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ECON 50483, Financial History, Spring 2003
9:30 am T & TH, Room 231 Dan Rogers Hall
Dr. Stephen Quinn
102 Economics Building, s.quinn@tcu.edu, 817.257.6234
Wednesday 9-11, or by appointment
This course will examine the development of "payments systems" from the Middle Ages to today. Payment systems are the networks of money, people, banks, governments, regulations, and other stuff that we use when we pay for things. For example, consider your checking account. You put Federal Reserve notes into your bank. You then write a check to TCU for expensive text books. TCU then deposits your check with the school's bank. Your check then moves through a clearing system that eventually transfers dollars from your bank to TCU's bank. We will study how these systems evolved. The issues will range from micro to macro, domestic to international, and private to public.
While taking a historical approach, the class is still an ECONOMICS class. The ultimate aim of the course will be to apply economic analysis to historical examples and will be reflected in the grading of all assignments. Students not having taken Econ 40153, The Economics of Financial Markets, or an equivalent money and banking course will have a serious amount of background knowledge to acquire on their own.
COURSE WORK
POINTS: 200 points will be available to be earned as follows:
A. Comments - 20 points (5 each). I will take the best one from each section, except Section IV. Section I, Foundations, January 16-February 4.
Section II, Public Finance, February 6-18.
Section III, Anglo-American Banking, February 20-March 18.
No comments on Section IV.
Section V, April 8 - 29. B. Paper - 40 points. Paper Topic: Did the development of paper money before 1800, make the payment system better?
First Draft (20 points) Due Thursday, February 6.
Final Draft ( 20 points) Due Tuesday, February 18.
C. Critique - 20 points, Due Tuesday, February 11.
D. Presentation - 40 points. Topic to be assigned.
Report - (20 points) Due Tuesday, March 18.
Presentation - (20 points) Due either Thursday, March 20, or Tuesday, April 1. E. Take Home Mid-Term - 40 points, CHANGED Due Tuesday, April 8. Write on two (20 points each) Question 1 - Which shock had the greater impact on the development of our payment system, the Glorious Revolution of 1688 or the US Civil War?
Question 2 - Banks were often both suppliers of means of payment and suppliers of delegated lending, yet the role of banks is changing today. Reconcile the Wall Street Journal article "Suddenly, Banks are Acting a Lot Like Bond Markets" of September 17, 2002, with the history of the US banking system.
Question 3 - Were the British and American banking and payments systems fragile and what are the implicatons of your answer? Use Benston, and Kaufman, �Is the Banking and Payments System Fragile?� Journal of Financial Services Research 9, (1995), pp. 209-40 to help you think through the issue. Your answer, of course, should be thick with historical examples from class.
F. Take Home Final - 40 points, Due by Thursday, May 8, at 3 p.m. Question 1 - (20 points) Read Hugh Rockoff's"The 'Wizard of Oz' as a Monetary Allegory," Journal of Political Economy (1990), pp. 739-60. JSTOR. Sketch how Baum might have extended the allegory to include the Great Contraction of 1929-33.
Question 2 - (20 points) What is the future of the Euro and the European Central Bank based on the history you have learned in this class?
GRADES: 180 points (90%) will earn an A, 160 (80%) a B, 140 (70%) a C, and 120 (60%) a D. I may lower these thresholds, but I will not raise them.
COMMENTS: Comments are designed to encourage students to read assigned material carefully and to develop critical analysis of economic texts.
A. Up to the beginning of each class, a comment on that day's readings will be accepted. Comments for that reading will not be accepted after this time.
B. The comment will be typed, will not exceed one page, and will ideally be only a few sentences. Each comment will identify you, the date, the article considered, and make one argument. You can email me a comment at s.quinn@tcu.edu , but it will only be accepted if it arrives before class begins.
C. Your comment will be graded based on the quality of economic analysis and relevance of the comment to the thesis of the article critiqued. Comments will placed on a five point scale. A lack of clarity, brevity, or correct grammar will reduce your grade.
Comment Grading Scale:
5 points: An insightful comment that correctly characterizes the author's argument while suggesting substantially change in the author's argument.
4 points: A comment that contains an original perspective but lacks insight, lacks importance for the author's argument, or makes an error regarding the author's argument.
3 points: A comment that only tells me what the author argued. An accurate book report.
2 points: A comment that only tells me what the author said and mistakes what the author argued. An inaccurate book report.
1 point: Something handed in on time.
0 points: Comment not handed in on time.
D. Only your best comment from each section of the semester will be counted. While only one comment will be accepted per class, you have the opportunity to submit a comment each class of the term
PRESENTATION: Presentations give students a public speaking opportunity.
A. I will pair students and assign an article on a historical panic for that pair to research and speak on.
B. The pair will submit a written report explaining the causes, consequences, and lessons of the panic for our class with particular focus on the assigned article. Additional sources may be used but must be referenced. The submitted reports will be copied and shared with the class.
C. The pair will give a ten minute presentation to the class.
PAPER: Paper assignments allow students to develop their analytical skills.
A. Papers will be at least 1,500 words (about six pages depending on your font).
B. Papers will use citations to refer to relevant required readings. Additional sources are not required, but may be used. Endnotes or footnotes can be used if needed.
C. Papers will have a bibliography.
D. Thoughtful use of economic analysis will be the most important part of the paper grade.
E. If I do not know what the thesis of the paper is by the end of the first 500 words, then I will stop reading and grade the paper accordingly.
F. The first draft of each paper will not be a rough draft; rather, it will be your best effort. You will submit TWO copies of the first draft and retain a third copy for yourself. The first draft will be returned to you with my comments and the comments of a fellow student.
G. Final drafts will be graded on the amount of improvement from the first draft. Simply doing exactly what I commented on will not earn a satisfactory grade. Instead, you will reconsider the paper and rewrite as much as necessary to make your piece the written work it should be. This can be more work than the original draft.
1. You will include a cover letter explaining changes you have made and why. You do not have to mention grammatical changes.
2. You will include a copy of the first draft for comparison purposes.
CRITIQUE: Each student will critique another student's first draft.
A. In class on the day when first draft papers are due, each student will be given a copy of another student's paper and a review guideline.
B. If you do not hand in a first draft paper, then you will not receive a critique to grade, and you will receive a zero for this assignment.
C. Each student will write a critique of the paper they were given and make TWO copies. On the Critique Day, students will hand one copy of their critique to me for grading and will hand the other copy to the author. Critiques will be graded based on the criteria set forth in the guideline.
TAKE HOME EXAMS: The purpose of exam is for students to show a knowledge of material covered during the semester and the ability to synthesis this evidence into persuasive economic arguments.
A. The essays will be typed, and each essay will not exceed 1,500 words.
B. Historical evidence, references to our required readings, a bibliography, and explicit use of economic theory are expected.
OTHER MATTERS
WRITTEN ASSIGNMENTS: Assignments will be typed, double spaced, and single sided.
PLAGIARISM: All submitted written assignments will be original. Plagiarism will result in receiving an F for the course. Lifting material from the internet without citing it is a form of plagiarism.
LATE ASSIGNMENTS: Late comments and late final exams will not be accepted. Papers, critiques, and exams during the semester submitted late but before the next class will have their highest possible grade lowered to a "B". No papers will be accepted after the following class period.
TEXTS and READINGS: The required books are Bodenhorn, A History of Banking in Antebellum America, Cambridge 2000, and Globalizing Capital, Princeton: Princeton University Press (1996). The vast bulk of the readings are in journals or book chapters. You are responsible for arranging your own copies.
Spring 2003 Financial History Schedule
*Secondary Readings are not required. I mention them because I will refer to them in class, and you may be interested in additional material.
| T, January 14 | Introduction |
| I. FOUNDATIONS | |
| Coinage
TH 16 |
Velde, "Lessons from the History of Money," Economic Perspectives, Federal Reserve Bank of Chicago (1998), pp, 2-17. PDF . |
| Price Revolution
T 21 |
Sargent and Velde, "The Price Revolution in France," The Big Problem of Small Change, Chapter 11 (2002) Princeton, pp. 186-215. On Reserve. |
| Venice
Deposit Banks TH 23 |
Mueller, "From Money Changing to Deposit Banking," The Venetian Money Market, Chapter 1, Johns Hopkins University Press (1997), pp. 3-32. On Reserve.
* Kohn, "Early Deposit Banking," Working Paper 99-03 (1999). PDF . |
| Venice
Bills of Exchange T 28 |
Mueller, "Exchange and the Money Market," The Venetian Money Market, Chapter 8, Johns Hopkins University Press (1997), pp. 288-355. On Reserve.
* Milgrom, North, and Weingast, "The Role of Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs," Economics and Politics 2, pp. 1-23. |
| Amsterdam
Exchange Banks TH 30 |
Dehing, and 't Hart, "Linking the Fortunes: Currency and Banking, 1550-1800," A Financial History of the Netherlands, 't Hart, Jonker, and van Zanden editors, New York: Cambridge University Press (1997), pp. 37-63. On Reserve.
* van der Wee, "The Influence of Banking on the Rise of Capitalism in North-west Europe, Fourteenth to Nineteenth Century," in Banking, Trade, and Industry, Teichove, Kurgan-van Hentenryk, and Ziegler eds. Cambridge University Press: New York (1997), pp. 173-90. |
| London
Bilateral Clearing T February 4 |
Quinn, "Goldsmith-Banking: Mutual Acceptance and Interbanker Clearing in Restoration London," Explorations in Economic History 34, (1997), pp. 411-32.
* Roseveare, "Part One: 1660-1685," The Financial Revolution 1660-1760, Longman: New York (1991), pp. 6-28. |
| II. PUBLIC FINANCE | |
| English Revolution
TH 6 First Draft Due |
Quinn, "Glorious Revolution," entry for EH.Net Dictionary. PDF
OR North and Weingast, "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," Journal of Economic History XLIX (December, 1989), pp. 803-832. JSTOR . * Roseveare, "Part Two: 1685-1714," and "Part Three: 1714-1760," The Financial Revolution 1660-1760, Longman: New York (1991), pp. 52-75. |
| T 11
Critique Due |
Critique Day, Read Assigned Paper. |
| French Revolution
TH 13 |
White, "The French Revolution and the Politics of Government Finance," Journal of Economic History 55 (June 1995), pp. 227-255. JSTOR .
* Hoffman, Postel-Vinay, and Rosenthal, "Micro-Economics and Macro-Politics: Credit and Inflation during the French Revolution," Priceless Markets, Chapter 8, (2000), pp. 177-206. |
| American Revolution
T 18 Final Draft Due |
Sylla, "Shaping the US financial system, 1690-1913: the dominant role of public finance, " in The State, the Financial System, and Economic Modernization, Sylla, Tilly, and Tortella eds., Cambridge University Press (1999), pp. 249-70. On Reserve.
*Calomiris, "Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental," Journal of Economic History 48 (1988), pp. 47-68. |
| III. DEVELOPMENT OF ANGLO-AMERICAN BANKING | |
| Britain
TH 20 |
Quinn, "Finance and Capital Markets," Cambridge Economic History of Britain to 1700, forthcoming. PDF.
*Davis and Gallman, "The United Kingdom," Evolving Financial Markets and International Capital Flows: Britain, the Americas, and Australia, 1865-1914. Cambridge University Press (2001), pp. 50-233. |
| Antebellum United States
T 25 |
Bodenhorn, "Financing Entrepreneurship: Banks, Merchants, and Manufacturers," Chapter 3 in A History of Banking in Antebellum America, Cambridge University Press: New York (2000), pp. 84-118. Required Text.
* Lamoreaux, "Banks, Kinship, and Economic Development," Journal of Economic History 46 (1986), pp. 647-68. |
| Note Markets
TH 27 |
Rolnick, Smith, and Weber, "Lessons From a Laissez-Faire Payments System: The Suffolk Banking System (1825--58)," Federal Reserve Bank of Minneapolis Quarterly Review, Summer 1998, pp. 11-21. PDF
* Calomiris & Kahn, "The Efficiency of Self-Regulated Payments Systems: Learning from the Suffolk System," Journal of Money, Credit, and Banking 28 (November 1996, Part 2), pp. 766-803. JSTOR . |
| Discount Markets
T, March 4 |
National BankingBodenhorn, "Integration of Short-Term Capital Markets in Antebellum America," and "Banks, Brokers, and Capital Mobility," A History of Banking in Antebellum America, Chapters 4 and 5, Cambridge University Press: New York (2000), pp. 119-212. Required Text. |
| National Banking
TH 6 |
White, "A Microeconomic Study of Bank Lending in Late Nineteenth Century America: Were Banks Special?" Federal Reserve Bank of St. Louis Review 80 (May/June 1998), pp. 13-32. PDF
*Gorton, "Clearinghouses and the Origin of Central Banking in the United States," Journal of Economic History, XLV (June 1985), pp. 277-284. |
| US Development
T 18 Panic Reports Due |
Davis and Gallman, "International Capital Movements, Domestic Capital Markets, and American Economic Growth, 1865-1914," Evolving Financial Markets and International Capital Flows: Britain, the Americas, and Australia, 1865-1914, Cambridge University Press (2001), pp. 234-341. On Reserve. |
| IV. SYSTEMIC RISK | |
| Panics, Europe
Th 20 First Set of Presentations |
1. 1374-5, Venice, Mueller, "Bank Failures in the Trecento," The Venetian Money Market, Chapter 4, Johns Hopkins University Press (1997), pp. 121-57. On Reserve.
2. 1720, London, Neal, "How the South Sea Bubble was Blown Up and Burst: A New Look at Old Data," in Crashes and Panics, ed. by Eugene White, 1990, Dow Jones-Irwin, pp. 33-56. On Reserve. 3. 1720, Paris, Neal, Rise of Financial Capitalism, Chapters 4 & 5, Cambridge: New York (1990), pp. 62-88, 89-117. See me. 4. 1772, Scotland, Checkland, "The Multiple System," Scottish Banking, Chapter 5, (1975) Collins, 91-135. See me. 5. 1793-7, Britain, Cannan, "Introduction," The Paper Pound of 1797-1821, 2nd edition (1925) King and Son, pp. vii-xxix. See me. 6. 1825, England, Neal, "The Financial Crisis of 1825 and the Restructuring of the British Financial System," Federal Reserve Bank of St. Louis Review 80 (May/June 1998), pp. 53-76. PDF . 7. 1847, Britain, King, "The Crises of 1847," History of the London Discount Market (1936), Routledge, pp. 129-69. See me. *Benston, and Kaufman, "Is the Banking and Payments System Fragile?" Journal of Financial Services Research 9, (1995), pp. 209-40. |
| Bank of England
T 25 |
Capie, "Banking in Europe in the nineteenth century: the role of the central bank," in The State, the Financial System, and Economic Modernization, Sylla, Tilly, and Tortella eds., Cambridge University Press (1999), pp. 118-33. On Reserve.
* Goodhart, The Evolution of Central Banks, Chapters 5 & 7 (1988, Cambridge: MIT Press), pp. 57-75, 85-102. |
| Second Bank of the US
TH 27 |
Timberlake, "Central-Banking Growth of the Second Bank of the United States," Monetary Policy of the United States, Chapter 3, pp. 28-42. On Reserve.
*Temin, "The Economic Consequences of the Bank War," Journal of Political Economy 76 (1968), pp. 257-74. JSTOR |
| Panics, US
T, April 1 Second Set of Presentations |
1. 1837, United States, Rousseau, "Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837" Journal of Economic History, June 2002, v. 62, iss. 2, pp. 457-88. See Me.
2. 1837, New England, Rolnick, Arthur J.; Smith, Bruce D.; Weber, Warren E, "The Suffolk Bank and the Panic of 1837" Federal Reserve Bank of Minneapolis Quarterly Review, Spring 2000, v. 24, iss. 2, pp. 3-13. PDF 3. 1854 and 1857, New York, Kelly and O Grada, "Market Contagion: Evidence from the Panics of 1854 and 1857", American Economic Review, December 2000, v. 90, iss. 5, pp. 1110-1124. See Me. 4. 1857, United States, Calomiris and Schweikart, "The Panic of 1857: Origins, Transmission, and Containment," Journal of Economic History, December 1991, v. 51, iss. 4, pp. 807-34. JSTOR 5. 1907, United States, Moen and Tallman, "Clearinghouse Membership and Deposit Contraction during the Panic of 1907," Journal of Economic History, 60 (March 2000), pp. 145-163. See Me. 6. 1932, Chicago, Calomiris and Mason, "Contagion and Bank Failures during the Great Depression: The June 1932 Chicago Banking Panic" American Economic Review, December 1997, v. 87, iss. 5, pp. 863-83. JSTOR |
| The FED
TH 3 |
Broz, "Origins of the Federal Reserve System: International Incentives and the Domestic Free-rider Problem," International Organization, Winter 1999, Vol. 53 Issue 1, p39-70. PDF available via the Library.
*Gilbert, "The Advent of the Federal Reserve and the Efficiency of the Payments System: The Collection of Checks, 1915-1930," Explorations in Economic History 37 (2000), pp. 121-48. |
| V. INTERNATIONAL | |
| Bimetallism
T 8 Mid-Term Due |
Flandreau, "The French Crime of 1873: An Essay on the Emergence of the International Gold Standard, 1870-1880," Journal of Economic History56, (December 1996), pp. 862-897. JSTOR .
*Rockoff, "The 'Wizard of Oz' as a Monetary Allegory," Journal of Political Economy (1990), pp. 739-60. JSTOR. |
| Gold Standard
TH 10 |
Eichengreen, "The Gold Standard," Globalizing Capital, Princeton University Press: Princeton (1996), Chapter 2, pp. 7-44. Required Text. |
| Interwar
T 15 |
Eichengreen, "Interwar Instability," Globalizing Capital, Princeton University Press: Princeton (1996), Chapter 3, pp. 45-92. Required Text. |
| Great Contraction
TH 17 |
Wheelock, "Monetary Policy in the Great Depression: What the Fed Did and Why," Review Federal Reserve Bank of St. Louis, (March/April 1992), pp. 3 -28. PDF
*Calomiris and Wheelock, "Was the Great Depression a Watershed for American Monetary Policy?" NBER Working Paper. |
| Bretton Woods
T 22 |
Eichengreen, "The Bretton Woods System," Globalizing Capital, Princeton University Press: Princeton (1996), Chapter 4, pp. 93-135. Required Text. |
| Float to EMU
TH 24 |
Eichengreen, "From Floating to Monetary Unification," Globalizing Capital, Princeton University Press: Princeton (1996), Chapter 5, pp. 136-191. Required Text. |
| Euro and ECB
T 29 |
Bertaut, "The European Central Bank and the Eurosystem," New England Economic Review Second Quarter, 2002, pp. 25-28. PDF
*The European Central Bank and the Euro: The First Year; By Feldstein, Martin, February 2000, pp. 12, National Bureau of Economic Research Working Paper: 7517 *The Euro, the European Central Bank, and the International Monetary System; By Salvatore, Dominick; Annals of the American Academy of Political and Social Science, January 2002, v. 579, iss. 0, pp. 153-67 |