Prometheus Shackled

my book with Peter Temin on banking and the Industrial Revolution will be out later this year. We are just finalizing the cover and waiting for the index. In the meantime, our friends who generously read (and criticized) the  manuscript have sent in their testimonials, and they have been very kind. Here is what their testimonials say:

“A major contribution to economic history, business history, social history, and economics, Prometheus Shackled resolves a great enigma about the Industrial Revolution by explaining why economic growth was so slow despite massive technical change."—Philip T. Hoffman, California Institute of Technology "Based on newly opened archival material, two economists have written a sparkling and provocative book on how banking worked in the past, that will force all scholars working in the area to re-examine their notions about the economics of the British Industrial Revolution, the importance of banking and finance in economic development, and the role that government regulation has played in the process of capital accumulation and industrialization."—Joel Mokyr, Northwestern University; author of The Enlightened Economy “Peter Temin and Joachim Voth have written a marvelous blend of business history and economic analysis.  Their careful study of Hoare’s Bank documents the origins of modern banking and relates the story to the state’s insatiable demand for credit to finance war.  Prometheus Shackled is a pleasure to read and calls into question many grand narratives that seek to explain the rise of the West.”--Bob Allen, University of Oxford; author of The British Industrial Revolution in Global Perspective “In a world still hobbled by the unchecked excesses of modern finance, this timely study of Industrial Revolution banking reminds us that bankers are as important for growth as engineers.  Indeed, the authors argue, too few bankers in eighteenth century Londonlimited economic growth much more than too many in the untrammeled City of today.” -- Greg Clark, University of California, Davis; author of A Farewell to Alms.

“This is an important work, and it is written in an engaging style. The authors integrate goldsmith banking operations with the history of the rise of the nation state’s finances and military aspirations, the broader economic trends that gave rise to industrialization, the rise of the middle class and the changing distribution of wealth, and evolving societal attitudes that accompanied industrialization. The central thesis of the book – that England’s constrained banking system served sovereign interests at the expense of private interests during the early industrial revolution (1760-1830) – is argued persuasively.” -- Charles Calomiris, Columbia University

“Prometheus Shackled solves a major puzzle:  Why during the first Industrial Revolution was Britain's economic growth anemic?  The authors show that financial and other policies diverted credit from the private economy to the government, making it easier for the British state to finance its numerous wars.  With implications for both history and our own financially and economically troubled times, this is an important book.” -- Richard Sylla, New YorkUniversity

a mostly stimulating and important black hole...

in the space + time continuum: I have just spent a few days writing tenure letters. It's hugely interesting... you get to read pretty interesting stuff that you wouldn't normally read, and you have to think about where the profession/subfield is headed. One can even live with the pleasant thought that one can influence (in a small way) where one's own field is going. Of course, the time cost is staggering. I hit "word count" on the last letter I wrote, and it weighs in at ~2,000 words. An average academic article is ~ 8,000 words, and much of the work that goes into it - except for the data analysis - isn't so different either ... the sifting of evidence and the ferreting out of research trends, plus the polishing of the text to make sure it conveys finer nuances. Good thing one only gets to do this with tenure under the belt!

Small nuggets at the Fed

I am visiting the Fed in Minneapolis, giving talks there and at the university. A lot of fun, especially since they don't really "do" economic history here. Next week, our strength doubles - Peter Koudijs is coming over from Stanford for some joint work.

Two priceless nuggets that I spotted on the information screens: one is for a free massage you can request on certain days to deal with stress; the other is for an IT-seminar entitled "What's new in Windows 7?". Judging from the atmosphere at the Minn Fed, the world is not coming to an end just yet...

Economists are useless

at predicting anything... so here is a bank that uses this often-lamented fact for advertising purposes (featuring Tom Sargent, really!):

Radio days

It's normally not a good sign for the politics/economics of the Eurozone + stability of financial markets when I start to get interview requests... this leading indicator is currently flashing orange. Here is an interview with Deutsche Welle on Glass-Steagall from August, and another, more recent one regional finances in Spain...  and here is one on the prospects for ECB intervention in bond markets (Swiss radio -- all of them in German). 

Finally...

Sometimes, I wonder about the disconnect between the time-scale of human life on the one hand, and of academia on the other. I have one paper that's been with a journal for 14 months now; some 3 months ago, I asked the editor about the state of play, and heard that he will make a decision "soon" [economists can probably guess which journal I am talking about - I hear a lot of really awful moaning and groaning about the very same journal from a lot of other people]. And there are papers that spent more years under submission and r+r [admittedly, at more than one journal] than it took to fight World War II...

Of course, many a paper improves immeasurably during the refereeing process. Now, Nico and I finally got our article about the Three Horsemen of Riches into the Review of Economic Studies:

How did Europe escape the "Iron Law of Wages?" We construct a simple Malthusian model with two sectors and multiple steady states, and use it to explain why European per capita incomes and urbanization rates increased during the period 1350-1700. Productivity growth can only explain a small fraction 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 can trigger a transition to a new steady state with higher per-capita income. The Black Death was such a shock, raising wages substantially. Because of Engel's Law, demand for urban products increased, and urban centers grew in size. European cities were unhealthy, and rising urbanization pushed up aggregate death 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 population pressure. We show in a calibration exercise that our model can account for the sustained rise in European urbanization 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 thus trace Europe's precocious rise to economic riches to interactions of the plague shock with the belligerent political environment and the nature of cities.