Finance and gambling in early modern Europe or why Arrow-Debreu can be fun

December 25, 2010

Hedge fund managers playing poker and investment gurus using their skills in casinos are part of the contemporary mythology surrounding the world of finance. This makes it surprising that when Merton listed the functions performed by financial markets and institutions he did not include a very important one: entertainment. Had he considered early modern Europe, the striking resemblance between a casino and a stock exchange would certainly not have eluded him.

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Opper S. (1993): the incredible story of the fleeing Dutchmen

December 13, 2010

Oppers, Stefan E. (1993) The Interest Rate Effect of Dutch Money in Eighteen-Century Britain. The Journal of Economic History, 53/1: 25-43.

Dutch citizens invested heavily in Britain over the 18th century. Even though the English themselves regarded this phenomenon as a necessary evil, it greatly help the Crown to levy the necessary capital for its expenses over the century (p.28). In the 1740s Dutch financiers in London had become critical for the funding of the government’s deficit. To a large extent it can even be said that the Seven Years War was won thanks to foreign money.

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Hoffman, P., Postel-Vinay, G. and Rosenthal, J.-L. …and notaries never became bankers

December 9, 2010

Hoffman, Philip T., Gilles Postel-Vinay and Jean-Laurent Rosenthal (2001) Notaries, Banking and the Expansion of Credit in Old-Regime Paris, chapter 7 in Priceless Markets. The Political Economy of Credit in Paris, 1660-1870. University of Chicago Press, Chicago and London; p.136-176.

Some of the ideas developed in this chapter have been presented elsewhere, so this summary concentrates on the what’s new.

Evidence indicates that in the second quarter of the 18th century, some Parisian notaries were venturing away from the role of brokers between creditors and debtors they had acquired since the mid 1600s. In effect some of them were filling the position left empty by the absence of deposit banks (p.138). They were accepting interest-bearing deposits redeemable on demand and investing the money in different longer term assets such as bills of exchange, government debt and loans to individuals.

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

November 21, 2009

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). Read the rest of this entry »


Bochove C. van (2008) Outsourcing financial modernisation

October 11, 2009

Bochove, Christiaan van (2008) “Integration of Denmark-Norway in the Dutch capital market”, chapter 4 in The Economic Consequences of the Dutch. Economic integration around the North Sea, 1500-1800, Amsterdam: Aksant, 90-125.

Picture 8Picture 7Picture 9

The early modern markets for goods and labour were highly integrated. As the country’s Golden Age came to an end, by 1700, Dutch capital was increasingly finding investment opportunities abroad, chiefly in Great Britain but also in the Danish Kingdom (p.90). It had not always been the case. For instance around 1600, trade with Norway was conducted with cash rather than bills of exchange, a sure sign of poor integration. The concentration of trade in the hands of a local business elite (rather than scattered between small producers) made this modernization possible. By the mid century Norwegian merchants started drawing credit from Amsterdam (p.93). Read the rest of this entry »


Fontaine L. (2008) When relief is worth more than a treasure

October 8, 2009

Fontaine, Laurence (2008) “Entre banque et assistance: la création des monts-de-piété”, chapter 6 in L’Economie morale. Pauvreté, crédit et confiance dans l’Europe préindustrielle. Paris : Gallimard, p.164-189.

Picture 2fontaine02FileMonte di pietà dei pilli, before 1880

The first Monti di Pietà (or mounts) were created in 15th-century Italy by Recollet monks to shield the less-fortunate from the scourge of usury. It was not so much intended to pool the poor out of misery as to provide the struggling middle dwellers with a last safety net before falling into poverty (p.164). In the peninsula, the capital hoarded in the safes of the mounts was often diverted from its original aim to be loaned to the rich. It prevented the Italian mounts from becoming really successful. However their model spread over Europe. Read the rest of this entry »


McCant A. (1997) Moral capitalism: investments to feed orphans

October 2, 2009

McCants, Anne E.C. (1997) “The Rise and Decline of an Institutional Endowment, in Civic Charity in a Golden Age. Orphan Care in Early Modern Amsterdam, Urbana/Chicago: University of Illinois Press, 151-191.

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Numerous elements point to the fact that Dutch charities were well-endowed in the early modern period (p.151). Nonetheless charities were expensive to run and part of the funds came from the beneficiaries themselves. For instance at the Amsterdam Municipal Orphanage, or Bugerweeshuis,

“the orphaned children of poor, but nonetheless, citizen, parents could not be denied entry on the basis of an inadequate inheritance to defray the cost of their support. But the orphaned children of prosperous citizens could also not expect to be cared for entirely at public expenses.”

Nonetheless the bulk of the institution’s resources came from its invested endowment (p.153). Read the rest of this entry »


McCants A. (2007) Poverty v. Modernity: 1/0

September 29, 2009

McCants, Anne E.C. (2007) “Inequality among the poor of eighteenth century Amsterdam”, Explorations in Economic History, 44/1: 1-21.

d5124042lAnne McCantssteen_nicholas

The Netherlands, and more precisely Holland, are often described as the first modern economy (p.2). Economic growth over the Golden Ages attracted numerous migrants from the rural areas of the country as well as from all over Northern Europe. Usually these new comers were extremely poor and as a result standards of living in 1800 seem to have been lower than in 1500. Dutch cities were thus characterized by a very high level of inequality (p.2). Read the rest of this entry »


Dagnino G. B. (1995) When being the first is not enough

September 28, 2009

Dagnino, Giovanni Battista (1995) “The Tavola di Palermo: The First Public Bank of Second European XVI century” in Proceedings of the Conference on Business History, October 24 and 25 1994, Rotterdam, eds Mila Davids, Ferry de Goey & Dirk de Witt, 91-111.

35-Trésor en or trouvé dans le rio de la Plata72_giovanni_battista_dagnino24-68-m

The evolution of Sicilian banks reflects the history of the island during the early modern period, in that they were “economically and financially backward” (p.91). The 16th century in the Western Mediterranean was a time of Spanish Domination dominated by (1) money clipping, (2) high inflation, (3) commercial mismanagement, (4) Gresham Law episodes fuelled by unscrupulous financiers and (5) heavy and altogether negative government interventions (p.93). Read the rest of this entry »


Sylla R. (2008) How Alexander Hamilton founded America (singlehanded)

September 22, 2009

Sylla, Richard (2008) “The Political Economy of Early U.S. Financial Development”, in Political Institutions and Financial Development, ed. Stephen Haber, Douglass C. North and Barry R. Weingast. Stanford: Stanford University Press, 60-91.

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In only seven years, from 1788 to 1795, the US underwent a dramatic financial revolution; starting from scratch and swiftly acquiring all the key components of a modern financial infrastructure. By the time the westward expansion and the industrial take-off were ready to swing into action, a strong financial system was there to back them (p.62). But what allowed the US to develop these instruments? Read the rest of this entry »


Sessions of the Second Latin American Economic History Congress

September 21, 2009

Wordle: CLADHE-II: List of sessions

Here is the list of preapproved sessions  of the Second Latin American Economic History Congress (CLADHE-II), to be held in Mexico City on February 3-5, 2010. To submit a paper to any of the sessions, you have to go here.

Wordle: CLADHE-II: Lista de simposios


Gelderblom O. & Jonker J. (2008) What really brought interests down

September 21, 2009

Gelderblom, Oscar & Joost Jonker (2009) “The Conditional Miracle. Institutional change, fiscal policy, bond markets and interest rates in Holland 1514-1713”, Utrecht University Working Papers.

Jan de Baen, Portret van Johan de WittOscar en JoostKaartLeiden

This paper is available online (pdf).

Traditional explanation of the low issuing rate on public debt in the Dutch Republic emphasize the dramatic fall that occurred around 1600, but fail to explain why this level kept on falling from 1640 to 1725, until it had reached 2.5% (p.2). Read the rest of this entry »


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