Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Financial history books redux

More than six years ago, I wrote a blog post with a list of books related to financial history that I had found useful (especially in the aftermath of the global financial crisis). The most important books in my list of 2010 were:

  • A History of Interest Rates by Sidney Homer and Richard Sylla
  • The Early History of Financial Economics, 1478-1776: From Commercial Arithmetic to Life Annuities and Joint Stocks by Geoffrey Poitras.
  • The Origins of Value: The Financial Innovations that Created Modern Capital Markets edited by William N. Goetzmann and and K. Geert Rouwenhorst.
  • Manias, Panics and Crashes: a History of Financial Crises by Charles Kindleberger
  • The Origins and Development of Financial Markets and Institutions: From the Seventeenth Century to the Present edited by Jeremy Atack and Larry Neal.
  • This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff

I read several more important books in the last few years and I would therefore like to expand my original list:

  • Larry Neal, A Concise History of International Finance. Cambridge Books (2015) is the most important book that I would add to my old list. In many ways, this is the perfect complement to Kindleberger:
    • Neal talks about the things that went right with finance: what economic functions were served by different financial innovations and reforms. Kindleberger is a litany of all that went wrong with finance.
    • Neal spends very little time taking about panics and crises and devotes most of the pages to the institutional reforms that came out of these crises and how these reforms enabled the financial sector to serve the needs of the economy.
    • Neal proceeds in chronological order while the endeavour of Kindleberger is to bring out the similarities between different crises.
  • David Hackett Fischer, The great wave: price revolutions and the rhythm of history. Oxford University Press, 1999 is more economic history (a history of inflation) than financial history, but it is a good complement to Homer and Sylla. Inflation is an important determinant of interest rates, and Fischer shows how over the past eight centuries, inflation has been concentrated in four very long waves of rising prices, punctuated by long periods of comparative price equilibrium. The developed world has been at the brink of deflation for a decade now after a century of inflation, and Fischer’s perspective is therefore hugely important. Fischer also demonstrates that these price revolutions are linked to cultural, economic, social, political, scientific, artistic and religious revolutions as well. If you want a quick overview of the book, I recommend Lynn Fichter’s slides.

  • William N. Goetzmann, Money changes everything: how finance made civilization possible. Princeton University Press, 2016 is in some ways a shorter and far less expensive version of his Origins of Value book that ranked high in my original list. If your budget or your library’s budget can absorb Origins of Value, I would still recommend that book.

  • If you want to explore the mutual relationships between power, politics, war and finance, there are a bunch of books worth reading:

    • Richard W. Carney, Contested capitalism: The political origins of financial institutions. Routledge, 2009. and Samuel Knafo, The making of modern finance: liberal governance and the gold standard. Routledge, 2013 are two books with a similar theme: financial institutions are a product of political power struggles. Knafo is a good antidote to the Douglas North thesis about the financial revolution in the UK being all about the state setting up property rights and withdrawing into the background. He argues that the Bank of England was the instrumentality through which the state asserted its dominance over financial markets.

    • David Graeber, Debt: the first 5,000 years. Brooklyn Melville House Publishing 2011 is a book that I regard as essential reading even (or especially) if you disagree with Graeber’s radical ideology. Graeber is an anthropologist and it is in the discussion of the ancient world and of pre-historic societies that his insights are most valuable.

    • Fritz Stern, Gold and Iron: Bismarck, Bleichroder, and the Building of the German Empire, Vintage, 1979. This is one of my favourite books. I still believe that the plural of biography is not history, but Stern’s book is less a biography of Bismarck and his financier (Bleichroder), and more a story of how the original German reunification was financed.

    • Ronald Findlay & Kevin H. O’Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton University Press, 2009. More economic history than financial history, but it is among the best books out there, and there is little trade without finance and little finance without trade.

    • Sven Beckert, Empire of cotton: A global history. Vintage, 2015. This too is more economic history than financial history, but cotton was so important for the industrial revolution and for sovereign credit that it merits a place in a financial history list.

    • Kwasi Kwarteng, War and gold: a five-hundred-year history of empires, adventures and debt. Bloomsbury 2014

    • Carl Wennerlind, Casualties of credit. Harvard University Press, 2011.

  • Lodewijk Petram, The World’s First Stock Exchange. Columbia University Press, 2014 is a valuable book that goes well beyond Joseph de la Vega’s pioneering book Confusion de Confusiones of 1688 in describing the evolution and operation of the Amsterdam Stock Exchange.

  • Jonathan Barron Baskin, and Paul J. Miranti Jr., A history of corporate finance. Cambridge University Press, 1999 is different from most other books in that examines the evolution of financial markets and institutions from the perspective of corporate finance rather than public finance or economic growth.

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7 responses to “Financial history books redux

  1. Pingback: Financial history books redux | CCRA

  2. Amol Agrawal January 27, 2017 at 5:44 pm

    Dear Prof Varma,

    Thanks a lot for this list. I am a keen follower of your blog for a long time. Though, I so wish you blogged a lot more for students like me.

    I was also wondering whether you could recommend some books on India’s financial history as well. I guess you might say there are hardly any. But I guess history of RBI (Volume I), History of SBI, Indigenous Banking by LC Jain etc could be a part of the list. But these are just on banking, We have very little ideas on equity markets, insurance, funds etc. Could you please help me with a few titles?

    Warm regards,

    Amol Agrawal

    • Jayanth Varma January 27, 2017 at 9:07 pm

      My main interest is in the financial history prior to World War I and there is so little that I have been able to find about Indian finance during this period. True, there are some excellent books on Indian economic history. The Cambridge Economic History of India is absolutely invaluable. There are some books and other material on the history of the East India Company (EIC) and the Dutch VOC which are also relevant. Adam Smith’s discussion of the EIC in the Wealth of Nations is also worth reading. Angus Maddison’s “Asia in the World Economy 1500–2030 AD” (http://onlinelibrary.wiley.com/doi/10.1111/j.1467-8411.2005.00164.x-i1/abstract) is also useful.

      But there is too little of financial history in all this. I would like to know more about the financial transactions of Jagat Seth for example though there is some material at http://www.jainworld.com/literature/jainhistory/chapter14.asp.

      Indian monetary history in the nineteenth century is absolutely fascinating: I think at one time or the other, India had every kind of exchange rate regime known at the time. Oscar Wilde famously advised a student to omit this chapter because it is too sensational. If you have access to JSTOR, I recommend: Laughlin, J. Laurence. “Indian Monetary History.” Journal of Political Economy, vol. 1, no. 4, 1893, pp. 593–596. http://www.jstor.org/stable/1819516.

      Way back in 2010, SEBI set up an Advisory Panel on History of Indian Securities Market of which I was a member and some material was collected and made available on the SEBI web site: http://www.sebi.gov.in/sebiweb/home/list/4/41/0/0/History-of-Indian-Securities-Market I do not think that much progress has taken place after that.

      I am very much interested in the boom and bust in the Indian markets during and after the US Civil War of 1860-65, but there is too little that I have been able to find about it because this predates the BSE.

      Please feel free to add to this comment thread. May be it could become a blog post by itself at some stage.

      PS: I follow your blog too though I skip everything that is not related to finance.

  3. Amol Agrawal January 28, 2017 at 8:58 am

    Dear Prof Varma,

    It is really nice to get your reply. It is even nicer to know that you read my blog for whatever it is worth.

    I fully agree we have nothing much in financial history which is a puzzle. I have read the Lodewijk Petram work on World’s oldest Stock exchange. We need similar accounts for BSE and other Regional SEs which were important earlier. I have seen SEBI’s links but most are unreadable. Like RBI and SBI have commissioned their history, we need SEBI/IRDA etc to do the same for other markets. From these, students like me can pick up and build.

    Likewise Sylla and Homer’s History of Interest Rates could be developed into History of interest rates in India using several RBI publications. There is some data which has to be all put together.

    Having said this, I think following books do give some perspective on history of finance in India:
    1) Industrial Organisation (1934) by PS Lokanathan
    2) Organisation and Finance of Industries in India (1937) by DR Samant and MA Mulky
    3) Financial Chapter in History of Bomaby (1910) by DE Wacha

    There are some others which are mainly on banking. I can add them but I think if one reads History of RBI and History of SBI (by Prof AK Bagchi), banking is pretty much covered.

    We clearly need to expand this list and have more works on India’s financial history. I will try and add as and when I find more readings.

    Warm regards

    • Jayanth Varma February 13, 2017 at 9:28 pm

      Another useful book is
      Raymond W. Goldsmith “The financial development of India, Japan, and the United States : a trilateral institutional, statistical and analytic comparison”, Yale University Press 1983.

  4. Pingback: Indian financial history | Prof. Jayanth R. Varma's Financial Markets Blog

  5. Pratik Datta March 23, 2017 at 5:54 pm

    Sir, thanks for sharing these resources.

    Just wanted to add three more resources:

    1. Varottil, The Evolution Of Corporate Law In Post‐Colonial India: From Transplant To Autochthony: http://law.nus.edu.sg/wps/pdfs/001_2015_Umakanth_Varottil.pdf

    2. Tirthankar Roy, Law and the economy in colonial India – This has a chapter on Corporate Law: Flawed Westernisation: https://www.amazon.in/Economy-Colonial-Markets-Governments-Economic-ebook/dp/B01KHRXFNY

    3. My NIPFP working paper titled “Judicial Review and Money Bill” explain how abuse of money bills led to constitutional law reforms in Britain and India: http://www.nipfp.org.in/media/medialibrary/2017/03/WP_2017_192.pdf

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