Interest rate restrictions in a natural experiment: loan allocation and the change in the usury laws in 1714

This article studies the effects of interest rate restrictions on loan allocation. The British governmenttightened the usury laws in 1714, reducing the maximum permissible interest rate from 6% to5%. A sample of individual loan transactions reveals that average loan size and minimum loan sizeincreased strongly, while access to credit worsened for those with little social capital. Collateralisedcredits, which had accounted for a declining share of total lending, returned to their former role ofprominence. Our results suggest that the usury laws distorted credit markets significantly; we findno evidence that they offered a form of Pareto-improving social insurance.

Poor, hungry and ignorant: Numeracy and the impact of high food prices in industrializing Britain, 1780-1850

This paper uses the ability to recall one s age correctly as an indicator of numeracy.We show that low levels of nutrition impaired numeracy in industrializing England, 1780-1850.Numeracy declined markedly among those born during the war years, especially where wheatwas dear. England s nascent welfare state mitigated the negative effect of high food prices oncognitive skills. Nutrition during early development mattered for labor market outcomes:individuals born in periods or countries with high age heaping were more likely to sort intooccupations with limited intellectual requirements.

Betting on Hitler: The value of political connections in Nazi Germany

This paper examines the value of connections between German industry andthe Nazi movement in early 1933. Drawing on previously unused contemporarysources about management and supervisory board composition and stock returns,we find that one out of seven firms, and a large proportion of the biggest companies,had substantive links with the National Socialist German Workers Party. Firmssupporting the Nazi movement experienced unusually high returns, outperformingunconnected ones by 5% to 8% between January and March 1933. These resultsare not driven by sectoral composition and are robust to alternative estimatorsand definitions of affiliation.

Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600

Philip II of Spain accumulated debts equivalent to 60% of GDP. He also defaulted four times onhis short-term loans, thus becoming the first serial defaulter in history. Contrary to a commonview in the literature, we show that lending to the king was profitable even under worst-casescenario assumptions. Lenders maintained long-term relationships with the crown. Lossessustained during defaults were more than compensated by profits in normal times. Defaultswere not catastrophic events. In effect, short-term lending acted as an insurance mechanism,allowing the king to reduce his payments in harsh times in exchange for paying a premium intranquil periods. © 2010 Elsevier Inc. All rights reserved.

Inflationary expectations during Germany's great slump

Was the German slump inevitable? This paper argues that -despite thespeed and depth of Germany's deflation in the early 1930s - fear ofinflation is evident in the bond, foreign exchange, and commodity marketsat certain critical junctures of the Great Depression. Therefore, policyoptions were more limited than many subsequent critics of Brüning'spolicies have been prepared to admit. Using a rational expectationsframework, we find strong evidence from the bondmarket to suggest fearof inflation. Futures prices also reveal that market participants werebetting on price increases. These findings are discussed in the contextof reparations and related to the need for a regime shift to overcomethe crisis.

Banking as an emerging technology: Hoare's Bank, 1702-1742

London s financial market underwent dramatic change after 1700. More limitedthan Paris or Amsterdam in the seventeenth century, London became the leadingfinancial centre in Europe in the eighteenth century. There is an extensive andgrowing literature on the causes of this change, but comparatively little on thechange itself. This article provides detailed information on the operation of theLondon financial market around 1700 by describing the operations of a nascentLondon bank.

Malthusian dynamism and the rise of Europe: Make war, not love

This paper argues that Malthusian regimes are capable of sustained changes in per capita incomes. Shifting mortality and fertility schedules can lead to different steady-state income levels, with long periods of growth during the transition. Europe checked the downward pressure on wages through late marriage, which reduced fertility, and a mortality regime that combined high death rates with high incomes. We argue that both emerged as a result of the Black Death.

Private borrowing during the financial revolution: Hoare’s Bank and its customers, 1702-1724

The financial revolution improved the British government s ability to borrow, andthus its ability to wage war. North andWeingast argued that it also permitted privateparties to borrow more cheaply and widely.We test these inferences with evidencefrom a London bank.We confirm that private bank credit was cheap in the earlyeighteenth century, but we argue that it was not available widely. Importantly, thegovernment reduced the usury rate in 1714, sharply reducing the circle of privateclients that could be served profitably.

Sweet diversity: Colonial goods and the rise of European living standards after 1492

When did overseas trade start to matter for living standards? Traditional real-wage indices suggest that living standards in Europe stagnated before 1800. In this paper, we argue thatwelfare rose substantially, but surreptitiously, because of an influx of new goods as a result ofoverseas trade. Colonial luxuries such as tea, coffee, and sugar transformed European diets afterthe discovery of America and the rounding of the Cape of Good Hope. These goods became household items in many countries by the end of the 18th century. We use three different methodsto calculate welfare gains based on price data and the rate of adoption of these new colonialgoods. Our results suggest that by 1800, the average Englishman would have been willing to forego 10% or more of his income in order to maintain access to sugar and tea alone. These findings are robust to a wide range of alternative assumptions, data series, and valuation methods.

Lending to the borrower from hell: Debt and default in the age of Philip II, 1556-1598

What sustained borrowing without third-party enforcement, in the early days of sovereignlending? Philip II of Spain accumulated towering debts while stopping all payments tohis lenders four times. How could the sovereign borrow much and default often? Weargue that bankers ability to cut off Philip II s access to smoothing services was key. Aform of syndicated lending created cohesion among his Genoese bankers. As a result,lending moratoria were sustained through a cheat the cheater mechanism (Kletzer andWright, 2000). Our paper thus lends empirical support to a recent literature emphasizingthe role of bankers incentives for continued sovereign borrowing.

The three horsemen of riches: Plague, war and urbanization in early modern Europe

How did Europe escape the "Iron Law of Wages?" We construct a simple Malthusian model withtwo sectors and multiple steady states, and use it to explain why European per capita incomes andurbanization rates increased during the period 1350-1700. Productivity growth can only explain a smallfraction of the rise in output per capita. Population dynamics changes of the birth and death schedules were far more important determinants of steady states. We show how a major shock to population cantrigger a transition to a new steady state with higher per-capita income. The Black Death was such ashock, raising wages substantially. Because of Engel's Law, demand for urban products increased, andurban centers grew in size. European cities were unhealthy, and rising urbanization pushed up aggregatedeath rates. This effect was reinforced by diseases spread through war, financed by higher tax revenues.In addition, rising trade also spread diseases. In this way higher wages themselves reduced populationpressure. We show in a calibration exercise that our model can account for the sustained rise in Europeanurbanization as well as permanently higher per capita incomes in 1700, without technological change.Wars contributed importantly to the "Rise of Europe", even if they had negative short-run effects. We thustrace Europe s precocious rise to economic riches to interactions of the plague shock with the belligerentpolitical environment and the nature of cities.

Recreating the South Sea bubble: Lessons from an experiment in financial history

Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been proposed as potentially contributing to one of the greatest periods of asset overvaluation in history: an intricate debt-for-equity swap, deferred payment for these shares, and the possibility of default on the deferred payments. We consider which aspect might have had the most impact in creating the South Sea bubble. The results of the experiment suggest that the company?s attempt to exchange its shares for government debt was the single biggest contributor to the stock price explosion, because of the manner in which the swap affected fundamental value. Issuing new shares with only partial payments required, in conjunction with the debt-equity swap, also had a significant effect on the size of the bubble. Limited contract enforcement, on the other hand, does not appear to have contributed significantly.

Reprisals remembered: German-Greek conflict and car sales during the Euro crisis

During the Greek debt crisis after 2010, the German government insisted on harshausterity measures. This led to a rapid cooling of relations between the Greekand German governments. We compile a new index of public acrimony betweenGermany and Greece based on newspaper reports and internet search terms. Thisinformation is combined with historical maps on German war crimes during theoccupation between 1941 and 1944. During months of open conflict between Germanand Greek politicians, German car sales fell markedly more than those of cars fromother countries. This was especially true in areas affected by German reprisals duringWorldWar II: areas where German troops committed massacres and destroyed entirevillages curtailed their purchases of German cars to a greater extent during conflictmonths than other parts of Greece. We conclude that cultural aversion was a keydeterminant of purchasing behavior, and that memories of past conflict can affecteconomic choices in a time-varying fashion. These findings are compatible withbehavioral models emphasizing the importance of salience for individual decision-making.

Viatjant a Grècia en cerca de l'ideal hel·lènic

Aquest és un article de síntesi que analitza sobretot l'anomenat Grand Tour i la cerca de l'ideal hel·lenic per part de tot un llarg seguit de personatges. Ells i els seus llibres i textos, anomenats aquí i dels quals se'n recullen nombrosos passatges, han estat veritablement significatius en la història del redescobriment europeu de Grècia: George Wheler, Jacob Spon, marquès de Nointel, James Stuart, Nicholas Revett, Robert Wood, Johann Joachim Winckelmann, Antiquities of Athens, Antiquities of Ionia, Richard Chandler, Lord Elgin, Lord Byron, Konstantinos P. Kavafis, etc.

Viajando a Grecia en busca del ideal helénico

Este es un artículo de síntesis que analiza sobre todo el llamado Grand Tour y la búsqueda del ideal helénico por parte de una larga serie de personajes. Ellos y sus libros y textos, ciados aquí y de los cuales se recogen numerosos pasajes, han sido verdaderamente significativos en la historia del redescubrimiento europeo de Grecia: George Wheler, Jacob Spon, marquès de Nointel, James Stuart, Nicholas Revett, Robert Wood, Johann Joachim Winckelmann, Antiquities of Athens, Antiquities of Ionia, Richard Chandler, Lord Elgin, Lord Byron, Konstantinos P. Kavafis, etc.