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on Business, Economic and Financial History |
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Issue of 2014‒12‒03
twenty-two papers chosen by |
| By: | Peter Temin |
| Abstract: | This review essay of the two-volume Cambridge History of Capitalism (2014), edited by Larry Neal and Jeffrey G. Williamson, is divided into three parts. First, I describe three chapters from the second volume that I recommend for all economists to add depth to their understanding of the world economy today. Robert C. Allen analyzes the world distribution of income; Randall Morck and Bernard Yeung discuss the history of business groups; and Peter Lindert surveys private and public programs to help the poor. In each case, they analyze historical backgrounds that illuminate current issues. Second, I criticize the definition of capitalism used in these volumes as too expansive to be useful. I argue that this definition mars the essays in first volume by stimulating a fruitless search for capitalism in the millennium before the Industrial Revolution. Third, I describe the essays in this reference work starting from the most recent and ending with those about antiquity. |
| JEL: | N14 O57 P12 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20658&r=his |
| By: | David Chambers; Elroy Dimson; Justin Foo |
| Abstract: | Founded in 1441, King's College was one of Cambridge University's wealthiest Colleges, endowed with a vast agricultural portfolio. John Maynard Keynes was appointed bursar just after WWI and initiated a major reallocation to equities, an innovation at least as radical as the late 20th century commitment to illiquid assets by Harvard and Yale. Keynes initially pursued a market-timing approach to investment with mixed success and failed to anticipate the 1929 market crash. Thereafter, his switch to a patient buy-and-hold strategy allowed him to maintain his commitment to equities in the subsequent market slump, reflecting the natural advantages that accrue to long horizon investors. Keynes' innovations in endowment asset management, implemented over a dynamic period of capital market development and economic turbulence remain of great relevance to modern investors emerging from the Great Recession. |
| JEL: | B26 G11 G14 G23 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20421&r=his |
| By: | Morgan Kelly (University College Dublin); Cormac O Grada (University College Dublin) |
| Abstract: | Sustained economic growth in England can be traced back to the early seventeenth century. That earlier growth, albeit modest, both generated and was sustained by a demographic regime that entailed relatively high wages, and by an increasing endowment of human capital in the form of a relatively adaptable and skilled labour force. Healthier and savvier English workers were better equipped to profit from the technological possibilities available to them, and to build on them. Technological change and economic growth stemmed from such human capital rather than Boserupian forces. They were the product of England’s resource endowment and its institutions. |
| Keywords: | economic history,industrial revolution |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:209&r=his |
| By: | Michael D. Bordo; Owen F. Humpage |
| Abstract: | During the Bretton Woods era, balance-of-payments developments, gold losses, and exchange-rate concerns had little influence on Federal Reserve monetary policy, even after 1958 when such issues became critical. The Federal Reserve could largely disregard international considerations because the U.S. Treasury instituted a number of stopgap devices—the gold pool, the general agreement to borrow, capital restraints, sterilized foreign-exchange operations—to shore up the dollar and Bretton Woods. These, however, gave Federal Reserve policymakers the latitude to focus on the domestic objectives and shifted responsibility for international developments to the Treasury. Removing the pressure of international considerations from Federal Reserve policy decisions made it easier for the Federal Reserve to pursue the inflationary policies of the late 1960s and 1970s that ultimate destroyed Bretton Woods. In the end, the Treasury’s stopgap devices, which were intended to support Bretton Woods, contributed to its demise. |
| JEL: | E5 N1 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20656&r=his |
| By: | Guillaume Bazot; Michael D. Bordo; Eric Monnet |
| Abstract: | Under the classical gold standard (1880-1914), the Bank of France maintained a stable discount rate while the Bank of England changed its rate very frequently. Why did the policies of these central banks, the two pillars of the gold standard, differ so much? How did the Bank of France manage to keep a stable rate and continuously violate the "rules of the game"? This paper tackles these questions and shows that the domestic asset portfolio of the Bank of France played a crucial role in smoothing international shocks and in maintaining the stability of the discount rate. This policy provides a striking example of a central bank that uses its balance sheet to block the interest rate channel and protect the domestic economy from international constraints (Mundell's trilemma). |
| JEL: | E42 E43 E50 E58 N13 N23 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20554&r=his |
| By: | Bignon, Vincent (Bank of France); Caroli, Eve (Université Paris-Dauphine); Galbiati, Roberto (CNRS) |
| Abstract: | Using local administrative data from 1826 to 1936, we document the evolution of crime rates in 19th century France and we estimate the impact of a negative income shock on crime. Our identification strategy exploits the phylloxera crisis. Between 1863 and 1890, phylloxera destroyed about 40% of French vineyards. We use the geographical variation in the timing of this shock to identify its impact on property and violent crime rates, as well as minor offences. Our estimates suggest that the phylloxera crisis caused a substantial increase in property crime rates and a significant decrease in violent crimes. |
| Keywords: | crime, income shock, phylloxera, 19th century France |
| JEL: | K42 N33 R11 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8531&r=his |
| By: | Jim Celia; Farley Grubb |
| Abstract: | Maryland's non-legal-tender paper money emissions between 1765 and 1775 are reconstructed to determine the quantities outstanding and their redemption dates, providing a substantial correction to the literature. Over 80 percent of this paper money's current market value was expected real asset present value and under 20 percent was liquidity premium. It was primarily a real barter asset and not a fiat currency. The liquidity premium was positively related to the amount of paper money per capita in circulation. This paper money traded below face value only due to time-discounting and not depreciation. Past scholars have simply confused time-discounting with depreciation. |
| JEL: | E31 E42 E51 N11 N21 N41 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20524&r=his |
| By: | Timothy W. Guinnane; Ron Harris; Naomi R. Lamoreaux |
| Abstract: | British general incorporation law granted companies an extraordinary degree of contractual freedom to craft their own governance rules. In this paper we study the uses to which this flexibility was put by examining the articles of association written by three samples of companies from the late nineteenth and early twentieth centuries. We find that incorporators consistently wrote rules that shifted power from shareholders to directors, that the extent of this shift became greater over time, and that Parliament made little effort to restrain it. Although large firms were less likely to enact the most extreme provisions, such as entrenching specific directors for life, they too wrote articles that gave managers essentially unchecked power. These findings have implications for the literature on corporate control, for the "law-and-finance" argument that the common law was more conducive to financial development than the code-based systems of civil law countries, and for the debate on entrepreneurial failure in Britain during the late nineteenth and early twentieth centuries. |
| JEL: | G3 K22 N23 N24 N43 N44 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20481&r=his |
| By: | Smith, Matthew |
| Abstract: | David Ricardo (1772-1823) and Thomas Tooke (1774-1858) were contemporaries in the ‘golden era’ of English classical economics, along with Malthus, Torrens and McCulloch. The central figure in that era was undoubtedly Ricardo with his vital contributions to the ‘core’ analysis of value and distribution. By contrast, Tooke’s vital contributions were mainly to the empirical analysis of prices as well as to the theory of money and prices, the latter made well after Ricardo’s premature death in 1823. Whereas Ricardo can be characterized as the ‘Logician’, the supreme deductive thinker among classical economists; Tooke can be characterized as the ‘Empiricist’, the supreme inductive thinker among classical contemporaries. The purpose of this paper is to explore the relationship between these two economists with their very different approaches to economics and to compare their different but vital contributions to the development of classical economics. We first consider and show the path-making nature of Ricardo’s contribution to the development of the ‘core’ theory of value and distribution. The paper then considers Tooke’s banking school monetary theory, showing it to represent an outright rejection of Ricardo’s well established monetary theory. It is argued that Tooke’s monetary theory provides a more valuable and lasting contribution than Ricardo’s quantity theory of money to the modern development of classical economics. In the brief conclusion we reconcile the different contributions of these two economists to modern classical economics. |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2014-12&r=his |
| By: | Carlo Ciccarelli; Pierpaolo Pierani; Silvia Tiezzi |
| Abstract: | This paper presents the first ever statistical reconstruction of annual tobacco consumption in Italy from 1871 to 2010. The time series of total tobacco is disaggregated into its four major components (cigars, cigarettes, cut tobacco, and snuff), both in physical and monetary term. Our task was largely facilitated by the peculiar institutional setting concerning the Italian case. From 1862 to recent years, the tobacco sector has been managed by the State under a regime of public monopoly so that a rich and detailed documentation is available. Using standard estimation techniques, demand models for aggregate tobacco are estimated for three separate sub-periods: 1871-1913, 1919-39, and 1946-2010. Price elasticities, estimated over a time period covering about one and a half centuries, belong constantly to a narrow [-.25, -.75] set. The result that the demand for tobacco is not elastic to its price constitutes apparently a re-invention of the wheel. Less so, when one considers that over the last 150 years policy perspectives and individual attitudes towards consumption of tobacco have changed dramatically. |
| Keywords: | Long-run, tobacco consumption, price and income elasticity of demand |
| JEL: | N43 N44 D12 C22 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:700&r=his |
| By: | Emmanuel Saez; Gabriel Zucman |
| Abstract: | This paper combines income tax returns with Flow of Funds data to estimate the distribution of household wealth in the United States since 1913. We estimate wealth by capitalizing the incomes reported by individual taxpayers, accounting for assets that do not generate taxable income. We successfully test our capitalization method in three micro datasets where we can observe both income and wealth: the Survey of Consumer Finance, linked estate and income tax returns, and foundations' tax records. Wealth concentration has followed a U-shaped evolution over the last 100 years: It was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then. The rise of wealth inequality is almost entirely due to the rise of the top 0.1% wealth share, from 7% in 1979 to 22% in 2012--a level almost as high as in 1929. The bottom 90% wealth share first increased up to the mid-1980s and then steadily declined. The increase in wealth concentration is due to the surge of top incomes combined with an increase in saving rate inequality. Top wealth-holders are younger today than in the 1960s and earn a higher fraction of total labor income in the economy. We explain how our findings can be reconciled with Survey of Consumer Finances and estate tax data. |
| JEL: | H2 N32 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20625&r=his |
| By: | Alberto Basso; Howard Bodenhorn; David Cuberes |
| Abstract: | The old-age security hypothesis establishes that one important reason why parents have a large offspring is to ensure that they will receive financial support from them in old age. In this paper we use data on fertility and financial development in 19th century U.S. to indirectly test this theory. In particular, we explore whether more developed local financial markets reduce the incentives for families to have a large offspring. After controlling for several factors likely to create cross-county variation in fertility levels and for potential spatial correlation, we find that the presence of a bank and the degree of financial development in a given county are strongly associated with lower children-to-women ratios. We find compelling evidence for the old-age security hypothesis. |
| JEL: | N21 N31 N91 R2 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20491&r=his |
| By: | Soares, Rodrigo R. (Sao Paulo School of Economics) |
| Abstract: | This short essay reviews Gary Becker's contributions and influence in health economics. It was originally prepared for the collection of short papers in honor of Gary Becker that is scheduled to appear in the inaugural issue of the Journal of Demographic Economics. |
| Keywords: | Gary Becker, health, human capital |
| JEL: | I1 J1 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8586&r=his |
| By: | Tetsuji Okazaki (Faculty of Economics, The University of Tokyo) |
| Abstract: | In the late 1940s, the Japanese economy transited to a market economy from an economy under the government planning and control, which had continued since the period of the Sino-Japanese War. This paper explored the impact of the transition on the micro-aspect of the economy, focusing on the coal mining industry. By comparing productivity of coal mines before and after the transition, we found that the price control indeed hurt the incentive for coal mines, in particular relatively efficient ones, to enhance productivity. |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2014cj263&r=his |
| By: | Gaël Giraud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - 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 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00969230&r=his |
| By: | James Forder |
| Abstract: | There is a widely believed but entirely mythical story to the effect that the discovery of 'the Phillips curve' was, in the 1960s and perhaps later, an inspiration to inflationist policy. The point that this is a myth is argued in Forder, Macroeconomics and the Phillips curve myth, OUP 2014. One aspect of the explanation of how that myth came to be widely believed is considered in this paper. It is noted that the expression 'Phillips curve' was applied in a number of quite distinct and inconsistent ways, and as a result there was, by about 1980, an enormous confusion as to what that label meant. This confusion, as well as the multiplicity of possible meanings, it is suggested, made the acceptance of the myth much easier, and is therefore part, although only part, of the story of its acceptance. |
| Keywords: | Phillips curve, expectations, Phillips curve myth |
| JEL: | B22 B29 |
| Date: | 2014–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:724&r=his |
| By: | Attar, M. Aykut |
| Abstract: | This paper constructs a two-sector unified growth model that explains the timing and the inevitability of an industrial revolution through entrepreneurs' role for the accumulation of useful knowledge. While learning-by-doing in agriculture eventually allows the preindustrial economy to leave its Malthusian trap, an industrial revolution is delayed as entrepreneurs of the manufacturing sector do not attempt invention if not much is known about natural phenomena. On the other hand, these entrepreneurs, as managers, serendipitously identify new useful discoveries in all times, and an industrial revolution inevitably starts at some time. The industrial revolution leads the economy to modern growth, the share of the agricultural sector declines, and the demographic transition is completed with a stabilizing level of population in the very long run. Several factors affect the timing of the industrial revolution in expected directions, but some factors that affect the optimal choice of fertility have ambiguous effects. The analysis almost completely characterizes the equilibrium path from ancient times to the infinite future, and the model economy successfully captures the qualitative aspects of the unified growth experience of England. |
| Keywords: | unified growth theory,useful knowledge,industrial enlightenment,demographic transition,endogenous technological change |
| JEL: | O31 O33 O41 J13 N33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201434&r=his |
| By: | Hunt Allcott; Daniel Keniston |
| Abstract: | Does natural resource production benefit producer economies, or does it instead create a "Natural Resource Curse," perhaps as Dutch Disease crowds out the manufacturing sector? We combine a new panel dataset of oil and gas production and reserves with county-level aggregate outcomes and restricted-access Census of Manufactures microdata to estimate how oil and gas booms have affected local economic growth in the U.S. since the 1960s. We find that a boom that doubles national oil and gas employment increases total employment by 2.9 percent in a county with one standard deviation larger oil and gas endowment. Despite substantial migration, wages also rise. Notwithstanding, manufacturing employment and output are actually pro-cyclical with oil and gas booms, because many manufacturers in resource-abundant counties supply inputs to the oil and gas sector, while many others sell locally-traded goods and benefit from increases in local demand. Manufacturers' revenue productivity also grows during booms, especially in linked and local industries, but there is no evidence that output prices rise. The results demonstrate how a meaningful share of manufacturers produce locally traded goods, and they highlight how linkages to natural resources can be a driver of manufacturing growth. |
| JEL: | J2 L6 O4 Q43 R1 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20508&r=his |
| By: | Joseph E. Stiglitz |
| Abstract: | Frank Ramsey's classic paper "A contribution to the theory of taxation" gave rise to the modern theory of optimal taxation. This paper traces the literature that grew out of Ramsey's 1927 paper and assesses which of its key insights has proven robust. Though the path breaking work of Peter Diamond and James Mirrlees showed that Ramsey's results could be generalized in some important ways, other work showed that the domain of applicability of Ramsey's original insights may be more limited: changes in assumptions about the set of feasible taxes (not allowing certain taxes, or allowing a progressive income tax or non-linear commodity taxes), and in particular about the taxation of pure rents, incorporating more explicitly distributional considerations, and/or recognizing the important ways in which our economy differs from the competitive model underlying Ramsey's analysis all change the optimal structure of commodity taxation in important ways. |
| JEL: | E62 H2 H21 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20530&r=his |
| By: | Julio Escolano; Laura Jaramillo; Carlos Mulas-Granados; G. Terrier |
| Abstract: | The sizeable fiscal consolidation required to stabilize the debt-to-GDP ratios in several countries in the aftermath of the global crisis raises a crucial question on its feasibility. To answer this question, we rely on historical evidence from a sample of 91 adjustment episodes of countries during 1945–2012 that needed and wanted to adjust in order to stabilize debt to GDP. We find that, in at least half the cases, countries improved their cyclically adjusted primary balances by close to 5 percent of GDP. We also observe that, while countries typically make substantial efforts to stabilize debt, once this objective is achieved, they tend to ease their primary balances and do not necessarily get back to their initial lower debt-to-GDP ratio. We find that consolidations tended to be larger when the initial deficit was high and adjustment efforts were sustained over time. Fiscal adjustments also tended to be larger when accompanied by an easing of monetary conditions and, to a lesser extent, by an improvement in credit conditions. |
| Keywords: | Fiscal adjustment;Fiscal consolidation;Debt sustainability;Fiscal stabilization;Econometric models;Deficit, debt, primary balance, size of adjustment, fiscal consolidation, fiscal sustainability |
| Date: | 2014–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:14/179&r=his |
| By: | Mallick, Debdulal |
| Abstract: | We document evolving patterns in the inflation-unemployment relationship in Australia in the frequency domain under different monetary policy regimes and labor market regulations. The RBA adopted monetary targeting in 1976 and inflation targeting in 1993. There were important changes in the labor relations during mid-1980s-mid-1990s. We document an upward sloping medium-run Phillips curve in the pre-1977 period, a downward sloping long-run Phillips curve during 1977-1993, and a flattened Phillips curve from 1993 onwards. Inflation lags unemployment during the first period but leads during the second period. The Phillips curve at business-cycle frequencies is downward sloping in all periods. Similar patterns are also observed in several industrialized countries that adopted inflation targeting. |
| Keywords: | Phillips curve, Long-run, Business-cycle, Frequency, Spectral method |
| JEL: | C49 E24 E31 E32 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59794&r=his |
| By: | Fahd Boundi Chraki |
| Abstract: | Resumen: El presente trabajo analiza la relación existente entre la crisis actual, la tendencia de la tasa de ganancia y la distribución del ingreso en el caso de la economía española. Para nuestro propósito, se realizará una revisión teórica de las contribuciones de Marx sobre las causas y los efectos de una caída de la tasa de ganancia. Asimismo, se aplica la ecuación kaleckiana de la tasa de beneficio para estimar la tendencia de ésta en la economía española, con el objeto de realizar un estudio empírico para dilucidar sobre la relación entre la distribución del ingreso y la tasa de beneficio en el caso español. |
| Keywords: | Crisis; Acumulación; Capital; Beneficios; Salarios |
| JEL: | B51 O4 O52 P10 |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000418:012300&r=his |