On cognitive functions interrupted (and the growth of two retail corporations in the US)

I haven’t been able to write much since the equivalent of a permanent shock affected my production function as well as its slope (break ups are always hard, being the dumpee is even worse, in the long run we are all dead).

I’m slowly regaining use of my cognitive functions. For I don’t want to leave Ben alone in this blog any longer, I thought of posting two maps showing the growth of two retail corporations in the US: Wal Mart (1962-2006) and Target (1962-2008).

This might interest fans of urban and regional economics (or not). Anyway, I promise that the quality of my contributions to this awesome blog will increase. Just have a little faith on me.

Murphy A. (2009) The smartest boys in the alley, early derivatives on the London stock market

Murphy, Anne L. (2009) Trading options before Black-Scholes: a study of the market in late seventeenth-century London. Economic History Review, 62/1: 8-30.

The ledger of the financial broker Charles Blunt contains the details of some 1,500 transactions realized between 1692 and 1695, about a third of which regard the then novel trade in equity options (p.9). The technique had arisen in the 1620s in the commodity market and was proving very useful in the decade following the Glorious Revolution, when some 100 joint-stock companies were floated in London  (p.10). During the boom of the early 1690s, it is likely that “several thousand derivatives were transacted each year”.

Market in everything

;) MR

During a class this morning, I came across a surprising mention in a 1626 list of commodities exported from New Amsterdam (Manhatten to be precise) to the old one. Along side the usual 7246 beaver furs and a host of other stuff were “34 ratte vellehiks” (rat furs).

Not only is it quite disgusting to imagine some elegant woman of 17th century Amsterdam wearing a rat hat or carrying a rat purse, but one ought to wonder: weren’t there any rats in the Netherlands during the Golden Age or were rat production costs too high?

Seurot F. (2002) Something rotten in the state of medieval banking

Seurot, François (2002) “Les crises bancaires en Italie au Moyen Age: un essai d’applicationn de la théorie de Minsky-Kindleberberger”, paper presented at the XIX Journée d’économie monétaire et bancaire, 21p.

This paper is available online (pdf).

Following a long tradition, Minsky and Kindleberger [1996] have based their analysis of financial crises in the early modern and modern periods on their vision of credit as intrinsically unstable and thus naturally prone to crashes. Their model is based on five steps:

1. An exogenous shock modifies the incentive system the economy is based upon.
2. These new incentive channel credit toward a given sector and produces a localized economic boom.
3. Euphoria leads to the overestimation of the ROI and to overtrading.
4. Fundamentals are reconsidered and credit dries up.
5. Torschlusspanik, or bank rush (p.1).

A’Hearn B. (2005) The not-so-mighty finance

A’Hearn, Brian (2005) Finance-led divergence in the regions of Italy. Financial History Review, 12/1: 7-41.

After the unification, the Italian South did not catch up with the North, on the contrary they engaged on a divergent path as the per capita income gap increased from 15-25% to 55% in the first 50 years (p.7). This continuing disparity may be explained by the sore state of the southern banks which could have been unable to support and finance local development (finance-led growth argument; p.9). However, initial evidence seems not to support this hypothesis, as the share of the Mezzogiorno in the banking activity of the country was in line with the relative economic weight of the region (p.10).

Webography

I was reading the papers and I spotted two interesting articles (from le Monde, in French):

The Belgians seem afraid to go through the 1585 blockade of Antwerp all over again as the Dutch are taking too long to flood a polder giving access to the harbour (some say in order to benefit the port of Rotterdam which would suffer from its neighbour’s competition).

An while China is inventing new way to bring modernity to its countryside, Russia has to deal with the heritage of 70 years of communist rule (did I ever stress how important EH was for our every day life?). The Russian government has decided to pull the plug on nearly 300 mono-cities, these towns built in the hinterland around a single industry and often a single factory (such as Togliatti, near the Volga, home-base of the the car manufacturer Avtovaz and its 100,000 workers). It a perfect illustration of the evils of government-led allocation of resources. I feel for the millions of people that will be left behind (specially because many of them had been forced to move to these places by Stalin, not mentioning that some of them are former gulags camps), but you cannot avoid rationality too long and geography is certainly one of the most stubborned things around.

Saint Catherine of the week

Saint Catherine by Roger van der Weyden

Bochove C. van (2008) Outsourcing financial modernisation

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.

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).

Dorestad. A Medieval Metropolis

I’m just back from Leiden where Jaco Zuijderduijn took us (a group of recently-arrived PhD students) to visit the exhibition devoted to the archaeological findings from the medieval emporium of Dorestad held at the National Museum of Antiquities. The curator, Annemarieke Willemsen, was kind enough to introduce us to several of the pieces.

I must confess, the city was unknown to me. However it seems to have been an important port dedicated to the transit of goods from and to Scandinavia and the Rhine area. Like most of the commercial hubs of the time (i.e. the 8th and 9th centuries), it evolved into a significant consumption center of its own while at the same time not hosting any significant production (be it agricultural or industrial) with the exception of the minting of coins.

The city may have counted some 3,000 inhabitants and was dominated/protected by the lords of the neighbouring countryside. Numerous goods were traded in Dorestad: wood, wine, amber, Frankish blades, potteries, millstones, hunting dogs, slaves, etc. The city was finally destroyed by the viking raids in the 840s and by the collapse of the Carolingian empire at the same period which suddenly made impossible the type of long-distance trade the city was based upon.

Dorestad seems to have been the most important trading center of NW Europe at the time and was particularly remarkable by the 150m jetties the inhabitants had to build as the rivers tended to shift westward leaving un-navigable muddy terrains in its wake. Noticeably, the city was also constructed without any distinctive defensive feature indicating that it was highly reliant on peaceful conditions.

The exhibition was truly nice and there is a host of beautiful pieces but I must say I was a bit skeptical about the whole Dorestad being the key emporium in NW Europe theory. Indeed, all the artifacts presented come either from Germany or Scandinavia, but any important city at the time should have been flowed with goods from England, Russia, the Muslim World (in particular Spain), Italy and of course Northern France/Belgium where the emperor spent most of his time. I really do not see how such an important trading center could have arose just by connecting two rather small and peripherical markets (Germany and Scandinavia). But then again I am no specialist.

Murphy A. (2006) The Financial Revolution: a supply-side story (for real)

Murphy, Anne L. (2006) “Dealing with Uncertainty: Managing Personal Investment in the Early English National Debt”, History, 91/302, 200-17.

The sums involved in the so-called English Financial Revolution following the arrival on the throne of William III were altogether not that important: £6.9m from 1688 to 1702 while the government budget over the period reached £72m. However, “the impact of those novel methods of fund-raising was considerable”. In particular because small wealth-owners represented a large share of these early investors (p.201). Samuel Jeake, a merchant from Rye (East Sussex) was one of those small investors. He recorded his thought and his transactions in a diary and a few letters (p.202).

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

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.

The first Monti di Pietà (or mounts) were created in 15^th-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.

In the news

An economic history of tomatoes

History in the making in rural China

E. Glaeser also explores what went wrong in Argentina (hat tip for publishing top-level research on a normal paper website, via MR).

Leipzig feels the bite of financial history