The Wealth of Nations Rediscovered: Integration and Expansion in American Financial Markets, 1780-1850

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Overview

This new study applies the economic theory of information asymmetry to our understandings of early U.S. financial development, expanding on recent scholarship of finance-led economic growth. The book's research is original, incorporating little-used archival material and new data on early U.S. securities prices, trading volumes, and stockholder patterns. The topics covered - securities trading, market liquidity, intermediation, banking reform, emerging market success, and foreign investment - are relevant to discussions in today's business community. Drawing from and building upon Adam Smith's lesser-known insights into financial relationships, The Wealth of Nations Rediscovered positions itself on the cusp of emerging paradigm shifts in history and economics.
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Editorial Reviews

From the Publisher
"...[an] impressively researched and closely argued study..." American Historical Review

"...a significant contribution. Wright has thoroughly documented his conclusions in a clear, accessible style. His bibliography alone is worth the price of the book. The Wealth of Nations Rediscovered should be required reading for every student of American financial history." Business History Review

"Today the U.S. financial system is 'state of the art' and a foundation of our dynamic enterprise economy. Remarkably, as Wright demonstrates in this bold interpretation of early U.S. economic history, the same was true two centuries ago. Blending archival evidence with economic insights, Wright argues convincingly that financial developments led the economic expansion that transformed a weak, peripheral economy of the 1780s into a world leader by the 1850s." Richard Sylla, Stern School of Business, New York University

"Robert Wright has produced a path-breaking book with an original and revolutionary thesis. He persuasively argues that financial innovation and sophistication preceded advancements in transportation, manufacturing, and agriculture. Active financial markets in major cities were a primary stimulus for the growth of the American economy in the first half of the nineteenth century." Edwin J. Perkins, University of Southern California

"Wright's thesis in The Wealth of Nations Rediscovered is simple and direct: Early U.S. financial development not only predated economic growth, but represented a necessary precondition for it. In supporting this hypothesis, Wright marshals an impressive array of evidence, from personal letters to manuscript bank records to published stock prices, and shows the principal players at work. Bankers and brokers recognized and resolved the information problems inherent in matching borrowers with lenders and, in so doing, fashioned a financial revolution. Wright's book nicely integrates original archival research with modern theory. It is, in short, an engaging mix of good history and good economics and I highly recommend it to historians and economists concerned with the development of the early American financial markets." Howard Bodenhorn, Lafayette College

"Wright has a fascinating story to tell economists and historians.... Recommended." Choice

"This is an important and highly readable book... Wright integrates anecdotal evidence with his quantitative data, which helps make a lively, argumentative text far more engaging than the highly technical analysis that dominates much of economic history." Journal of Ameican History

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Product Details

  • ISBN-13: 9780521812375
  • Publisher: Cambridge University Press
  • Publication date: 12/1/2002
  • Edition description: 2002 First Edition
  • Pages: 240
  • Product dimensions: 5.98 (w) x 8.98 (h) x 0.79 (d)

Table of Contents

List of Tables
Acknowledgments
List of Abbreviations
1 Introduction: The Wealth of Nations and National Wealth 1
2 The International and Colonial Background of America's Financial Revolution 9
The First Financial Revolutions: Holland and Great Britain 10
Colonial America: Courts and Experiments 16
The First U.S. Information Revolution: From Periphery to Center 18
3 Banks, Securities Markets, and the Reduction of Asymmetric Information 26
Adverse Selection 28
Moral Hazard 32
The Principal-Agent Problem 37
4 The Financial Sector and the Reduction of Lending-Related Costs and Risks 43
Commercial Banking: Intermediation and Information Creation 45
The Emergence of Secondary Securities Markets 51
The National Bank and the Panic of 1792 75
5 Evidence of Capital Market Integration, 1800-1850 82
Brief Descriptions of the Major Securities Markets 82
Price Comparisons between Markets 91
Price Movements and the Theory of Portfolio Choice 94
Evidence of Efficiency: Bid-Ask Spreads 97
Geographical Distribution of Stockholders: Maine and Beyond 99
6 Expansion of the Securities Services Sector, 1790-1850 123
Brokers: Their Role and Numbers 124
Initial Public Offerings 130
Trading Volumes in the Secondary Securities Markets: The Case of Philadelphia 135
Nonlisted Securities 159
A Brief Sketch of the Expansion of the Securities Sector 166
7 The Freest of the Free: Regulation of the Financial Sector 167
Securities Market Regulations 167
Special Banking Regulations 173
General Banking Regulations in New York: The Revised Statutes, the Safety Fund, and Free Banking 175
8 Finance-Directed Economic Development 193
Financing Trade 194
Financing Farming through Internal Improvements 201
Financing Manufacturing 204
9 Conclusion 212
References 217
Index 227
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