The_micro-foundations_of_the_early_Londo

The_micro-foundations_of_the_early_Londo - Blackwell...

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Economic History Review , LIX, 3 (2006), pp. 498–538 © Economic History Society 2005. Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. Blackwell Publishing Ltd.Oxford, UK and Malden, USAEHRThe Economic History Review0013-0117Economic History Society 20052006 LIX 3498538Articles EARLY LONDON CAPITAL MARKET FOUNDATIONSANN M. CARLOS AND LARRY NEAL The micro-foundations of the early London capital market: Bank of England shareholders during and after the South Sea Bubble, 1720–25 1 By ANN M. CARLOS AND LARRY NEAL SUMMARY Using two sources, Bank of England Transfer Books and Stock Ledgers, this article explores the nature of the ‘customer base’ for Bank shares during and after the South Sea Bubble. This examination uncovers the nature of individ- ual participation in this early capital market. The Transfer Ledgers record roughly 7,000 transfers during 1720, while the Ledger Books from 1720–25 record over 8,000 individuals holding stock. The analysis finds the customer base had breadth and depth, comprising individuals from across the social spectrum, from all over England and Europe. The market was diverse and liquid. Activity during the Bubble came from those living in and around London, with most traders participating in the market only twice at most. While the majority of participants were men, there was a sizeable female presence. Men as a group lost money from their market activity, but women made money. In the five years after the Bubble, the customer base was sustained. The analysis argues that the secondary market in financial assets cannot be dismissed as mere gambling devices, and that the basis for a mutually productive interaction between the financial sector and the real sector of the economy was already in existence and was sustained through the shock of the South Sea Bubble and its collapse. I iscussions of the development of English capital markets generate an interesting and unresolved tension between the disruptive and possibly irrational South Sea bubble in 1720 on the one hand, and the strength, 1 A very early draft of this paper was presented at the Economic History Society meeting 2002. This paper has benefited greatly from comments and suggestions by the anonymous referees and participants in workshops at Trinity College Dublin, University of Oxford, University of British Columbia, and University of California, Los Angeles. The authors gratefully acknowledge the financial support of the National Science Foundation. We must acknowledge the help and expertise of the Bank of England archivists, especially Henry Gillett and Sarah Millard. All errors unfortunately remain our own. D
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EARLY LONDON CAPITAL MARKET FOUNDATIONS 499 © Economic History Society 2005 Economic History Review , LIX, 3 (2006) durability, and sheer vitality of eighteenth-century English public finance on the other. Indeed, the role of the South Sea bubble in the long-run development of modern financial markets, and especially of the London stock market, remains an open issue, both for historians and economists.
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