If y’all don’t know how much I love photographas, well, I’m telling you now, I love photographs. I haven’t written much lately about history, but I love history, too. And I really love old photographs, historical photographs, and photographs of women doing awesome things. So, for this International Women’s Day, I saved a link to some fantastic old photos of women being awesome. That’s just how we do.
Happy International Women’s Day!
The Bank of England just released three centuries’ worth of economic data to hype up its data visualization competition. As someone who once spent a lot of time with 18th century stock market data from England, I feel a little giddy seeing it all. On that note, my paper on share portfolios in the early 18th century with Ann Carlos and Larry Neal is available on the Economic History Review Website. And my favorite #dataviz from the project (that actually didn’t quite make it into the paper) is pasted below.
Now, that’s a bubble!
The American Economic Review was sitting in my mailbox this morning. Yes, I do realize I’m pretty much the last economist on earth to still receive hard copy journals, but don’t knock it ’til you try it.
Claudia Goldin writes the lead article from the April issue. It’s titled A Grand Gender Convergence: Its Last Chapter. The abstract is below.
The converging roles of men and women are among the grandest advances in society and the economy in the last century. These aspects of the grand gender convergence are figurative chapters in a history of gender roles. But what must the “last” chapter contain for there to be equality in the labor market? The answer may come as a surprise. The solution does not (necessarily) have to involve government intervention and it need not make men more responsible in the home (although that wouldn’t hurt). But it must involve changes in the labor market, in particular how jobs are structured and remunerated to enhance temporal flexibility. The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours. Such change has taken off in various sectors, such as technology, science and health, but is less apparent in the corporate, financial and legal worlds.
Given the nature of the debate over the past few months on equal pay legislation and other forms of labor market discrimination against women, and more importantly against individuals that don’t conform to the two-gender paradigm, to claim that the gender convergence is in its last chapter seems a little short-sighted. But she’s a historian and a very smart economic historian at that, having written a book, Understanding the Gender Gap: An Economic History of American Women
It’s a good read and would be great for students. In fact, perhaps I’ll have mine read it this week. Look out for their tweets!
Phillip Cohen of the Family Inequality blog has a piece in the Sunday NYTimes about women’s labor force participation over the past half-century. I’d quote from it, but there are too many things. I say just go read it.
He also mentions Sarah Damaske‘s new book, For the Family?: How Class and Gender Shape Women’s Work,
which I promptly ordered (and think you should, too).
The Economic Logician picked up some of my recent research last week, and since I’ve been in the midst of trying to revise that paper and get it out, I figured it wasn’t a bad time to highlight it here myself.
Ann Carlos and Larry Neal, my coauthors, engaged in an extensive data collection project whereby they digitized the ledger and transfer books of some of the earliest English joint-stock companies and their share prices in the early 1700s. Picture hours upon endless hours in historical archives in London. You can imagine that for a data geek like myself, this was just too much fun to pass up, so with them, I have been exploring ways to combine these data and look at portfolio holdings of individuals over the period of the South Sea Bubble. We find two big things. First is that investors didn’t diversify. Despite transparent pricing and an active secondary share market, most investors we see both during the 1720s and three decades earlier owned stock in only one company. This isn’t to say that they weren’t diversifying in other ways. We don’t have full portfolio information for most, so we don’t know if they held land or bonds, for instance. We do know that within the set of financial instruments for which we have information, they didn’t diversity.
We explore a few reasons for this. Carruthers (which is a very good read) suggests that individuals traded their shares on a personal basis, mostly to business partners, family, or friends, as a way of ensuring that the stock stayed in the hands of individuals of a particular political persuasion. Stock market activity in this period does not support this hypothesis, with a large number of jobbers or brokers taking on the sale and purchase of stock and the rise of meeting places like the coffee shops in Exchange Alley where daily prices were posted.
We do not exactly, as Economic Logician suggests, show that individuals weren’t financially literate. Rather, we suggest that individuals didn’t diversity partially due to the voting rules of the companies. There was likely room for diversification to reduce idiosyncratic risk associated with holding in only one company, and many individuals had the requisite capital to purchase a portfolio of shares. However, the gains to purchasing in only one company were large for merchants who could use their vote or position on the governing boards to score lucrative contracts or help friends. We believe that the voting rules were a primary factor in the lack of diversification, at least where a wealth constraint didn’t bind.
Related: Carl Wennerlind released a very good book on this period explaining the rise of credit markets and their link to power, war, slavery, the pamphleteers, and more. Worth a read as well if you find this stuff interesting.
A year ago, about this time, I was on my way to Ottawa for the Canadian Economic Association and Canadian Network of Economic History Meetings. They coincided, so I presented papers at both and took the opportunity to adamantly assert that I was not an economic historian.
A year later, I have a book chapter, a working paper, a paper (almost–I’m just waiting for confirmation it was sent out) under review, and a paper idea percolating that all belong under the label Economic History. I’m trying to get the paper idea in shape to submit to the CNEH meetings again this year, with the deadline fast approaching.
While my coauthors and I were hard at work on the paper on financial portfolios in the early 18th century, the one that is (almost) under review, a seminar participant at Stanford asked my coauthor what an optimal portfolio would look like. We didn’t know. None of us is really a finance person. I got involved with the project because it had a gender component and the others on the papers are economic historians.
I took it upon myself to pick the brain of my colleague who teaches finance at Gettysburg and found myself quickly immersed in the heady world of portfolio optimization, betas, alphas, indices, Markov matrices, and so much more. From my understanding of the literature, the S&P500 represents the closest thing we have to an optimal portfolio, and so creating a similar index for the time period we’re interested in should provide the answer to the seminar participant’s question.
What I find particularly interesting about the index method of portfolio construction is that the S&P500 in particular is thought to provide an accurate picture (returns and growth-wise) of a balanced portfolio of all assets–not just financial instruments. If you were to put a big chunk of your money in a fund that purchased stocks along with the S&P market capitalization strategy, you would actually be bringing your portfolio out of balance by buying things like real estate or durable investment goods.
The idea, I believe, is that the stock market has “evolved” such that it captures the risk and reward of all those types of instruments–not just the stocks themselves. I find this assumption, particularly given the dramatic dips and peaks in the stock market we’ve seen over the past four or five years to be heroic, at best, but it becomes more problematic when we turn to 1700s finance.
The financial instruments available in the period for which I have data are incredibly few in number and even more limited in scope. Besides a bank or two, they are joint-stock, charted trading companies, whose fortunes lie entirely in the wind and the water and the ability of colonists to extract resources from the colonies. There’s no ability to invest in steel or textiles or the machines that make them. I don’t have information about real estate or other investments for most of the people in the sample, and I certainly don’t have their prices. So, our optimal portfolio can really only be for the available stocks, not for the entire gamut of instruments.
I doubt that I’ll be the one to rewrite modern portfolio theory, and I do think this is the best place to start, but it’s not ideal. Story of an economics paper, I guess.
I’m only beginning to get into this economic history literature. In much of the work I’ve done so far, my comparative advantage came in the form of data work. So while having skimmed, but not read in depth, most of the literature cited was formerly compelling and advantageous, I’m going to have a little catching up to do if I’m going to branch out on my own in this field. Hence, my tweet from yesterday afternoon with three fat volumes of The Constitution and Finance of Early English, Scottish, and Irish Joint-Stock Companies by Scott. It’s okay to say you’re jealous.
The decline of industry and manufacturing in America over the past few decades has been decried as one of the primary culprits behind the decline of the middle class and of blue-collar jobs. It seems as though, we aren’t the first ones to be in this situation.
At the same time that British capital was leaving the island at unprecedented levels, British industry began a decline that signalled the beginning of Britain’s transformation from world’s workshop to banker. While it was no surprise that a nation would eventually surpass Britain in industrial might, the speed of the reversal caused much consternation among the British elite. The city of London, with its perceived propensity to funnel capital overseas rather than into domestic industry, was widely suspected of hastening the decline of British industry.
The growing pains of developing from a manufacturing economy to a service-based economy aren’t new. I think that’s why I like history, because it reminds me that even though nothing is a replica of the past, it’s not like no one has ever been in a similar situation before.
1. Benjamin R. Chabot and Christopher J. Kurz. 2010. “That’s where the money was: Foreign bias and English investment abroad, 1866–1907”. Economic Journal 120 (September), 1056–1079.
ERIN K. FLETCHER 