization of persons in very narrowly partitioned skill types that are, effectively, non-transferable across different persons, had never occurred before in our history. That is why it is a new phenomenon, and it is time we understood what it is. Moreover, it has an abiding character, a stationary state nature, and (1) thus should emerge as an equilibrium phenomenon in a fully specified general equilibrium model of a market economy, and (2) should be of concern to us, since it is going to be around for a while as we all live our lives. I illustrate the relevance of this new concept of unemployment to the U.S economy in the first decade of the 21st Century. This helps achieve a deeper understanding of the current global economic crisis, and inter alia to identification of potentially effective, and potentially ineffective, public policies. Additional implications are (b) the emergence of a new social formation that may be called World Market Capitalism, which has a vastly different economic foundation of relations of production and income distribution compared to the pre-21st Century economic system that then existed in the world, and (c) the transition from a uni-polar world, with the U.S.A. as the single center of power, after the fall of the Soviet Union in 1989, to a multi-polar world order at the end of the first decade of the 21st Century, with implications for strategic interaction and coalition formation. (403 words)
    Keywords: Marxian; Keynesian; human capital; unemployment; economic; financial; political; crisis; globalization; capitalism; international capital mobility; division of labor; Adam Smith; USA; China; India; Japan
    JEL: F16 N10 F54 P16 J62 E30 E24 N30 F01 F21 D50 O24 J01 E44 E10 E60 P50 F11 F02 F41 I28
    Date: 2010–02–07
  7. By: Kurz, Heinz D.
    Abstract: There can be no doubt that Michio Morishima and Takashi Negishi are two of the most important historians of economic thought of the recent past. Both authors contributed numerous papers and books to the subject, dealing with the works of major economists from the very inception of systematic economic thought at the time of the classical economists up until modern times. And both authors combined a vivid interest in modern economic theory with an interest in what past masters had to say. The paper assesses and compares the motivations of the two authors to engage in the history of economic theories, their similar, but different approaches to do historical research, and their achievements in this regard. Given the remarkable amount of work each one of them accomplished, the paper has to focus attention on a subset of the themes the two authors dealt with. The emphasis will be on (i) their treatment of the classical theories of value, distribution and capital accumulation, especially those of Adam Smith and David Ricardo, (ii) their discussion of the contributions of Karl Marx and some Marxists, (iii) their interpretation of some early and mature marginalist economists, especially Léon Walras, Eugen von Böhm-Bawerk and Knut Wicksell, and (iv) their views about the achievements of John Maynard Keynes. Given the intrinsic complexity of each of these themes, it goes without saying that the paper is bound to proceed largely in terms of synthetic statements.
    Keywords: Negishi; Takashi; Morishima; Michio; general equilibrium; Marxist economics; trade; growth
    JEL: B31 C02 B16
    Date: 2010
  8. By: Daniel Bogart; Gary Richardson
    Abstract: During Britain’s industrialization, Parliament operated a forum where rights to land and resources could be reorganized. This venue enabled landholders and communities to exploit economic opportunities that could not be accommodated by the inflexible rights regime inherited from the past. In this essay, historical evidence, archival data, and statistical analysis demonstrate that Parliament increased the number of acts reorganizing property rights in response to increases in the demand for such acts. Tests with placebo groups confirm the robustness of this result. This evidence indicates that Parliament responded elastically to changes in the public’s demand for reorganizing property rights. Parliament’s efforts to adapt property rights to modern economic conditions may have accelerated Britain’s economic ascent
    JEL: K0 K11 K4 L9 N33 N43 N53 N7 N9 O13 O2 O25 O52 P1 P14 P16 P17 P26 P48 R14 R38 R4 R52
    Date: 2010–01
  9. By: Werner Troesken
    Abstract: Between 1810 and 1939, real per capita spending on patent medicines grew by a factor of 114; real per capita GDP by a factor of 5. The long-term growth and survival this industry is puzzling when juxtaposed with standard historical accounts, which typically portray patent medicines as quack medicines. This paper argues that patent medicines were distinguished from other products by an unusually low elasticity of demand with respect to product failure. While consumers in other markets stopped searching for a viable product after a few failed attempts, consumers of patent medicines kept trying different products, irrespective of the number of failed medicines they observed. The market expanded as the stock of people buying potential cures accumulated over time. Because no one was ever cured and consumers possessed a highly inelastic demand with respect to product failures, demand was unrelenting. In short, patent medicines flourished not despite their dubious medicinal qualities, but because of them. There is also evidence that genuine medical advances, such as the rise of the germ theory of disease and new therapeutic interventions, helped expand the market for quack medicines.
    JEL: N0
    Date: 2010–01
  10. By: Germa Bel
    Abstract: Italy’s first Fascist government applied a large-scale privatization policy between 1922 and 1925. The government privatized the state monopoly of match sale, eliminated the State monopoly on life insurances, sold most of the State-owned telephone networks and services to private firms, reprivatized the largest metal machinery producer, and awarded concessions to private firms to build and operate motorways. While ideological considerations may have had a certain influence, privatization was used mainly as a political tool to build confidence among industrialists and to increase support for the government and the Partito Nazionale Fascista. Privatization also contributed to balancing the budget, which was the core objective of Fascist economic policy in its first phase.
    Keywords: Privatization,Public Enterprise,Government,Fascist Economy,Italy
    Date: 2009–09–01
  11. By: Price V. Fishback; Samuel Allen; Jonathan Fox; Brendan Livingston
    Abstract: Social welfare programs in the United States are designed to serve as safety nets for people in hard times, in contrast with the universal approach found in many other developed western nations. In a survey of Cliometric studies of social welfare programs in the U.S., we examine the variation in the safety net in the U.S. across states in the 20th century, the determinants of the variation, and its impact on socioeconomic outcomes. The U.S. has always displayed substantial variation in the extent of the safety net because the features of most public social welfare programs are and were determined by local and state governments, even after the federal government became involved. Differences across states persist strongly for typically a decade, although the persistence weakens with time, and there are some periods when federal intervention led to a re-ordering. The rankings of state benefits differs from program to program, and economic and political factors have different weights in determining benefit levels in panel data estimation of their effects. Variation in benefits across programs during the early 1900s had significant impact on labor markets, economic activity, family formation, death rates, and crime.
    JEL: H53 H75 N32 N42 R50
    Date: 2010–01
  12. By: Mazumdar, Surajit
    Abstract: This paper briefly presents an analytical description of the twin processes of growth of output and change in its composition in the Indian economy since independence, by looking at the time-paths of the two dimensions simultaneously. It suggests that three turning points located respectively in the mid-1960s, 1980, and the mid-1990s separate the entire period after independence into four sequential phases of growth and structural change. This periodization of India’s post-independence economic history points towards the need to go beyond relating the dynamics of the Indian economy to exclusively the degree to which the prevalent economic policy regime was interventionist or liberal in different periods
    Keywords: Growth; Structural Change; India
    JEL: O53 O10
    Date: 2010–01
  13. By: Boone Ch.; Declerck C.H.; Rao H.; Van Den Buys K.
    Abstract: What explains the recognition gained by artists? Is it learning by doing? Or is it social structure? We study the recognition gained by modernistic composers in Belgium during the interwar years,and find that learning by doing increases recognition for pioneers, and that it matters only when there is fragmentation of the genre. However, novices secured recognition if they worked in a genre allied with a political ideology; more specifically, when the far right parties gained ground reflecting the rise of Flemish nationalism, expressionists belonging to the German pole garnered more recognition even if they were novices. Taken together, these results suggest that worlds of art shape the fates of works of art.
    Date: 2009–12
  14. By: Argandoña, Antonio (IESE Business School); von Weltzien Hoivik, Heidi (Norwegian School of Management)
    Abstract: This article serves as an introduction to the collection of papers in this monographic issue on "What the European tradition can teach about Corporate Social Responsibility" and presents the project's rationale and main hypotheses. We maintain that Corporate Social Responsibility (CSR) is an ethical concept, that demands for socially responsible actions have existed since before the Industrial Revolution and that companies have responded to them, especially in Europe, and that the content of CSR has evolved over time, depending on historical, cultural, political and socio-economic drivers and particular conditions in different countries and also at different points in time. Therefore, there is not - and probably cannot be - a single, precise definition of CSR: one global standard for CSR is unlikely.
    Keywords: Business ethics; corporate social responsibility; responsibility; welfare state;
    Date: 2009–11–07
  15. By: George J. Hall; Thomas J. Sargent
    Abstract: This paper uses the sequence of government budget constraints to motivate estimates of interest payments on the U.S. Federal government debt. We explain why our estimates differ conceptually and quantitatively from those reported by the U.S. government. We use our estimates to account for contributions to the evolution of the debt to GDP ratio made by inflation, growth, and nominal returns paid on debts of different maturities.
    JEL: E31 E43 H6
    Date: 2010–01
  16. By: Nijhof, André; Zwart, Alex van der; Jonker, Jan (Nyenrode Business Universiteit)
    Abstract: Since the last decades of the twentieth century the debate on the concept of corporate social responsibility (CSR) intensified significantly. This debate concentrates on the meaning, impact and possible gains from CSR. Alongside the growing number of CSR advocates there are also a number of CSR critics. Especially NGOs, plus some consultants, business representatives, academics and politicians have published critical articles on the development and progress of CSR. These articles are generally published in newspapers, on CSR websites and in press releases and, as a consequence, gain only limited attention in academic publications. In this article, these observations are collected, categorized and analyzed, leading to a typology consisting of ten critical viewpoints regarding the progress of CSR. Each of these viewpoints is discussed in more detail and supplemented with empirical examples together with references to academic literature.
    Keywords: Corporate Social Responsibility (CSR), Non-Governmental Organizations (NGO), Critical perspective, stakeholders, media
    Date: 2009
  17. By: Franco Donzelli (University of Milano)
    Abstract: In a brief review of the second edition of Walras's Eléments, published in 1889, Edgeworth criticizes Walras's theory of tâtonnement, viewed as a misplaced and misleading attempt at explaining the equilibration process in a multi-market economy. Edgeworth's attack sets off a controversy, raging over the 1889-1891 period, and then smouldering over the entire lives of both economists. The chief aim of this paper is to analyze the joint evolution of Edgeworth's and Walras's ideas on equilibrium and equilibration from the 1889-1891 controversy onwards. Even if Edgeworth's original critique concerns Walras's tâtonnement only, it will be proved that the fundamental divide between the two authors involves not only the dynamic, but also the static part of their respective theoretical systems. The Edgeworth-Walras controversy will be shown to produce major effects on both Walras and Edgeworth: both of them will partially revise their ideas on statics and dynamics; further, either one will take in some hints originating from the other. Yet, in spite of their reciprocal influences, their mutual communication will turn out to be quite limited. For Edgeworth will prove unable to understand the central, and unsolvable, problem of tâtonnement from Walras's own standpoint: how to preserve a "realistic" and comprehensive picture of an observable disequilibrium process in "real" time, without disrupting the assumption of data invariance during the equilibration process. At the same time Walras will prove unable to grasp the essence of Edgeworth's critique: that bargaining is more "fundamental" than price-taking behavior, so that the core is a broader solution concept than competitive equilibrium and recontracting a more general equilibration process than tâtonnement.
    Keywords: Edgeworth, Walras, equilibrium, disequilibrium, statics, dynamics,
    Date: 2009–11–27
  18. By: Kurz, Heinz D.
    Abstract: The paper discusses the relationship between Arthur Spiethoff and Joseph A. Schumpeter, the men and their works. Had it not been for Spiethoff Schumpeter would in all probability have forever been lost to scientific work. It was Spiethoff who brought the Austrian back to academia and research after a sequence of serious mishaps in politics and banking. Spiethoff's contribution to an analysis of business cycles is then summarized and important similarities and some differences between it and Schumpeter's are pointed out. The view of Spiethoff and Schumpeter that cycles are endogenous and cannot possibly be eliminated without at the same time eliminating the dynamism of the capitalist economy is then couterposed with views of some of their contemporaries and particularly modern mainstream macroeconomics that this is not so.
    Keywords: Schumpeter; Spiethoff; business cycles; innovations; creative destruction
    JEL: B31 E32 O31 O12
    Date: 2010–01
  19. By: Jürgen von Hagen
    Abstract: In response to the financial and economic crisis, central banks, unlike in the 1930s, have created enormous amounts of money. There are fears that this will lead to inflation, but it is base money (the central bank's liabilities) that has expanded; total monetary aggregates have not. By contrast, in the 1930s, base money remained stable and monetary aggregates dropped. The reason for this is that in a crisis the relationship between the base money and monetary aggregates is altered. The money multiplier drops. It is therefore necessary to create more base money so that monetary aggregates remain stable. This is what central banks have done in the current crisisand rightly so. They have learned the lessons of the Great Depression. This framework helps understand differences across countries. The crisis affected the euro area money and credit supply process much less than the US and the UK. Therefore, the European Central Bank was right to respond to the crisis with a less expansionary monetary policy than the Bank of England and the Federal Reserve. However, stabilising the money supply may not have been enough to stabilise the supply of credit.
    Date: 2009–08

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