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The Money Pitt: Lord Londonderry and the South Sea Bubble; or, How to Manage Risk in an Emerging Market

Published online by Cambridge University Press:  18 February 2015

Larry Neal
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Abstract

Business history forces historians and economists to take a wider view of individuals' actions as economic agents. The risk-managing strategies of Lord Londonderry (also known as “the Money Pitt”) during the financial boom and bust of the South Sea Bubble illustrate this theme well. He dealt in staggering sums for the time but hedged his bets along at least three dimensions: the pecuniary, the personal, and the political. His skills, however, remain unappreciated because he could not manage the ultimate uncertainty always present in human affairs—when will fate bring down the final curtain on one's partners, family and friends, patrons, or one's own person?

Type
Presidential Address
Information
Enterprise & Society , Volume 1 , Issue 4 , December 2000 , pp. 659 - 674
Copyright
Copyright © Enterprise and Society 2000

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References

1. Blakey, George G.,The Diamond (New York,1977),268.Google Scholar

2. PRO C110/ 28, Materials on suit made by Caesar Child, Gregory Page, Elihu Yale, Rogery Braddylls and Thomas Gibson Esq. surviving assignees under a Commission of Bankrupt awarded against Sr. Stephen Evance and Wm. Hales Goldsmiths and partners against Thomas Pitt (Sr.) and Robert Pitt, in Michaelmas term 1718 and amended 27 April 1719. Thanks to this law suit, many details of the early history of the diamond are given in Yogev, Gedalia,Diamonds and Coral: Anglo-Dutch Jews and Eighteenth-Century Trade (New York,1978)Google Scholar, who uncovered this well-organized depository of exhibits for the law suit.

3. These details on Londonderry's life, as well as those that follow below, have been winnowed from the materials left by his lawyers inChancery Master's Exhibits, PRO C108/415-23, Pitt v. Cholmondeley.

4. The total payment for the diamond was 2 million livres tournois, equivalent to £135,000 at the exchange rate then ruling. The sum was divided into “. . . three installments, payable as follows (vizt.) 720,000 livres part thereof upon the 1 June 1717 N. S., 320,000 livres on the 1 December N. S. then next 320,000 livres on the 1 June following 320,000 livres upon the 1st December and 320,000 livres residue on the 1 June 1719.” PRO C110/28, p. 4, answer of 13 June 1723.

5. Great Britain, Miscellaneous State Papers (London, 1778), 2: 593, as cited in Lévy, Claude-Frédéric,Capitalistes et pouvoir au siécle des lumiéres, t. 3: La monarchie buissoniére, 1718–1723 (Paris,1980),235–161.CrossRefGoogle Scholar

6. British Museum, Add. MS 36152.

7. PRO C 108/423, fol. 164, Letter of Londonderry to John Law, 3 Nov. 1720.

8. Knight, Frank Hyneman,Risk, Uncertainty and Profit (Boston,1921).Google Scholar