Market history and investing in high supply-and-demand economies

What drives supply and demand? High wages and cheap energy, asserts Professor Robert Allen in his enlightening book The British Industrial Revolution in Global Perspective. Published last month by Cambridge University Press, this is the first volume in the Economic History Society’s series New Approaches to Economic and Social History.

Why was the Industrial Revolution British?
Robert C. Allen © voxEU.org
15 May 2009

It is still not clear among economic historians why the Industrial Revolution actually took place in 18th century Britain. This column explains that it is the British Empire's success in international trade that created Britain's high wage, cheap energy economy, and it was the spring board for the Industrial Revolution.

Read the article here.

Beer, Fries, and Globalization

The day started with pouring rain in Toronto and bad unemployment numbers in the US. In the afternoon, the sun is out and North American markets are in the green again, which might offer a crumb or two of comfort.

I met an old friend for lunch today, and we discussed business and our kids' education. On the subway (instead of at Starbucks as usual), I enjoyed reading through Tim Harford's book The Undercover Economist.

The post's title above is the name of one of the chapters in this book. Some excerpts, for the benefit of my cognitive fog, follow:

Once upon a time there was a prosperous trading city called Bruges, nestling on the Zwin estuary in what is now Belgium. Bruges grew up around a castle built in late ninth century by the founder of the Duchy of Flanders.

[I]t was the center of gravity for the Hanseatic League of trading cities. But in the fifteenth century something strange began to happen. The Zwin began to silt up. The great ships could no longer reach the docks of Bruges. The Hanseatic League moved up the coast to Antwerp.

Antwerp, still connected to the world via the Scheldt River, took over from Bruges as the greatest economic power in Western Europe. The wealth of that time is clearly visible today. Antwerp remains an economic powerhouse. It is still the diamond capital of the world, and the mighty port on the Scheldt operates around the clock.

The contrasting stories of Bruges and Antwerp suggest a simple message: if you would like to be rich, then it is a good idea to forge close links with the rest of the world. If you prefer nothing to change, then it is best to have a harbor that silts up. If you would like to be rich and have nothing change, then you will be disappointed.

The last sentence, a veritable call to action, is thoroughly edifying...

Antwerp

Bruges - Venice of the North

Money, money, money, and the financial markets

This readable and meaningful book review of The Origins of Value: The Financial Innovations that Created Modern Capital Markets (edited by William M. Goetzmann and K. Geert Rouwenhorst, Oxford University Press, 2005), written by Stephen Fidler for the Financial Times, may shed some light on money and its usage. Loans bets and trades, or bonds stocks/options and commerce.

A globe-trotting history of modern finance
By Stephen Fidler

Published: December 27 2005. © The Financial Times Limited 2009

Loans, bets and trades. These three words, more or less, encapsulate all transactions in the world's financial markets. Raw computing power in the past 20 years has pushed modern finance to levels of sophistication that make it hard for laymen to grasp. But understand these building blocks and you understand, at root, what financial markets are about.

Read the article here.

A brief history of Genoa

As il mio amico ml discovered the other day, all the roads may have once led to Rome, but they certainly start from Genoa. Giuseppe Felloni, Guido Laura - Genova e la storia della finanza: una serie di primati? / Genoa and the history of finance: A series of firsts? is a fairly readable history of Genoa's innovations in the world of economics in ten chapters.

These apparently include public debt, government bonds, discount on state bond coupons, the clearing house, and double-entry accounting. At least, that is, based on the existing documentation in Genoa and lack thereof elsewhere.

You can read the first edition (2004) of this bilingual (Italian/English) book, in PDF format, on Giuseppe Felloni's site. Chapter 4 deals specifically with the history of the House and Bank of St. George (Genoa, 1407-1805), whose archives, the basis for this book, Felloni has catalogued for years.

If nothing else, you'll certainly enjoy the pictures.

The above illustration of Genoa, around 1490, is a woodcut from Hartmann Schedel’s Weltchronik (Nürnberg 1493), fol. lviii verso. Source: Wikimedia Commons.