New Economics Papers
on Business, Economic and Financial History
Issue of 2014‒04‒05
twenty papers chosen by

  1. Economic Freedom in the Long Run: Evidence from OECD Countries (1850-2007) By Leandro Prados de la Escosura
  2. Soft power: the media industries in Britain since 1870 By Gerben Bakker
  3. Discovering economic history in footnotes: the story of Tŏng Tàishēng merchant archive (1790-1850) and the historiography of modern China By Debin Ma; Weipeng Yuan
  4. Elite Influence? Religion, Economics, and the Rise of the Nazis By Spenkuch, Jörg; Tillmann, Philipp
  5. American tariff policy and the British alkali industry, 1880-1905 By Brian Varian
  6. Productivity trends from 1890 to 2012 in advanced countries By Bergeaud, A.; Cette, G.; Lecat, R.
  7. Deja vu? The Greek crisis experience, the 2010s versus the 1930s. Lessons from history By George Chouliarakis; Sophia Lazaretou
  8. "A New Approach to Explaining the Value of Colonial Paper Money: Evidence from New Jersey, 1709-1775" By FARLEY GRUBB
  9. Independent within—not of—Government: The Emergence of the Federal Reserve as a Modern Central Bank By Humpage, Owen F.
  10. The Economics of the Gift By David Reinstein;
  11. From Monetary Theory of Production to Culture-Nature Life Process:Feminist-Institutional Elaborations of Social Provisioning By Todorova, Zdravka
  12. The impact of local minimum wages on employment: evidence from Italy in the 1950s By Guido de Blasio; Samuele Poy
  13. Growth and Violence: Argument for a Per Capita Measure of Civil War By Hannes Mueller
  14. Relations internationales et discriminations tarifaires : le cas de la France (1850-1913) By Stéphane BECUWE; Bertrand BLANCHETON
  15. Quelle intelligence du capital pour demain ? Une lecture du Capital au XXIème siècle de Thomas Piketty By Gaël Giraud
  16. Network effects, homogeneous goods and international currency choice: new evidence on oil markets from an older era By Eichengreen, Barry; Chiţu, Livia; Mehl, Arnaud
  17. My parents taught me. Evidence on the family transmission of values By Giuseppe Albanese; Guido de Blasio; Paolo Sestito
  18. Discussion of 'debt and incomplete financial markets' by Kevin Sheedy By Bullard, James B.
  19. Finding a Space for Story: Sensemaking, Stories and Epistemic Impasse By Gazi Islam
  20. Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based models By D. Sornette

  1. By: Leandro Prados de la Escosura
    Abstract: This paper presents historical indices for the main dimensions of economic freedom and an aggregate index for nowadays developed countries -(pre-1994) OECD, for short-. Economic liberty expanded over the last one-and-a-half centuries, reaching two thirds of its maximum possible. Its evolution has been, however, far from linear. After a substantial improvement since mid-nineteenth century, World War I brought a major setback. The post-war recovery up to 1929 was followed by a dramatic decline in the 1930s and significant progress took place during the Golden Age but fell short from the pre-World War I peak. A steady expansion since the early 1980s has resulted in the highest levels of economic liberty of the last two centuries. Each main dimension of economic freedom exhibited a distinctive trend and its contribution to the aggregate index varied over time. Nonetheless, improved property rights provided the main contribution to the long-run advancement of economic liberty.
    Keywords: Negative freedom, Economic liberty, OECD
    JEL: O17 P10
    Date: 2014–02
  2. By: Gerben Bakker
    Abstract: This paper discusses the emergence and growth of various media industries in Britain. It shows how a rise in real wages and leisure time, rapid urbanisation and the development of fast urban transport networks, and a rapid growth of the market’s size let to a sharp rise in the demand for media and entertainment products and services, which was met by ever-new technologies coming from constantly emerging new industries, such as recorded music, film, radio, television, cable, videogames, internet, and social media. The paper argued these industries contributed to a sharp productivity rise by industrialising traditional media and entertainment, and to a sharp welfare growth as consumers valued them so highly that they were willing to incur ever-higher opportunity costs to consume them. It also discusses how four factors quality races, marginal revenues equalling marginal profits, the superstar effect and agglomeration benefits shaped the evolution of individual industries, and it assesses the success or failure of British industrial policy towards media industries. The paper observes media’s impact on the aggregate economy through opportunity costs, expectations and aspirations, the functioning of the market, education, and, finally, through shaping the means of institutional change. In addition, the paper makes new decennial benchmark estimates for British consumer expenditure on books between 1870 and 1900, on recorded music between 1900 and 1930 and on cinema between 1910 and 1930, for which previously no estimates were available
    Keywords: media industries—economic history; consumer expenditure; revealed comparative advantage; Britain; 1870-2010; industrialisation of services; sunk costs; quality races; toll goods; superstars; agglomeration benefits; media policy; ‘happiness’; advertising; news agencies; books; publishing; theatre; recorded music; film industry; broadcasting; radio; television; videogame
    JEL: N0
    Date: 2014–03
  3. By: Debin Ma; Weipeng Yuan
    Abstract: The Tong Taisheng (统泰升) merchant account books in the Ninjing county of Northern China in 1800-1850 is the most complete and integrated surviving archive of a family business. It contains unusually detailed and high-quality statistics on exchange rates, commodity prices and other information. Utilized once in the 1950s, the archive has been left largely untouched until our recent, almost accidental rediscovery. Tracing the personal history of the original owner and donor, we show that the nature of evidence and records of economic statistics of China’s early 19th century, - indeed - of the entire early modern era – have been profoundly impacted by the development of political ideology and consequently of academic discipline in modern and contemporary China. Our article discusses the important historiographical and epistemological issue in interpreting surviving historical statistics which have been largely neglected in the current Great Divergence debate.
    Keywords: historical archives; Chinese historiography; modernisation
    JEL: N0
    Date: 2014–03
  4. By: Spenkuch, Jörg; Tillmann, Philipp
    Abstract: Adolf Hitler's seizure of power was one of the most consequential events of the twentieth century. Yet, our understanding of which factors fueled the astonishing rise of the Nazis remains highly incomplete. This paper shows that religion played an important role in the Nazi party's electoral success -- dwarfing all available socioeconomic variables. To obtain the first causal estimates we exploit plausibly exogenous variation in the geographic distribution of Catholics and Protestants due to a peace treaty in the sixteenth century. Even after allowing for sizeable violations of the exclusion restriction, the evidence indicates that Catholics were significantly less likely to vote for the Nazi Party than Protestants. Consistent with the historical record, our results are most naturally rationalized by a model in which the Catholic Church leaned on believers to vote for the democratic Zentrum Party, whereas the Protestant Church remained politically neutral.
    Keywords: religion, fascism, elite influence, Nazis, Weimar Germany
    JEL: D72 N00 N34 N94 Z12
    Date: 2014–03–30
  5. By: Brian Varian
    Abstract: Until the late nineteenth century, the British alkali industry enjoyed a colossal export market in the United States. Yet, as several scholars have already noted, the highly protectionist Dingley Tariff of 1897 caused a precipitous and irreversible decline in the volume of British alkali exports to the United States. Drawing upon an abundance of textual evidence, this study argues that, in addition to the climactic Dingley Tariff, previous American tariff acts in 1883, 1890, and 1894 also exerted a pronounced influence on the volume of British alkali exports to the United States. Further corroborating this claim is a regression analysis that employs, as an explanatory variable, newly constructed annual estimates of the ad valorem equivalent tariff that the United States imposed upon alkali imports from Britain. Approaching the British alkali industry from a microeconomic standpoint, this study also argues that one particular British alkali firm, Brunner, Mond & Co., mitigated its financial exposure to American tariff policy by acquiring, in 1887, a minority shareholding in a nascent American alkali firm, the Solvay Process Company. Profits from Brunner’s shareholding in the Solvay Process Company substantially offset the profits that Brunner, Mond & Co. lost as the result of its diminished alkali exports to the United States. The other dominant British alkali firm, the United Alkali Company, did not fare so well.
    Keywords: alkali; chemicals; tariffs; trade; Britain; United States; nineteenth century
    JEL: N0
    Date: 2014–03
  6. By: Bergeaud, A.; Cette, G.; Lecat, R.
    Abstract: In order to examine innovation diffusion and convergence processes, we study productivity trends, trend breaks and levels for 13 advanced countries over 1890-2012. We highlight two productivity waves, a big one following the second industrial revolution and a small one following the ICT revolution. The first big wave was staggered across countries, hitting the US first in the Interwar years and the rest of the world after World War II. It came long after the actual innovation could be implemented, emphasizing a long diffusion process. The productivity leader changed during the period under study, the Australian and UK leadership becoming a US one during the first part of the XXth century and, for very particular reasons, also a Norwegian, Dutch and French one at least for some years at the end of the XXth century. The convergence process has been erratic, halted by inappropriate institutions, technology shocks, financial crises but above all by wars, which led to major productivity level leaps, downwards for countries experiencing war on their soil, upwards for other countries. Productivity trend breaks are detected following wars, global financial crises, global supply shocks (such as the oil price shocks) and major policy changes (such as structural reforms in Canada or Sweden). The upward trend break for the US in the mid-1990s is confirmed, as well as the downward trend break for the Euro Area in the same period. The downward trend break observed as early as the mid-2000s for the US leads one to question the future contribution of the ICT revolution to productivity enhancement.
    Keywords: Productivity, convergence, technological change, global history.
    JEL: E22 N10 O47
    Date: 2014
  7. By: George Chouliarakis (The University of Manchester and Bank of Greece); Sophia Lazaretou (Bank of Greece)
    Abstract: The past Greek crisis experience is more or less terra incognita. In all historical empirical studies Greece is systematically neglected or included only sporadically in their cross-country samples. In the national literature too there is little on this topic. In this paper we focus on the Greek experience of the Great Depression and use it as a benchmark against which to assess the policy choices and constraints that Greece faces today, with the ultimate aim to draw policy lessons from history and warn against a repeat of the same outcome. The 1930s crisis episode is used as a useful testing ground to compare the two crises episodes, ‘then’ and ‘now’; detect differences and similarities, discuss the policy facts and assess the impact of policy pursued on output. To the best of our knowledge, this paper is the first attempt to study the Greek crisis experience over the two historical episodes and detect similarities and differences. Comparisons with the interwar period show that the current crisis of the Greek economy should be classified a great depression rather than a great recession and that the inability of the national authorities to credibly adhere to their commitment to a nominal anchor was at the root of the country’s failure.
    Keywords: economic crisis; economic policy; interwar Greece
    JEL: F33 H6 N14 N24
    Date: 2014–02
  8. By: FARLEY GRUBB (Department of Economics,University of Delaware)
    Abstract: A new approach to explaining the value of colonial paper money that relies on their distinctive character as bills of credit is presented. The market value of these bills is decomposed into their real asset present value and their liquidity premium value. This approach is applied to the newly reconstructed monetary data for colonial New Jersey. The real asset present value of New Jersey bills accounted for at least 80 percent, whereas the value of these bills as “money” accounted for at most 10 to 20 percent, of their market value. Colonial paper money was not primarily a fiat currency.
    Keywords: commodity money, currency depreciation, exchange rates, fiat currency, fiscal backing theory of money, land banks, money supply, present value, price inflation, purchasing power parity, quantity theory of money, Seven Year’s War, value of money, zero-interest bearer bonds
    JEL: E31 E42 E51 N11 N21 N41
    Date: 2014
  9. By: Humpage, Owen F. (Federal Reserve Bank of Cleveland)
    Abstract: Independence is the hallmark of modern central banks, but independence is a mutable and fragile concept, because the governments to whom central banks are ultimately responsible can have objectives that take precedence over price stability. This paper traces the Federal Reserve’s emergence as a modern central bank beginning with its abandonment of monetary policy for debt-management operations during the Second World War and through the controversies that led to the Treasury-Federal Reserve accord in 1951. The accord, however, did not end the Federal Reserve’s search for independence. After the accord, the Federal Reserve’s view of responsibilities "within" government led it to policies—even keel and foreign exchange operations—that complicated the System’s ability to conduct monetary policy.
    Keywords: Second World War; U.S. Treasury-Federal Reserve Accord; Even Keel
    JEL: E4 E5 E6 N1
    Date: 2014–03–27
  10. By: David Reinstein;
    Abstract: This essay broadly considers gifts, giving and gift economies, modern and pre-modern, from a mainstream (and behavioural) economics perspective.
    Date: 2014–03–01
  11. By: Todorova, Zdravka
    Abstract: The article seeks to contribute to the literature on social provisioning as an organizing concept in heterodox economics. Particularly, the article details social provisioning as an amalgamation of processes and as a part of a system of culture-nature life process. First, the article delineates a categorization of social provisioning activities with respect to motivation in their organization – monetary and non-monetary, emphasizing the differences, as well as links between those. Second, the article discusses valuation of social activities, applying institutional theory. Third, the concept of a social process is delineated. It is argued that the concept captures agency and structure without reducing one to the other, and allows for theorizing open-endedness of social provisioning. The fourth section offers a categorization of processes and briefly explains each one of those, conceptualizing social provisioning within a historical culture-nature life process. Finally, the article concludes.
    Keywords: Social Provisioning; Social Process; Institutions; Heterodox Economics; Feminist-Institutional Economics; Post Keynesian Economics; Monetary Theory of Production; Social Economics; Political Economy
    JEL: B41 B52 B54 E02 Z1
    Date: 2014–03–21
  12. By: Guido de Blasio (Bank of Italy); Samuele Poy (FBK-IRVAPP)
    Abstract: This paper measures the impact of wage zones – minimum wage differentials at the province level – on Italy's local labor markets during the 1950s. Using a spatial regression discontinuity design, it finds that for the industrial sectors covered under wage zones there was an increase in employment when one crossed the border from a high-wage province into a low-wage one; the effect diminished, however, as the distance from the boundary increased. The paper also illustrates that the impact on the overall (non-farm) private sector, which includes both covered and uncovered sectors, was basically zero. On balance, the scheme generated some reallocation of economic activity, albeit confined to areas close to the province border.
    Keywords: minimum wages, regional economic activity, regression discontinuity
    JEL: C14 J38 R11
    Date: 2014–03
  13. By: Hannes Mueller
    Abstract: This article proposes a new measure of civil war. The measure defines violence intensity in casualties per capita instead of number of casualties. We discuss the assumptions behind this per capita model and the existing standard model. We show that the two measures behave differently in standard growth regressions and argue that this is because the standard model is a mis-specification in this context. Casualties appear to affect growth more in smaller populations. We argue that a debate on the right model can help distinguish between competing theories in the conflict literature. This is particularly relevant given the current development of new micro-data in this field.
    Keywords: civil war, conflict, growth
    JEL: D74 O11 O47
    Date: 2014–03
  14. By: Stéphane BECUWE; Bertrand BLANCHETON
    Abstract: Cette étude propose une mesure du niveau et de la volatilité des tarifs douaniers appliquée à chacun des partenaires commerciaux de la France au cours de la période 1850-1913. Sur la base des taux moyens, une typologie originale issue de la classification ascendante hiérarchique est proposée. La taxation des produits tropicaux apparait comme un facteur explicatif clef des écarts entre les pays même si le groupe des pays exportateurs de denrées exotiques ne peut être considéré comme homogène.
    Keywords: politique commerciale, tarifs douaniers, commerce international, 1ière mondialisation
    JEL: N7
    Date: 2014
  15. By: Gaël Giraud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: On propose une lecture critique de l'ouvrage Le Capital au XXIème siècle (Seuil, 2013) de Thomas Piketty.
    Keywords: Capital; capitalisme; inégalité; Kaldor; Solow
    Date: 2014–02
  16. By: Eichengreen, Barry; Chiţu, Livia; Mehl, Arnaud
    Abstract: Conventional wisdom has it that network effects are strong in markets for homogeneous goods, leading to the dominance of one settlement currency in such markets. The alleged dominance of the dollar in global oil markets is said to epitomize this phenomenon. We question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets. European oil import payments before and after World War II were split between the dollar and non-dollar currencies, mainly sterling. Differences in use of the dollar across countries were associated with trade linkages with the United States and the size of the importing country. That several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar-based system toward a multi-polar system in the period ahead is not impossible. JEL Classification: F30, N20
    Keywords: homogeneous goods, international invoicing currency, network effects, oil markets, US dollar role
    Date: 2014–03
  17. By: Giuseppe Albanese (Bank of Italy); Guido de Blasio (Bank of Italy); Paolo Sestito (Bank of Italy)
    Abstract: The paper uses questions included in the 2010 wave of the Bank of Italy’s Survey on Household Income and Wealth to investigate the role of family transmission of values. It presents three main empirical findings. First, the paper shows that a number of attitudes (generalized and personalized trusting behaviour, risk and time preferences) and outcomes (female labour force participation, fertility, entrepreneurship, productivity) are associated with the values received. Second, it documents that values received from parents are correlated with the values transmitted to descendants. Third, by using respondent moving patterns the paper highlights that there is little evidence that the values received are affected by the local environment before they are passed on further. This evidence is consistent with the idea that family transmission is a channel for historical persistence.
    Keywords: family, cultural transmission, values
    JEL: Z1 D10 C83
    Date: 2014–03
  18. By: Bullard, James B. (Federal Reserve Bank of St. Louis)
    Abstract: March 21, 2014. Presentation. Brookings Institution, Washington, D.C.
    Date: 2014–03–21
  19. By: Gazi Islam (MC - Management et Comportement - Grenoble École de Management (GEM))
    Abstract: The current study explores the role of stories in organizational sensemaking processes. Rather than positioning stories as one among many different sensemaking mechanisms, it is argued that stories allow a particular kind of sensemaking that is inherently openended, distinguishing it from theoretical and propositional explanations for organizational phenomena. Drawing on previous Foucaultian discussions of epistemes, I introduce the notions of epistemic impasse and epistemic spillover, arguing that cross-functional interaction can cause tensions between incompatible epistemic bases, and that stories can act as a mechanism to overcome such tensions. I illustrate this mechanism in an ethnographic, participant-observer study of a university student-support center, showing how storytelling led to an increasingly open although ultimately totalizing tendency within the center, thus demonstrating both the potentials and limits of using stories within organizations.
    Date: 2013
  20. By: D. Sornette (ETH Zurich)
    Abstract: This short review presents a selected history of the mutual fertilization between physics and economics, from Isaac Newton and Adam Smith to the present. The fundamentally different perspectives embraced in theories developed in financial economics compared with physics are dissected with the examples of the volatility smile and of the excess volatility puzzle. The role of the Ising model of phase transitions to model social and financial systems is reviewed, with the concepts of random utilities and the logit model as the analog of the Boltzmann factor in statistic physics. Recent extensions in term of quantum decision theory are also covered. A wealth of models are discussed briefly that build on the Ising model and generalize it to account for the many stylized facts of financial markets. A summary of the relevance of the Ising model and its extensions is provided to account for financial bubbles and crashes. The review would be incomplete if it would not cover the dynamical field of agent based models (ABMs), also known as computational economic models, of which the Ising-type models are just special ABM implementations. We formulate the ``Emerging Market Intelligence hypothesis'' to reconcile the pervasive presence of ``noise traders'' with the near efficiency of financial markets. Finally, we note that evolutionary biology, more than physics, is now playing a growing role to inspire models of financial markets.
    Date: 2014–04

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