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THEORY AND HISTORY OF FINANCIAL CRISES: EXPLAINING THE PANIC OF 1873

Published online by Cambridge University Press:  27 April 2018

Christoph Nitschke
Christoph Nitschke*
Affiliation:
University of Oxford
*
email: [email protected]
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Abstract

This article demonstrates the value of a joint application of the theory and history of financial crises of 1873. It weaves together concepts of financial and banking panic theory with a narrative explanation of the causes and triggers of the Panic of 1873. Basic concepts of economic theory, it suggests, can act as both a framework and a starting point to the historical interpretation of a financial panic.

Employing such theory, however, ultimately reinforces the need for contextual cultural explanations of financial panics. A theoretically grounded view of the cultural history of capitalism—and its sudden crises—can help explain why and how some structures of exchange systematized and conditioned human confidence within specific historical contexts.

Drawing together theoretical models of banking panic and historical evidence, this article thus emphasizes the importance of Gilded Age money-making culture for understanding the impact of Philadelphia financier Jay Cooke upon the causes of the Panic of 1873. Cooke's sudden and unexpected bankruptcy caused the deconstruction of confidence on the stock exchange and throughout the country. The cultural idiosyncrasy of Cooke's outstanding position in all matters of American finance multiplied the asymmetry that occurred in the wake of a major information shock.

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Articles
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The Journal of the Gilded Age and Progressive Era , Volume 17 , Issue 2 , April 2018 , pp. 221 - 240
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Copyright © Society for Historians of the Gilded Age and Progressive Era 2018 

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References

NOTES

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