In the mid-1820s, banks became the first businesses in Great Britain and Ireland to be allowed to form freely on an unlimited liability joint-stock basis. Walter Bagehot warned that their shares would ultimately be owned by widows, orphans, and other impecunious individuals. Another hypothesis is that the governing bodies of these banks, constrained by special legal restrictions on share trading, acted effectively to prevent such shares being transferred to the less wealthy. We test both conjectures using the archives of an Irish joint-stock bank. The results do not support Bagehot's hypothesis.

The debate over whether political democracy is the least bad regime, as Churchill said, remains unresolved because history has been misread, and because statistical studies have chosen the wrong tests. This address reinterprets five key experiences to show how the institutional channels linking voice and growth are evolving with the economy. Until the early nineteenth century, the key institutional link was property-rights and contract enforcement. Since then, the human-investment channel has assumed an ever-greater role. Elite rule damages growth by underinvesting in egalitarian human capital, especially primary schooling, relative to historical norms for successful economies.This Presidential Address was delivered at the Economic History Association Annual Meeting, 12 October 2002, in St. Louis, Missouri.

Changes in formal institutions do not always affect economic outcomes. When an industry has specific technological features that limit a government's ability to expropriate it, or when the industry is able to call on foreign governments to enforce its de facto property rights, economic agents can easily mitigate changes in formal institutions designed to reduce these property rights. We explore the Mexican oil industry from 1911 to 1929 and demonstrate that informal rather than formal institutions were key, permitting oil companies to coordinate their responses to increases in taxes or the redefinition of their de jure property rights.

This article combines a game-theoretic framework and a comparative analysis to study the impact of the Great Depression on private welfare capitalism. Recharacterizing welfare capitalism as an implicit-contract equilibrium, the article documents parallel institutional developments in the United States and Japan in the 1920s and the process of bifurcation thereafter. In the United States, the breach of contract by major employers induced by the depression led to the rise of explicit contracts and legal enforcement institutions. By contrast, the less severe depression in Japan allowed the maintenance of implicit contracts and the formation of complementary labor laws.This article is partly based on my doctoral dissertation. I am deeply indebted to my thesis advisors, Avner Greif, Gavin Wright, Masahiko Aoki, and John Pencavel. I am grateful to Lee Alston, Carliss Baldwin, Samuel Bowles, Adam Brandenburger, Loren Brandt, Amit Bubna, Louis Cain, David Fairris, Joe Ferrie, Price Fishback, Robert Gibbons, Claudia Goldin, Rakesh Kurana, Robert Margo, Jim Minifie, Joel Mokyr, Laura Owen, Ben Polak, Daniel Raff, Paul Rhode, William Tsutsui, Warren Whatley, and two anonymous referees for their valuable comments.

New estimates of mean stature indicate declining heights in Northern Italy from 1730 to 1860, corroborating recent findings of a deterioration in per capita GDP and real wages—though possibly calling into question its severity. The level of heights in the 1830s is respectable in international comparison. Estimated geographic and occupational effects show the influence of the disease environment, malnutrition, and income. Declining living standards suggest a Malthusian interpretation of the economy, in which even a relatively flexible agricultural sector was not quite able to keep up with the growing pressure of population on resources.John Komlos arranged the collection of the data analyzed here and made them available to me. I am also indebted to him for ongoing discussions about anthropometrics and helpful comments on this article. I am grateful to Jörg Baten, Giovanni Federico, Paolo Malanima, Gianni Toniolo, and Vincent Tassenaar for reading and commenting on the article, and to three anonymous referees for their com-ments. An earlier version of the article was presented at the Seminar for Economic History, University of Munich.

With passage of the Federal Reserve Act in 1913, the institutional structure necessary to support an American market for bankers' acceptances was created. This article examines the development of the secondary market for bankers' acceptances during its first 20 years. It provides evidence that discount market liquidity increased dramatically during the 1920s and helped the dollar acceptance challenge the sterling bill as an important source of trade finance around the world. The Federal Reserve Banks played a key role by reducing the risk borne by private dealers and propelling the market to a high-liquidity equilibrium.The author thanks Mike Haupert, William Roberds, and Ellis Tallman for their useful comments and suggestions, and Susan Isaac for her excellent editorial assistance. All errors are the responsibility of the author.

We calculate the natural rate of unemployment in 1909 by first estimating equations for the incidence and time lost in unemployment on a pooled dataset integrating the manuscript sample of the 1910 census and state BLS surveys and then simulating a counterfactual unemployment rate as if the economy had been on trend that year with business-cycle effects neutralized. Following a similar procedure for the 1960s, we find the natural rate in the earlier period to have been substantially higher. The demise of casual unskilled labor, or floaters, seems to have been an important contributory factor.

In 1842 Lowell textile firms increased weaving productivity by assigning three looms per worker instead of two. This marked a turning point. Before, weavers at Lowell were temporary and mostly literate Yankee farm girls; afterwards, firms increasingly hired local residents, including illiterate and Irish workers. An important factor was on-the-job learning. Literate workers learned new technology faster, but local workers stayed longer. These changes were unprofitable before 1842, and the advantages of literacy declined over time. Firm policy and social institutions slowly changed to permit deeper human-capital investment and more productive implementation of technology.

Spain provides an opportunity to study the causes of regional differences in industrial development over the nineteenth century. As transportation costs decreased and barriers to domestic trade were eliminated, Spanish manufacturing became increasingly concentrated in a few regions. This article combines Heckscher-Ohlin and economic-geography frameworks and finds that comparative-advantage and increasing-return effects were economically very significant and practically explained all differences in industrialization levels across regions. The deficits of some regions in terms of industrialization appear to have been largely attributable to their factor endowments and the absence of home-market effects for modern industries.

Between 1830 and 1860 the United States experienced rapid economic growth but declining stature and rising mortality. Debate has centered on whether the American diet deteriorated in the mid-nineteenth century. Employing census and muster records, this article tests the hypotheses that adult height was positively correlated with local production of nutrients in early childhood and negatively correlated with local mortality conditions, urbanization, proximity to transport, and population mobility. Results indicate that antebellum economic growth was accompanied by an increasing nationalization and internationalization of the disease environment, which affected the health and longevity of the population.This article is based on two earlier papers presented at the conference “The Biological Standard of Living and Economic Development: Nutrition, Health, and Well-Being in Historical Perspective,” held at the University of Munich, Munich, Germany, 18–21 January 1997. They have been published in The Biological Standard of Living in Comparative Perspective edited by John Komlos and Jörg Baten (Stuttgart: Franz Steiner Verlag, 1998), pp. 155–80 and 190–207. This research was funded in part by the National Institute of Aging (AG 10120) and by the National Science Foundation (#SBR-9408525). The authors wish to thank Brian A'Hearn, Markus Heintel, and Robert Fogel for data and Jörg Baten, Timothy Cuff, Richard Easterlin, Stanley Engerman, John Komlos, John Murray, Richard Steckel, Robert Whaples, and participants at the Economic History Seminar at the University of California at Berkeley, the Economics Seminar at the College of William and Mary, the NBER Summer Institute, and the Social Science Colloquium at Colgate University for valuable comments and suggestions on earlier versions. In addition two anonymous referees provided very useful suggestions. The late Robert Gallman also provided valuable comments at an early stage of the project. Part of this research was conducted by Craig while he was a German Marshall Fund Fellow at the Seminar fuer Wirtschaftsgeschichte at the University of Munich.

In May 1927, the German central bank intervened indirectly to reduce lending to equity investors. The crash that followed ended the only stock market boom during Germany's relative stabilization 1924–1928. The evidence strongly suggests that the German central bank under Hjalmar Schacht was wrong to be concerned about stock prices—there was no bubble. Also, the Reichsbank was mistaken in its belief that a fall in the market would reduce the importance of short-term foreign borrowing and improve conditions in the money market. The misguided intervention had important real effects. Investment suffered, helping to tip Germany into depression.

This article reconsiders industrial growth in post-Unification Italy in light of a new set of sector-specific production estimates. Though still in part provisional, the new series confirm that the production of durables (and related materials) was dominated by the Kuznets cycle. A similar cycle is documented in the growth rate of the residual, excluding foodstuffs, and extended by reasonable assumption to foodstuffs as well. The new series thus support the traditional view of the 1880s as a period of widespread prosperity and above-trend consumption rather than the opposite, now dominant view.This article presents the first comprehensive results of a long-term research project that owes much to the constant encouragement of Pierluigi Ciocca and Gianni Toniolo, to extended exchanges with Giovanni Federico, to the kindness of the librarians at the Bank of Italy and the Istituto centrale di statistica, and not least, for their financial support, to the Ente per gli studi monetari, bancari e finanziari “Luigi Einaudi,” the National Science Foundation, the Guggenheim Foundation, and the Ministero dell'Università e della Ricerca Scientifica e Tecnologica. The usual disclaimer applies.

Are firms with strong market positions powerful engines of technological progress? Joseph Schumpeter thought so, but his hypothesis has proved difficult to verify empirically. This article highlights Schumpeterian market-power and creative-destruction effects in a sample of early-twentieth-century U.S. industrial firms; his contention that an efficiently functioning capital market has a positive effect on the rate of innovation is also confirmed. Despite market power abuses by incumbents, the extent of innovation stands out: 21 percent of patents assigned to the firms sampled between 1920 and 1928 are cited in patents granted between 1976 and 2002.

Following World War II millions of cotton workers, especially African-Americans, left the fields forever, and farmers mechanized the cotton harvest. Prevailing empirical studies argue that high factory wages lured farmhands away. Based on newly reconstructed data, we estimate the causes of the demise of harvest employment in 12 major cotton-producing states from 1949–1964 and find important roles for mechanization, government farm programs, higher nonagricultural wages, and falling cotton prices. On net, our estimates indicate that factors affecting farm labor demand, not labor-supply influences, caused the disappearance of hand-picked cotton—results that reverse the best econometric work to date.For helpful comments, we thank Lee Alston, Larry Neal, Werner Baer, Bill Collins, Lee Craig, Carl Moody, Beverley Peart, Eric Hilt, Michele Knapp, the participants of the workshops at Syracuse University, Northwestern University, the University of Illinois, Colby College, Harvard University, the All-Ohio Economic History Seminar (Ohio State University Economics Department), the Social Science History Association Meeting (2001), and the Allied Social Science Meeting (2002), anonymous referees and the editor, Gavin Wright. The authors assume full responsibility for errors and omissions.

During World War II the United States attempted to prevent Germany from acquiring wolfram (tungsten ore) in Spain by buying it in the open market. Preemptive buying forced the Germans to pay more for and to consume less tungsten, a material crucial for the production of machine tools and armor-piercing shells. The income provided an important incentive for Spain to remain neutral. The naval blockade and the relatively low elasticity of the supply of wolfram contributed to the success of the wolfram-buying campaign.

During the second millennium, the Middle East's commerce with Western Europe fell increasingly under European domination. Two factors played critical roles. First, the Islamic inheritance system, by raising the costs of dissolving a partnership following a partner's death, kept Middle Eastern commercial enterprises small and ephemeral. Second, certain European inheritance systems facilitated large and durable partnerships by reducing the likelihood of premature dissolution. The upshot is that European enterprises grew larger than those of the Islamic world. Moreover, while ever larger enterprises propelled further organizational transformations in Europe, persistently small enterprises inhibited economic modernization in the Middle East.For useful comments on previous drafts, I am indebted to Scott Altman, Murat Çizakça, Avner Greif, Eric Jones, Daniel Klerman, Naomi Lamoreaux, ôevket Pamuk, David Powers, Kenneth Sokoloff, Jan de Vries, Dean Williamson, and three anonymous referees. Excellent research assistance was provided by Hania Abou Al-Shamat, Iva Bozˆović, and Sung Han Tak.

The new sectoral estimates of industrial production in 1871, 1881, 1901, and 1911 are regionally allocated using census labor-force data. The regional aggregates suggest that the “industrial triangle” emerged over these decades out of a traditional surplus-recycling economy. The concomitant change in the industrial rankings argues against attributing the regions' different paths to their different initial conditions; surprisingly, too, overall growth does not seem closely tied to industrial development. The disaggregated estimates suggest in turn that the industrial structure of the various regions remained relatively similar, as if comparative advantages were generically industrial rather than sector-specific.

Between 1928 and 1960 U.S. cotton production experienced a revolution with average yields roughly tripling while the quality of the crop increased significantly. This article analyzes the key institutional and scientific developments that facilitated the revolution in biological technologies, pointing to the importance of two government programs—the one-variety community movement and the Smith-Doxey Act—as catalysts for change. The story displays two phenomena germane to the recent literature: an important real-world example of Akerlof's lemons model and a case in which inventors, during an early phase of the product cycle, encouraged consumers to copy and disseminate their intellectual property.We would like to thank Shelby Baker, Dick Bassett, Fred Bourland, J. Jerome Boyd, David L. Carlton, Peter Coclanis, Harry B. Collins, John Constantine, Tom Culp, Early C. Ewing Jr., Deborah K. Fitzgerald, Janet Hudson, Susana Iranzo, Hal Lewis, Gary Libecap, Shelagh Mackay, C. W. Manning, Leslie Maulhardt, William Meredith, Robert Margo, Massimo Morelli, Larry Nelson, Carl Pray, Gene Seigler, Macon Steele, Nancy Virts, Henry Webb, Gavin Wright, and two anonymous referees for their comments and assistance. Julian Alston played an especially important role in shaping our analysis. We also benefited from the comments of the seminar participants at the Triangle Economic History Workshop, the University of Mississippi, Harvard University, the Spring 2002 All-UC Group in Economic History Conference at Scripps College, and the 2003 Meetings of the American Historical Association. Work on this article was facilitated by a fellowship granted by the International Centre for Economic Research (ICER) in Turin, Italy.

The debasement of the Byzantine gold coin during the reign of Constantine IX Monomachus (1042–1055) marked the end of more than seven centuries of near stability and the beginning of a sharp fall in the coin's gold content. I reject a widely accepted view that the debasement was caused by the increase in the number of transactions in an expanding economy. I explain the debasement as being a measure undertaken to finance the protracted war against the Pechenegs in the latter half of Constantine's reign.I would like to thank Judith Herrin for her help and encouragement and for first suggesting that I look at this problem. I would also like to thank this JOURNAL's editor and three anonymous referees whose comments and recommendations significantly improved this article. Finally, thanks are also due to Richard Brealey, Ian Cooper, Michael Crawford, Julian Franks, Jonathan Goodman, Mervyn King, Michael Metcalf, Robert Mundell, Anthony Neuberger, and Gabriel Stein.

Takahashi Korekiyo is remembered as a wise finance minister saving Japan from the Great Depression. The contribution of his policy measures however remains to be rigorously measured, with proper control of other forces also driving the recovery. Structural vector autoregression analysis of previously unexploited monthly data confirms the pivotal role of Takahashi's debt-financed fiscal expansion. Monetizing the public debts, the Bank of Japan maintained a neutral stance. The recovery was aided by exchange-rate shocks generated during the transition from the gold standard to the floating-exchange-rate regime and, to a smaller extent, by the world recovery.