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

October 24, 2009

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.

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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”.

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Flandreau M. et al. (2009) The question was not how to develop finance

August 30, 2009

Flandreau, Marc, Christophe Galimard, Clemens Jobst and Pilar Nogués-Marco (2009) “The bell-jar: commercial interest rates betwee two revolutions” in The Origin and Development of Financial Markets and Institutions. From the Seventeenth Century to the Present, eds. Jeremy Atack and Larry Neal, Cambridge: Cambridge University Press, 161-208.

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An earlier version of this paper is available here.

For institutionalist economists as well as for contemporary commentators, the wealth of nations in 18th century Europe was rooted in their political system which influenced the level of interest rates and thus trade (p.165). The confidence investors had in the government’s credit was thus seen as critical (tellingly John Law’s primary aim was to bring interest rates down; p.166). Read the rest of this entry »

Glorious Revolution Week, the end: are institutional economics a gamy theory?

August 15, 2009

The Glorious Revolution is a cardinal event in the eyes of modern economic historiography. Not only did it provide the setting for the Industrial Revolution, but it also became a textbook example of the impact of institutional change upon the economy. The 1989 article by North and Weingast is said to be the most quoted in the discipline. Indeed it formalized the process of historical change, but also strongly hinted at what good institutions should be. Read the rest of this entry »

North D. and Weingast B. (1989) The economic impact of institutions

August 14, 2009

North, Douglass C. and Barry Weingast (1989) “Constitution and Commitment: The Evolution of Institutional Governing Public Choice in Seventeenth-Century England”, The Journal of Economic History, 49/4: 803-832.

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Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).

“Put simply, successful long-run economic performance requires appropriate incentives not only for economic actors but for political actors as well. Because the state has a comparative advantage in coercion, what prevents it from using violence to extract all the surplus?” Read the rest of this entry »

O’Brien P. (1988) … or why the Brits used to like paying taxes

August 13, 2009

O’Brien, Patrick K. (1988) “The Political Economy of British Taxation, 1660-1815”, The Economic History Review , 41/1, 1-32.

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Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).


From the Restoration to Waterloo, warfare occupied nearly half the fiscal years, imposing an ever-increasing burden upon the British taxpayers (p.1). The sudden extra expenditures caused by the conflicts were met not through higher taxes but thanks to loans obtained on the London capital market. The British “tax system was [not] elastic or reliable enough to finance abrupt transitions”. The service of the debt contracted during wars soon took over most of peacetime budget (p.2). Read the rest of this entry »

Quinn S. (2001) Public debt to private finance: “Drop dead”

August 12, 2009

Quinn, Stephen (2001) “The Glorious Revolution’s Effect on English Private Finance: A Microhistory 1680-1705”, The Journal of Economic History, 61/3: 593-615.

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Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).


According to North and Weingast’s famous thesis, the investiture of William III of England in 1688, the “Glorious Revolution”, triggered a quick modernization of the British financial system – prompting in turn a fall of the interest rates. But the arrival of the new king also led the realm into a new war against France which lasted nine years and increased public debt from £1 million to £19 million (⅓ of the national income; p.593). Read the rest of this entry »

Bogart D. (2009) The glorious Transport Revolution

August 11, 2009

Bogart, Dan (2009) “Did the Glorious Revolution Contribute to the Transport Revolution? Evidence from Investment in Roads and Rivers”, University of California-Irvine, Department of Economics Working Papers, #080918, 56p.

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This paper is available online. Disclaimer: it is still an ongoing work.


By 1600, individual undertakers started proposing to relieve the royal administration and the parishes from the burden of taking care of the rivers and roads. Proposals for individual projects were made to the House of Commons or the House of Lords; “passed bills were sent to the other House and later to the Crown for final approval”. Read the rest of this entry »