Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Financial history books

In my blog post more than a month ago on books related to the global financial crisis, I promised to post a list of books related to financial history. One of the lessons from the crisis was that practitioners, regulators and academics in the field of finance need to have a good understanding of financial history.

If you wish to read only one book on financial history, I would recommend A History of Interest Rates by Sidney Homer and Richard Sylla. This book covers the evolution of credit markets over 5,000 years and is packed with charts and tables about interest rates across space and time. It was from this book that I learned for example that credit predates money and probably predates barter.

Another important book is The Early History of Financial Economics, 1478-1776: From Commercial Arithmetic to Life Annuities and Joint Stocks by Geoffrey Poitras. I found it surprising that so much of financial economics including net present value and expected utility had been developed prior to Adam Smith and the Wealth of Nations. Poitras also covers the early development of the stock market in Amsterdam and has extensive extracts from Joseph de la Vega’s pioneering book Confusion de Confusiones of 1688.

I was fascinated by The Origins of Value: The Financial Innovations that Created Modern Capital Markets edited by William N. Goetzmann. This wonderfully illustrated book covers financial innovations from ancient Mesopotamia and China to the modern world. For example, it describes how Benjamin Franklin printed United States government bonds at home introducing technical innovations designed to make counterfeiting difficult.

Manias, Panics and Crashes: a History of Financial Crises by Charles Kindleberger would probably be the favourite financial history book for many academics. It is also one of my favourite books – I have been fond of saying that one must approach the study of finance with Ito’s lemma in one hand and Kindleberger in the other. In this list, I have ranked it lower for two reasons. First, it is more a theory of financial crises than a history. Second, it covers only the period since modern financial markets developed in Holland in the late 16th and early 17th centuries.

For an institutional perspective of financial history, I enjoyed The Origins and Development of Financial Markets and Institutions: From the Seventeenth Century to the Present edited by Jeremy Atack and Larry Neal. I also learned a lot from Meir Kohn’s forthcoming books on commerce and finance in preindustrial Europe (draft chapters are available on his website)

In my post on crisis related books, I mentioned This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff but I must mention it again here. This book is more of a macroeconomist’s view of financial crises than a financial economist’s view but the wealth of data and analysis in this book make it indispensable.

Among the books that I read but did not enjoy as much as the above books are:

  • Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor
  • The Ascent of Money: A Financial History of the World by Niall Ferguson
  • False Economy: A Surprising Economic History of the World by Alan Beattie

Turning to the financial history of the 19th and 20th centuries, there is a wealth of material that is available on each country and each period. Among the books that provide an interesting multicountry perspective, I would like to mention:

  • Financial Development of India, Japan and the United States: A Trilateral Institutional, Statistical and Analytic Comparison by Raymond Goldsmith
  • Evolving Financial Markets and International Capital Flows: Britain, the Americas, and Australia, 1865-1914 by Lance Davis and Robert Gallman.

I believe that the plural of biography is not history and have therefore not included the numerous books that have been written about individual banks and bankers. For example, Niall Ferguson is absolutely outstanding in his two-volume book on The House of Rothschild. There are also many good books on the House of Morgan and on the Medici, but I have not seen any on the Hopes of Rotterdam/Amsterdam.


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