New Economics Papers
on Business, Economic and Financial History
Issue of 2011‒02‒26
twenty papers chosen by

  1. Historical Oil Shocks By James D. Hamilton
  2. The promise and performance of the Federal Reserve as Lender of Last Resort 1914-1933 By Michael D. Bordo; David C. Wheelock
  3. An Empirical The Restoration of the Gold Standard after the US Civil War: A Volatility Analysis By Max Meulemann; Martin Uebele; Bernd Wilfling
  4. The Influence of Michal Kalecki on Joan Robinson’s Approach to Economics By Peter Kriesler; G. C. Harcourt
  5. Irish Perceptions of the Great Depression By Frank Barry and Mary E. Daly; Mary E. Daly
  6. Empresas y distritos industriales en el mercado mundial: una aproximación desde la historia económica By Jordi Catalan; José Antonio Miranda; Ramón Ramón-Muñoz
  7. Industrial Catching Up in the Poor Periphery 1870-1975 By Jeffrey G. Williamson
  8. Occupational structures, migration, religion and poor relief in nineteenth century urban Ireland By Cousins, Mel
  9. Japan's Civil Registration Systems Before and After the Meiji Restoration By Saito, Osamu; Sato, Masahiro
  10. (Mis)understanding Classical Economics By Thomas, Alex M
  11. Where It All Began: Lending of Last Resort and the Bank of England during the Overend, Gurney Panic of 1866 By Marc Flandreau, Stefano Ugolini
  12. Greatness and Limits of the West. The History of an Unfinished Project By Heinrich August Winkler
  13. Fiscal decentralisation in the Netherlands: History, current practice and economic theory By Frits Bos
  14. Religious Orders and Growth through Cultural Change in Pre-Industrial England By Thomas Barnebeck Andersen; Jeanet Bentzen; Carl-Johan Dalgaard; Paul Sharp
  15. The highway concession system in Italy : history, regulation and politics By Limodio, Nicola
  16. Tocqueville on Poverty in Industrial Democracies By Jimena Hurtado
  17. Public health movements, local poor relief and child mortality in American cities: 1923-1932 By Jonathan Fox
  18. Measuring competition using the Profit Elasticity: American Sugar Industry, 1890-1914 By Jan Boone; Michiel van Leuvensteijn
  19. On Smith's ambiguities on value and wealth By Meacci, Ferdinando
  20. A economia brasileira 1930-1964 By Marcelo de Paiva Abreu

  1. By: James D. Hamilton
    Abstract: This paper surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Although oil was used much differently and was substantially less important economically in the nineteenth century than it is today, there are interesting parallels between events in that era and more recent developments. Key post-World-War-II oil shocks reviewed include the Suez Crisis of 1956-57, the OPEC oil embargo of 1973-1974, the Iranian revolution of 1978-1979, the Iran-Iraq War initiated in 1980, the first Persian Gulf War in 1990-91, and the oil price spike of 2007-2008. Other more minor disturbances are also discussed, as are the economic downturns that followed each of the major postwar oil shocks.
    JEL: E32 Q41 Q43
    Date: 2011–02
  2. By: Michael D. Bordo (Rutgers University and NBER); David C. Wheelock (Federal Reserve Bank of St. Louis)
    Abstract: This paper examines the origins and early performance of the Federal Reserve as lender of last resort. The Fed was established to overcome the problems of the National Banking era, in particular an “inelastic” currency and the absence of an effective lender of last resort. As conceived by Paul Warburg and Nelson Aldrich at Jekyll Island in 1910, the Fed’s discount window and bankers acceptance-purchase facilities were expected to solve the problems that had caused banking panics in the National Banking era. Banking panics returned with a vengeance in the 1930s, however, and we examine why the Fed failed to live up to the promise of its founders. Although many factors contributed to the Fed’s failures, we argue that the failure of the Federal Reserve Act to faithfully recreate the conditions that had enabled European central banks to perform effectively as lenders of last resort, or to reform the inherently unstable U.S. banking system, were crucial. The Fed’s failures led to numerous reforms in the mid-1930s, including expansion of the Fed’s lending authority and changes in the System’s structure, as well as changes that made the U.S. banking system less prone to banking panics. Finally, we consider lessons about the design of lender of last resort policies that might be drawn from the Fed’s early history.
    Keywords: Federal Reserve Act, lender of last resort, discount window, banking panics, Great Depression
    JEL: E58 G28 N21 N22
    Date: 2011–02–15
  3. By: Max Meulemann; Martin Uebele; Bernd Wilfling
    Abstract: Using a Markov-switching GARCH model this paper analyzes the volatility evolution of the greenback's price in gold from after the Civil War until the return to gold convertibility in 1879. The econometric inference associated with our methodology indicates a switch to a regime of low volatility roughly seven months before the actual resumption. Since this empirical finding is most likely to be reconciled with a change in market expectations, we conclude that expectations affected the exchange rate more than fundamentals. Our analysis also demonstrates that regime switches in the volatility of exchange rates may refl ect historical events that remain undiscovered otherwise.
    Keywords: Monetary history, 19th century, USA, greenback, Markov-switching GARCH models
    JEL: A
    Date: 2011–02
  4. By: Peter Kriesler (School of Economics, University of New South Wales); G. C. Harcourt (Jesus College Cambridge and University of New South Wales)
    Abstract: Joan Robinson and Michal Kalecki were two of the intellectual giants of twentieth century economics, whose contributions over a significant range of issues have had major impacts on economics. This paper examines the significant communications between them, concentrating on the major cross influences which were apparent from the first time that they met. It focuses on Kalecki’s influence on Joan Robinson in a number of areas. In particular, there was much communication between them about developments in Keynesian theory, where Joan Robinson was influenced by Kalecki’s Marxian approach. Further areas of influence included the role and determination of investment and innovation, the nature of price setting in capitalist economies, and methodological issues associated with the nature of economic theory, particularly with respect to economic cycles and trends.
    Keywords: History of Economic Thought since 1925; Current Heterodox Approaches; Economic Methodology
    JEL: B20 B50 B41
    Date: 2010–11
  5. By: Frank Barry and Mary E. Daly (Institute for International Integration Studies, Trinity College Dublin); Mary E. Daly (University College Dublin)
    Abstract: This paper traces how the Great Depression was perceived in 1930s Ireland. Perceptions were complicated by internal political developments. Fianna Fáil, upon acceding to power in 1932, rapidly expanded protection and engaged in (near balanced budget) fiscal expansion. Despite the tariff war with Britain triggered by the land annuities dispute, Ireland appears to have weathered the storm better than most other European economies. The contemporary writings of academic economists reflected the influence of Lionel Robbins and the Austrian School, while – to paraphrase Ronan Fanning – the winds of change in Irish economics blew much more vigorously in the corridors of the public service.
    Keywords: Great Depression, Ireland, Irish Economic Thought, Irish Economic Policy
    JEL: B22 N14 N74
    Date: 2011–01
  6. By: Jordi Catalan (Universitat de Barcelona); José Antonio Miranda (Universidad de Alicante); Ramón Ramón-Muñoz (Universitat de Barcelona)
    Abstract: This paper deals with the contribution of industrial districts and clusters to the creation of competitive advantage in industry. It is divided into two well-differentiated parts. The first one provides an interpretative summary of key issues in the analysis of the geographic concentration of industry. In particular, some of the main interpretations and debates on the causes and characteristics of this concentration are presented. Additionally, it pays particular attention to the ongoing debate about the role of external economies (i.e. the externalities of industrial concentration) and internal economies (i.e. the strategies and capabilities of medium-large firms) in the competitiveness of districts and clusters. The second part of the paper reviews some recent studies, mostly focused on nineteenth- and twentieth-century Spain. This review, which includes historical analyses of districts, clusters and industries with export capacity, is undertaken in the light of the discussion in the first part of this study. An interesting conclusion that emerges from the studies reviewed is that in Southern Europe the competitive advantage of the geographically concentrated industry appears to have been associated more with hub-firm clusters than with neo-Marshallian districts (Main text in Spanish)
    Keywords: industrial districts, clusters, competitive advantage, externalities, leading firms, economic history, industrial economics.
    JEL: L25 N00 O14 R12
    Date: 2011–02
  7. By: Jeffrey G. Williamson
    Abstract: This paper documents industrial output and labor productivity growth around the poor periphery 1870-1975 (Latin America, the European periphery, the Middle East, South Asia, Southeast Asia and East Asia). Intensive and extensive industrial growth accelerated there over this critical century. The precocious poor periphery leaders underwent a surge and more poor countries joined their club. Furthermore, by the interwar the majority were catching up on Germany, the US and the UK, a process that accelerated even more up to 1950-1975. What explains the spread of the industrial revolution world-wide and this catching up? Productivity growth certainly made their industries more competitive in home and foreign markets, but other forces mattered as well. A falling terms of trade raised the relative price of manufactures in domestic markets, as did real exchange rate depreciation. In addition, increasingly cheap fuel and non-fuel intermediates from globally integrating markets seems to have taken resource advantages away from the European and North American leaders, and integrating world financial markets also reduced the cheap capital advantage of the leaders. However, ever-cheaper labor was not a serious cause of industrial catch up, offering little support for the Krugman-Venables (1995) model. Furthermore, tariffs did not foster industrial catch up either, but rather poor industry performance fostered high tariffs. Markets and policies mattered, not just institutions.
    JEL: F1 N7 O1
    Date: 2011–02
  8. By: Cousins, Mel
    Abstract: Patterns of poor relief varied greatly amongst nineteenth century Irish cities. To date, however, there has been little examination of the reasons behind these divergences. One possible factor is the divergent occupational and demographic structures of these cities – ranging from the dramatic growth of an industrialising Belfast, to relative (post-Famine) stability in more service-oriented Dublin, to the slow decline of other southern regional capitals. This paper examines the occupational and social class breakdown of the six major Irish cities over the period from 1861 (after the Great Famine) to 1901 and explores whether the difference in these factors can help to explain the differences in poor relief policies adopted in the different poor law unions. It concludes that the aggregate evidence suggests little clear link between occupational structures and poor relief policies. While it would seem unlikely that occupational structures did not have some impact on such policies, it appears that the impact of such structures was mediated through a range of other policies and will only be revealed through detailed local studies. Drawing on broader work, the paper suggests that key influences in the different patterns of poor relief– in addition to overarching factors such as the wealth of a union – may have included both religious factors and the use of poor relief policy to control in-migration in the rapidly growing northern cities.
    Keywords: Poor relief; urbanisation; occupational structures; Ireland; nineteenth century
    JEL: H55 N33 N93 H75 J21 I38 I3 H53
    Date: 2011–01
  9. By: Saito, Osamu; Sato, Masahiro
    Abstract: This essay traces the evolution of Japan's systems of household and land registration from Tokugawa times to the period of early Meiji reforms in the 1870s and 80s. The paper pays due attention to the distinction between an early modern system designed by state authority and local forms of registration practice. Thus, in the section on the Tokugawa period, one such local practice of having people 'disowned' and its consequence, registerlessness, will be examined. The section on the Meiji reforms turns to the issue of continuity and discontinuity, while the next section discusses if any progress in terms of civil identity registration was made by these Meiji reforms. In order to illustrate the actual changes that took place at the local level, the essay begins with an eighteenth-century story about a peasant woman and her disputes with the village officialdom and ends with a case of family dispute that another village woman brought before court some 120 years later.
    Date: 2011–01
  10. By: Thomas, Alex M
    Abstract: In 1936, Keynes published The General Theory of Employment, Interest and Money, one of the most influential books in economics of the twentieth century. With this publication, Keynes has confused and will continue to confuse generations of economists as to what classical economics means. This short essay argues that the 'classical economists' whom Keynes referred to in The General Theory were actually those economists who primarily employed 'marginal methods' in economics.
    Keywords: Classical economics; Keynes; Ricardo
    JEL: B12 E12 B22 B13
    Date: 2011
  11. By: Marc Flandreau, Stefano Ugolini (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: The National Monetary Commission was deeply concerned with importing best practice. One important focus was the connection between the money market and international trade. It was said that Britain’s lead in the market for “acceptances” originating in international trade was the basis of its sterling predominance. In this article, we use a so-far unexplored source to document the portfolio of bills that was brought up to the Bank of England for discount and study the behavior of the Bank of England during the crisis of 1866 (the so-called Overend- Gurney panic) when the Bank began adopting lending of last resort policies (Bignon, Flandreau and Ugolini 2011). We compare 1865 (a “normal” year) to 1866. Important findings include: (a) the statistical predominance of foreign bills in the material brought to the Bank of England; (b) the correlation between the geography of bills and British trade patterns; (c) a marked contrast between normal times lending and crisis lending in that main financial intermediaries and the “shadow banking system” only showed up at the Bank’s window during crises; (d) the importance of money market investors (bills brokers) as chief conduit of liquidity provision in crisis; (e) the importance of Bank of England’s supervisory policies in ensuring lending-of-lastresort operations without enhancing moral hazard. An implication of our findings is that Bank of England’s ability to control moral hazard for financial intermediaries involved in acceptances was another reason for the rise of sterling as an international currency.
    Date: 2011–02–16
  12. By: Heinrich August Winkler
    Date: 2011–02
  13. By: Frits Bos
    Abstract: This paper describes and discusses the division of tasks between Dutch central and local government and their financing in view of economic theory.
    JEL: D70 H11 H70 N43 N44
    Date: 2010–12
  14. By: Thomas Barnebeck Andersen (Department of Business and Economics, University of Southern Denmark); Jeanet Bentzen (Department of Economics, University of Copenhagen); Carl-Johan Dalgaard (Department of Economics, University of Copenhagen); Paul Sharp (Department of Economics, University of Copenhagen)
    Abstract: We advance the hypothesis that cultural values such as high work ethic and thrift, “the Protestant ethic” according to Max Weber, may have been diffused long before the Reformation, thereby importantly affecting the pre-industrial growth record. The source of pre-Reformation Protestant ethic, according to the proposed theory, was the Catholic Order of Cistercians. Using county-level data for England we find empirically that the frequency of Cistercian monasteries influenced county-level comparative development until 1801; that is, long after the Dissolution of the Monasteries. The pre-industrial development of England may thus have been propelled by a process of growth through cultural change.
    Keywords: Protestant ethic; Malthusian population dynamics; economic development
    JEL: N13 O11 Z12
    Date: 2011–02
  15. By: Limodio, Nicola
    Abstract: This paper contains a critical discussion of the opening of the highway concession to the private sector in Italy over the past 20 years. It describes the political context, legal mechanisms and regulatory settings; offers an analysis of the changes in the equity composition of concessionaires after the introduction of public-private partnerships, quality standards, and tariff dynamics; and provides some examples. The Italian experience reflects the typical problems of the"build-now-regulate-later"approach recognized in the highway public-private partnership literature. The Italian model is also characterized by the existence of an overly complex regulatory framework, as well as the lack of a single agent in charge of contract enforcement and independent data collection.<BR>
    Keywords: Transport Economics Policy&Planning,Debt Markets,Roads&Highways,Infrastructure Economics,Bankruptcy and Resolution of Financial Distress
    Date: 2011–02–01
  16. By: Jimena Hurtado
    Abstract: In this paper I explore Tocqueville’s views on poverty and pauperism in democratic times. Tocqueville’s explanation of economic and social phenomena linked to the raise of equality, show the difficult dilemmas he foresaw with the consolidation of democracy and increasing industrialization. New social classes and the unequal access to wealth would generate a social problem which could, eventually, threaten freedom.
    Date: 2011–02–02
  17. By: Jonathan Fox
    Abstract: This paper examines the effectiveness of the public health education and poverty relief programs prior to the New Deal. Prior researchers have speculated that these programs contributed to the declining mortality rates during the 1920s, but have been unable to econometrically estimate their impact. This paper uses new data on municipal health education expenditures, as well as data on spending to relieve poverty, to separately estimate how effective each of these different types of programs were at reducing child mortality. A panel of 67 cities over 10 years is created, and the effects are identified using the variation within cities over time, after controlling for nation-wide shocks to the system. Fixed effects estimations suggest that spending on both health education and poverty relief were relatively low cost ways to reduce mortality for infants and school age children. Additionally, spending on public health education was extremely cost effective at reducing infant and child mortality rates, with about $27,000 2007 dollars associated with an infant death averted. This supports assertions by prior researchers that education and changing behaviors was the primary reason for falling infant and child mortality in the early twentieth century.
    Keywords: USA, health education, infant mortality, public health
    JEL: J1 Z0
    Date: 2011–02
  18. By: Jan Boone; Michiel van Leuvensteijn
    Abstract: The Profit Elasticity (PE) is a new competition measure introduced in Boone (2008). So far, there was no direct proof that this measure can identify regimes of competition empirically.
    JEL: D43 L13
    Date: 2010–12
  19. By: Meacci, Ferdinando
    Abstract: Ricardo’s criticisms of Adam Smith on value and wealth have been sometimes rejected and sometimes accepted in the period following the publication of his Principles. By contrast, they have been mostly ignored in the recent revivals of Ricardian economics both in the branch concerned with value and distribution and in the branch devoted to wealth and equilibrium growth. This paper intends to fill the gap between these two branches by revisiting Smith’s link between value and wealth in the light of Ricardo’s criticisms. This is done in two steps. The first step is provided in Part I and deals with Ricardo’s criticisms i) of Say’s and Lauderdale’s criticisms of Smith on this issue, and ii) of Smith’s and Malthus’ arguments on the related issues of rent and of the “annual produce of the land and labour of a country”. The second step is provided in Part II. The aim of this Part is to dissolve Smith’s terminological inaccuracies or contradictions by disentangling them from the analytical foundations of his system of thought. This is done by re-examining Smith’s arguments on value and wealth in the light of two distinctions. One runs between the two points of view –of an individual and of society– which underlie the whole of his system of thought. The other is put forward by Smith himself in a neglected passage of the Wealth and runs between the notions of “work done” and “work to be done”. Both distinctions are then utilized to revisit the principle of exchangeable value as command of labour in the economy as a whole and in the sense of work to be done. The paper is closed by arguing that this principle is needed for supporting the idea of a permanent increase in the natural price of labour (in Smith’s rather than in Ricardo’s sense) in economies exposed to a continuous process of accumulation.
    Keywords: Smith, Ricardo, value, wealth, labour
    JEL: B12 B0
    Date: 2010–10
  20. By: Marcelo de Paiva Abreu (Department of Economics PUC-Rio)
    Abstract: Este capítulo abarca um longo período entre marcado por três golpes de estado. O primeiro golpe, em 1930, determinou o fim da República Velha e o início de um período de quinze anos de preeminência política de Getúlio Vargas, primeiro como chefe do Governo Provisório, depois como presidente eleito indiretamente de acordo com as regras da Constituição de 1934 e, finalmente, a partir de novembro de 1937, como ditador, à frente do Estado Novo. Em 1945, em outro golpe, Vargas foi deposto, tendo início a “Terceira República”. O terceiro golpe, em 1964, marcou o início da ditadura militar que sobreviveria até meados da década de 1980.
    Date: 2010–11

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