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.

Method and data

To address this issue, the authors use on the one hand public securities prices in London and interest rates from Middlesex and West Yorkshire obtained from “annual counts of registered property transactions” (p.3).  Real estate was and still is a sector highly sensitive to interest rates variation, making it an ideal benchmark (p.7). But it also mean that it should be taken as a high estimate of integration.

For the early observation, the authors se the yield of the Bank of England stock as a proxy for interest rates in London and then the price of consoles (p.11).


The London variables are negatively correlated with the provincial ones suggesting that an increase in interest rates led to a contraction in the housing sector in Middlesex and West Yorkshire. The authors are more careful however about the size of the London effect, they indicate “that a one-percentage point increase in the interest rate sustained for 18 months [was] associated with a 19 percent decrease in deed registrations”. But they point out “that a one-percentage-point increase in the interest rate was itself large for this period and was a relatively rare event” (p.16).

The financial market of West Yorkshire seems to have lagged a bit behind the one of Middlesex in terms of integration with London. But more broadly, for both regions the 1730-1770 period was one of still limited integration, while the 1770-1820 with it numerous wars created noisy data difficult to account for, England was clearly an integrated financial market by the end of the second decade of the 19th century.

One could almost assume that it is the Napoleonic Wars which increased the speed of the national financial integration, as the ever-increasing needs of the government brought the whole country into a single market (p.18).

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