New Economics Papers
on Business, Economic and Financial History
Issue of 2010‒04‒11
eleven papers chosen by

  1. The Institution of Douglass North By McCloskey, Deirdre Nansen
  2. Diet, Health and Work Intensity in England and Wales, 1700-1914 By Bernard Harris; Roderick Floud; Robert W. Fogel; Sok Chul Hong
  3. Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century. By Cette, G.; Kocoglu, Y.; Mairesse, J.
  4. Serial Defaults, Serial Profits: Returns to Sovereign Lending in the Age of Philip II By Drelichman, Mauricio; Voth, Hans-Joachim
  5. The Monetary and Banking Reforms During the 1930 Depression in Argentina By Roberto Cortes Conde
  6. On the Historical Process of the Institutionalizing Technical Education: The Case of Weaving Districts in the Meiji Japan By Tomoko Hashino
  7. Commodity Chains: what can we learn from a business history of the rubber chain? (1870-1910) By Felipe Tamega Fernandes
  8. The Trend of Mean BMI Values of US Adults, Birth Cohorts 1882-1986 Indicates that the Obesity Epidemic Began Earlier than Hitherto Thought By John Komlos; Marek Brabec
  9. Using Innovations Surveys for Econometric Analysis By Jacques Mairesse; Pierre Mohnen
  10. Modern Finance, Methodology and the Global Crisis By Esteban Pérez Caldentey; Matías Vernengo
  11. Cross-Section of a ‘Bubble’: Stock Prices and Dividends during the British Railway Mania By Campbell, Gareth

  1. By: McCloskey, Deirdre Nansen
    Abstract: North, with many other Samuelsonian economists, thinks of “institutions” as budget constraints in a maximization problem. But as Clifford Geertz put it, an institution such as a toll for safe passage is “rather more than a mere payment,” that is, a mere monetary constraint. “It was part of a whole complex of moral rituals, customs with the force of law and the weight of sanctity.” The Geertzian metaphor of negotiation and ritual makes more sense than the metaphor of a mere budget constraint. Meaning matters. North in particular thinks that the budget line of anti-property violence was shifted in the late 17th century. It was not: on the contrary, England was a land of property rights from the beginning. So “institutional change” does not explain the Industrial Revolution. The timing is wrong. Incentive (Prudence Only) is not the main story, and cannot be the main story without contradiction: if it was Prudence Only the Industrial Revolution would have happened earlier, or elsewhere. Other virtues and vices mattered—not only prudence, beloved of the Samuelsonians; but temperance, courage, justice, faith, hope, and love, which changed radically in their disposition in the seventeenth and eighteenth centuries. Sheer commercial expansion is routine and predictable and ill-suited therefore to explaining the greatest surprise in economic history. The Glorious Revolution of 1689, which North and Weingast have cast in a central role, merely made the British state effective. It did not change property rights, as economists such as Darin Acemoglou have supposed, on the basis of North’s tale. North praises patents and incorporation laws, neither of which had much impact in the Industrial Revolution. The 18th century, in other words, was not a century of “institutional change.” Nor is the entire absence of property relevant to the place or period. Richard Pipes argued it was relevant, on the basis of the Russian case. Yet only in society’s dominated by Steppe nomads was property weak---in Europe in the 16th and 17th centuries, as in China then, it had been strong for centuries past. The Stuarts were not princes of Muscovy. And indeed private property characterizes all settled human societies.
    Keywords: Douglass North; Industrial Revolution; institutions; Clifford Geertz; institutional change; virtues
    JEL: N00
    Date: 2009–07
  2. By: Bernard Harris; Roderick Floud; Robert W. Fogel; Sok Chul Hong
    Abstract: In their different ways, both Thomas Malthus and Thomas McKeown raised fundamental questions about the relationship between food supply and the decline of mortality. Malthus argued that food supply was the most important constraint on population growth and McKeown claimed that an improvement in the population’s capacity to feed itself was the most important single cause of mortality change. This paper explores the implications of these arguments for our understanding of the causes of mortality decline in Britain between 1700 and 1914. It presents new estimates showing changes in the calorific value and composition of British diets in 1700, 1750, 1800 and 1850 and compares these with the official estimates published by the Royal Society in 1917. It then considers the implications of these data in the light of new arguments about the relationship between diet, work intensity and economic growth. However the paper is not solely concerned with the analysis of food-related issues. It also considers the ways in which sanitary reform may have contributed to the decline of mortality at the end of the nineteenth century and it pays particular attention to the impact of cohort-specific factors on the pattern of mortality decline from the mid-nineteenth century onwards.
    JEL: I1 I3 N3
    Date: 2010–04
  3. By: Cette, G.; Kocoglu, Y.; Mairesse, J.
    Abstract: This study compares labor and total factor productivity (TFP) in France, Japan, the United Kingdom and the United States in the very long (since 1890) and medium (since 1980) runs. During the past century, the United States has overtaken the United Kingdom and become the leading world economy. During the past 25 years, the four countries have also experienced contrasting advances in productivity, in particular as a result of unequal investment in information and communication technology (ICT). The past 120 years have been characterized by: (i) rapid economic growth and large productivity gains in all four countries; (ii) a long decline in productivity in the United Kingdom relative to the United States, and to a lesser extent also relative to France and Japan, a relative decline that was interrupted by the second world war (WW2); (iii) the remarkable catching-up to the United States by France and Japan after WW2, interrupted in the case of Japan during the 1990s. Capital deepening (at least to the extent this can be measured) accounts for a large share of the variations in performance; increasingly during the past 25 years, this has meant ICT capital deepening. However, the capital contribution to growth varies considerably over time and across the four countries, and it is always less important, except in Japan, than the contribution of the various other factors underlying TFP growth, such as, among others, labor skills, technical and organizational changes and knowledge spillovers. Most recently (in 2006), before the current financial world crisis, hourly labor productivity levels were slightly higher in France than in the United States, and noticeably lower in the United Kingdom (by roughly 10%) and even lower in Japan (30%), while TFP levels are very close in France, the United Kingdom and the United States, but much lower (40%) in Japan.
    Keywords: Productivity, growth accounting, macro-economic history.
    JEL: O47 O57 E22 J24 N10
    Date: 2010
  4. By: Drelichman, Mauricio; Voth, Hans-Joachim
    Abstract: Philip II of Spain accumulated debts equivalent to 60% of GDP. He also defaulted four times on his short-term loans, thus becoming the first serial defaulter in history. Contrary to a common view in the literature, we show that lending to the king was profitable even under worst-case scenario assumptions. Lenders maintained long-term relationships with the crown. Losses sustained during defaults were more than compensated by profits in normal times. Defaults were not catastrophic events. In effect, short-term lending acted as an insurance mechanism, allowing the king to reduce his payments in harsh times in exchange for paying a premium in tranquil periods.
    Keywords: sovereign debt; serial default; rate of return; profitability; Spain
    Date: 2010–04–01
  5. By: Roberto Cortes Conde (Department of Economics, Universidad de San Andres)
    Keywords: monetary reform, banking reform, depression, 1930, Argentina
    Date: 2010–02
  6. By: Tomoko Hashino (Graduate School of Economics, Kobe University)
    Abstract: This paper explores the process of the institutionalizing technical education in modern Japan. In particular, this research attempts to elucidate why people in local weaving districts needed such educational institutions and how it is related with the introduction of western technology. This process is found to be much different from the government-led introduction of modern industries through establishment of technical high schools and universities to nurture engineers. In the case of traditional Japanese weaving districts, it was trade associations that voluntarily and actively established institutes for training, which were later supported by prefectural governments and the Ministry of Agriculture and Commerce and finally institutionalized as public technical schools by the Ministry of Education.
    Date: 2010–03
  7. By: Felipe Tamega Fernandes (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: The literature on the rubber boom applied a Dependendist view of rubber production in the Brazilian Amazon. Even though a sizable surplus was generated in the rubber chain, it was mostly appropriated by foreigners. This view is in tune with the Global Commodity Chain approach that argues that manufacturing/core economies absorb the bulk of surplus generated in the commodity chain. This paper challenges both frameworks and asks for a more careful examination of the business history of commodity chains: it is a first step in this direction through an analysis of the relationship between two nodes of the rubber chain.
    Keywords: Rubber, Commodities, Commodity Chains, Business History, Amazon Region, Brazil.
    JEL: L1 L2 L73 N56 N86
    Date: 2010–04
  8. By: John Komlos; Marek Brabec
    Abstract: The trend in the BMI values of the US population has not been estimated accurately because time series data are unavailable and because the focus has been on calculating period effects. In contrast to the prevailing strategies, we estimate the trend and rate of change of BMI values by birth cohorts stratified by gender and ethnicity born 1882-1986. We use loess additive regression models to estimate age and trend effects of BMI values of US-born black and white adults measured between 1959 and 2006. We use all the NHES and NHANES survey data and find that the increase in BMI was already underway among the birth cohorts of the early 20th century. The rate of increase was fastest among black females; for the three other groups under consideration, the rates of increase were similar. The generally persistent upward trend was punctuated by upsurges, particularly after each of the two World Wars. That the estimated rate of change of BMI values increased by 71% among black females between the birth cohorts 1955 and those of 1965 is indicative of the rapid increases in their weight. We infer that transition to post-industrial weights was a gradual process and began considerably earlier than hitherto supposed.
    JEL: I00
    Date: 2010–04
  9. By: Jacques Mairesse; Pierre Mohnen
    Abstract: After presenting the history, the evolution and the content of innovation surveys, we discuss the characteristics of the data they contain and the challenge they pose to the analyst and the econometrician. We document the two uses that have been made of these data: the construction of scoreboards for monitoring innovation and the scholarly analysis of various issue related to innovation. In particular we review the questions examined and the results obtained regarding the determinants, the effects, the complementarities, and the dynamics of innovation. We conclude by suggesting ways to improve the data collection and their econometric analysis.
    JEL: C35 C81 O30 O50
    Date: 2010–04
  10. By: Esteban Pérez Caldentey; Matías Vernengo
    Abstract: Modern finance has a conceptually unified theoretical core that includes the efficient market hypothesis (EMH), the relationship between risk and return based on the Capital Asset Pricing Model (CAPM), the Modigliani-Miller theorems (M&M) and the Black-Scholes-Merton approach to option pricing. The core has been instrumental to the growth of the financial services industry, financial innovation, globalization, and deregulation. The significant impact of the core is explained by their success in elevating finance to the category of a science by extracting the acquisitiveness associated with economic freedom from the workings of a free market society. This success was somewhat of a paradox. The core theories/theorems were based on wildly unrealistic assumptions and did not stand out for their empirical strength. Overcoming this paradox required a methodological twist whereby theories were devised to create rather than to interpret or predict reality. This view led to a series of financial practices that increased the fragility and vulnerability of financial institutions setting the context for the occurrence of financial crises including the current one.
    Keywords: History of Finance, Economic Methodology
    JEL: B23 B41
    Date: 2010–04
  11. By: Campbell, Gareth
    Abstract: Historical ‘bubbles’ are often attributed to mispricing, but the empirical analysis of such episodes has been limited. This paper examines a notable but academically neglected period, known as the British Railway Mania, using a new dataset and a cross-sectional methodology which is unique to the study of historical asset price reversals. The main finding is that the cross-sectional variation in stock prices, in every week of the sample, is explained by the cross-sectional variation in dividends, growth and risk, with no significant differences between the railways and non-railways. This implies that an economic bubble was not responsible for the rise and fall in the prices of railway assets at this time.
    Keywords: bubbles; financial crises; Railway Mania
    JEL: G12 G11 N23
    Date: 2010–03–31

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