Béguin K. (2005) Finance in times of uncertainty

Béguin, Katia (2005) La circulation des rentes constituées dans la France du XVIIe siècle. Une approche de l’incertitude économique. Annales. Histoire, Sciences Sociales, 60/5 : 1229-1244.

Molière “L’Avare”

Kindleberger C. (1991) An early manic episod

Kindleberger, Charles P. (1991) The economic Crisis of 1619 and 1623. The Journal of Economic History, 51/1 : 149-175.

Introduction

The early European 17th century has commonly been described as the troublesome transition from a medieval to a modern economy (p.149). The multi-layered crisis of 1619-23 is a perfect embodiment of the woes of the time. However, the author’s “interest in that crisis does not concern its potential role as a catalyst of modern economies, but rather its function in the mechanism for the spread of a primarily financial crisis from one part of Europe to another” (p.150).

Quote of the day: Adam Smith on small states

The currency of a great state, such as France or England, generally consists almost entirely of its own coin. Should this currency therefore be at any time, worn, clipt or otherwise degraded below its standard value, the state by a reformation of its coin can effectively re-establish its currency. But the currency of a small state, such as Genoa or Hamburgh, can seldom consist altogether in its own coin, but must be made up, in great measure, of the coins of all the neighboring states with which its inhabitants have a continual intercourse. Such a state, therefore, by reforming its coin will not always be able to reform its currency.

The Wealth of Nations, p.446, New York 1937

Buchinsky M. & Polak B. (1993) Dieu, mon droit and an integrated capital market

Buchinsky, Moshe & Ben Polak (1993) The Emergence of a National Capital Market in England, 1710-1880. The Journal of Economic History, 53/1: 1-24.

Introduction: the invisible hand is hard to see

“Two economic ‘revolutions’ took place in eighteenth-century England: an industrial revolution in the North and a financial revolution in the South”.  Of course historians have tried to figure out whether these two events were connected. Less ambitious, the authors wonder to what extent what was happening in London could affect the industrializing Northern and the Western parts of the kingdom (p.1). In other words, was there a national financial market or a collection of regional ones? Previous researches on this matter have yielded widely different results.

100,000th hits!!!!

yeah!

Caporale T. and Grier K. (2000) On why the sheriff still matters

Caporale, Tony and Kevin B. Grier (2000) Political Regime Change and the Real Interest Rate, Journal of Money, Credit and Banking, 32/3: 320-334.

Intro

A number of influential macroeconomic models, from Keynes to the monetarists, assume that real interest rates (i.e. discounted for inflation) change over time and are sensitive to their political environment, other words that they are policy variant. However this assumption has not been empirically tested, should this assumption be in fact contradicted, it would have important repercussions on these models’ viability. Moreover, the policy-variant hypothesis apparently conflicts with Eugene Fama’s conclusion that the mean of the real rate is essentially constant (p.322). The literature has found to match Fama’s views more closely with reality: real interest rates are “essentially constant over long periods of times but subject to infrequent mean shifts that are not related to policy regime changes”.

Who said a grenade launcher could not be a perfect financial asset?

A new form on finance on the coast of Somalia.

I particularly enjoyed this part:

Piracy investor Sahra Ibrahim, a 22-year-old divorcee, was lined up with others waiting for her cut of a ransom pay-out after one of the gangs freed a Spanish tuna fishing vessel.

“I am waiting for my share after I contributed a rocket-propelled grenade for the operation,” she said, adding that she got the weapon from her ex-husband in alimony.

“I am really happy and lucky. I have made $75,000 in only 38 days since I joined the ‘company’.”

HT to Sarah

Finding new models

In today’s FT:

Organic mechanics

By Clive Cookson, Gillian Tett and Chris Cook

What do you call a financier in search of the iron laws of human behaviour? Answer: someone with a bad case of “physics envy”.

That is the peculiar psychological disorder diagnosed by Andrew Lo, a professor of financial engineering, as afflicting bankers and economists. Symptoms include a desperate search for the predictive certainty that comes from the hard sciences.

Continue reading (excellent and stimulating article).

Coates J., Gurnell M. & Rustichini A. (2009) Girls can’t trade

Coates, John M., Mark Gurnell and Aldo Rustichini (2009) Second-to-fourth digit ratio predicts success among high-frequency financial traders. Proceedings of the National Academy of Science, 106/2: 623-8.

Introduction

What does traders’ success on the market floor depend on? Earlier studies have shown that one’s level of testosterone did affect one’s daily results. Since “prenatal androgens have organizing effects on the developing brain, increasing its later sensitivity to […] testosterone”, it would make sense that prenatal androgens also have a structural effect on a trader’s results on the long term.

Time to worry? Financial history matters

In today’s FT

Saad G. & Vongas J. (2009) What bling really does to you

Saad, Gad and John G. Vongas (2009) The effect of conspicuous consumption on men’s testosterone levels. Organizational Behavior and Human Decision Processes, 110/2: 80-92.

Introduction (longue one)

Thorstein Veblen coined the expression conspicuous consumption in 1899 to refer to goods which principal aim was to be displayed, advertise one’s wealth and impress one’s peers (p.80). In other words, it makes one’s fortune obvious by stressing one’s ability to waste.

DuPlessis R. & Howell M. (1982) Killing capitalism in its craddle (twice)

DuPlessis, Robert S. and Martha C. Howell (1982) Reconsidering the Early Modern Urban Economy : The Case of Leiden and Lille. Past and Present, 94/, 49-84.

In Marx’s view, capitalism had arisen in the late Middle Ages out of a production system dominated by lords and guilds. In this framework, urban economies can be regarded as the craddle of capitalism (p.44), the places where capital and labour were separated through the use of putting-out, or the hiring of a migrant or female workforce (p.45). However some cities, such as Leiden and Lille where artisans remained proprietors of their means of production, still managed to integrated the very competitive European textile market (p.46).