The British were here first

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.

Advertisements

The value of financial history

Last week, when Eric Hanushek was at Gettysburg College for the Finance Symposium, we got into a post-symposium debate over a couple of glasses of wine concerning the usefulness of historians. In a place like Gettysburg, where most everyone is a historian of some stripe, this is a relevant argument. Gettysburg hosts the Civil War Institute and several scholars who study just that. Civil War buffs travel from all over the country–and perhaps even the world (are there non-American Civil War buffs?) to visit the battlefield and the town. They walk over Cemetery Ridge and Seminary Ridge and talk about Pickett’s Charge* and strategy and the people who died and go on ghost tours. Students and scholars read books and reimagine history, too. Hanushek argued that history is unlikely to change much because we already know all the facts and thus studying it, or at least writing several new books and papers on topics that had been exhausted, was perhaps not the best use of intelligent peoples’ time.

Last summer, I attended the Canadian Network of Economic Historians conference. It’s a great group of scholars who I’m sure would profoundly disagree with Eric’s argument, and they were particularly excited when I told them about my plans. “Gettysburg is going to have three economic historians!?” someone asked me. Actually, no. One retired, one is on leave–the one whom I’m replacing–and me, well, I don’t really consider myself an economic historian.

Despite that lack of self-identified association, I was ready to tell Eric he was wrong. I do have a few papers in economic history, using financial transaction and shareholding data from 18th century England. It’s really cool. Which is exactly what I told Eric. Perhaps I’m not going to entirely rewrite the History (with a capital H) of the establishment of the English stock market and modern portfolio theory, but I probably can make little changes to our understanding of how financial markets worked, how investors made decisions, and what effect that might have on commerce, trading, and the like.

In one of these papers, a coauthor and I show that despite relatively established secondary markets for trading shares of companies, individuals did not tend to buy in more than one company. Wealth constraints and the value of being able to vote likely trumped the relative ease with which one could stroll down to Garroway’s in Exchange Alley and pick up a few extra shares. In another, we show how women (who likely couldn’t stroll down to Exchange Alley for propriety reason) used the market.

Like I said, I’m not changing the history of the world, but it’s kind of cool to know that investors weren’t diversifying over these kinds of assets as we might expect modern investors to do. (Which, incidentally, they don’t always do, either).

I’ve been discussing some of these ideas with a few colleagues and all of a sudden, the ideas are flowing. Over lunch today, we mapped out at least half a dozen papers that could come out of these data. So now, my problem is this: how do I go on the market as a labor economist with a slew of papers that fall better under financial macro and economic history? I usually say that being a labor economist means I can do whatever I want, so there it is, I guess.

*Notes:

  1. The Battle of Gettysburg was July 1-3, 1863.
  2. You now know pretty much everything that I do about the Battle of Gettysburg.