Rockoff suto (eds ) coping with financial crises; some lessons from economic history (2018)

Studies in Economic History Hugh Rockoff Isao Suto Editors Coping with Financial Crises Some Lessons from Economic History Studies in Economic History Series editor Tetsuji Okazaki, The University of Tokyo, Tokyo, Japan Editorial Board Member Loren Brandt, University of Toronto, Canada Myung Soo Cha, Yeungnam University, Korea Nicholas Crafts, University of Warwick, UK Claude Diebolt, University of Strasbourg, France Barry Eichengreen, University of California at Berkeley, USA Stanley Engerman, University of Rochester, USA Price V Fishback, University of Arizona, USA Avner Greif, Stanford University, USA Tirthanker Roy, London School of Economics and Political Science, UK Osamu Saito, Hitotsubashi University, Japan Jochen Streb, University of Mannheim, Germany Nikolaus Wolf, Humboldt University, Germany Aims and Scope This series from Springer provides a platform for works in economic history that truly integrate economics and history Books on a wide range of related topics are welcomed and encouraged, including those in macro-economic history, financial history, labor history, industrial history, agricultural history, the history of institutions and organizations, spatial economic history, law and economic history, political economic history, historical demography, and environmental history Economic history studies have greatly developed over the past several decades through application of economics and econometrics Particularly in recent years, a variety of new economic theories and sophisticated econometric techniques— including game theory, spatial economics, and generalized method of moment (GMM)—have been introduced for the great benefit of economic historians and the research community At the same time, a good economic history study should contribute more than just an application of economics and econometrics to past data It raises novel research questions, proposes a new view of history, and/or provides rich documentation This series is intended to integrate data analysis, close examination of archival works, and application of theoretical frameworks to offer new insights and even provide opportunities to rethink theories The purview of this new Springer series is truly global, encompassing all nations and areas of the world as well as all eras from ancient times to the present The editorial board, who are internationally renowned leaders among economic historians, carefully evaluate and judge each manuscript, referring to reports from expert reviewers The series publishes contributions by university professors and others well established in the academic community, as well as work deemed to be of equivalent merit More information about this series at http://www.springer.com/series/13279 Hugh Rockoff Isao Suto • Editors Coping with Financial Crises Some Lessons from Economic History 123 Editors Hugh Rockoff Department of Economics Rutgers University New Jersey, NJ USA Isao Suto School of Political Science and Economics Meiji University Tokyo Japan ISSN 2364-1797 ISSN 2364-1800 (electronic) Studies in Economic History ISBN 978-981-10-6195-0 ISBN 978-981-10-6196-7 (eBook) https://doi.org/10.1007/978-981-10-6196-7 Library of Congress Control Number: 2017951989 © Springer Nature Singapore Pte Ltd 2018 This work is subject to copyright All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer Nature Singapore Pte Ltd The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore This book is dedicated to the memory of Prof John Allan James of the University of Virginia, who passed away unexpectedly on November 28, 2014 John loved Japan, and had planned on presenting a paper in the session of the World Economic History Congress in Kyoto, where most of the papers in this volume were originally presented John was an extraordinary scholar, and a kind and generous friend He was universally admired by his fellow economic historians for his skill, his willingness to wrestle with the most difficult questions, and his commitment to the highest scholarly standards He is greatly missed by his many friends and colleagues Preface This book began life in a session at the World Economic History Congress in Kyoto Japan, August 3–7, 2015 The papers are by scholars from the United States, Sweden, France, and Japan They address a wide range of historical examples, but in each case help us understand how governments and private individuals cope with the problems created by financial crises Preliminary versions of the second, third, fourth, sixth, and seventh papers were presented at the conference Revised versions that reflect intense and lively discussions at the Conference, as well as subsequent research, are included here Two papers, however, were prepared especially for this volume This includes the first paper in the volume, “Reflections on the Evolution of Financial Crises: Theory, History and Empirics,” by Prof Michael D Bordo It provides a broad overview of the issues that economic historians must wrestle with when they address the history of financial crises, and the advances they have made We believe that it provides an ideal introduction to the remaining papers The fifth paper by Prof Hugh Rockoff, which was also prepared subsequently, describes the views of Milton Friedman and Anna J Schwartz, two of the towering figures in the field of financial history, on the role of the government in achieving an efficient and stable financial system Together these papers attest to vitality of current research in financial history and to the important contribution made by the World Economic Congress to the scholarly conversation New Jersey, USA Tokyo, Japan Hugh Rockoff Isao Suto vii Contents Reflections on the Evolution of Financial Crises: Theory, History and Empirics Michael D Bordo The International Contagion of Short-Run Interest Rates During the Great Depression Samuel Maveyraud and Antoine Parent 17 Banking Crises and Lender of Last Resort in Theory and Practice in Swedish History, 1850–2010 Anders Ögren 47 It is Always the Shadow Banks: The Regulatory Status of the Banks that Failed and Ignited America’s Greatest Financial Panics Hugh Rockoff 77 Milton Friedman and Anna J Schwartz on the Inherent Instability of Fractional Reserve Banking 107 Hugh Rockoff Financial Crises and the Central Bank: Lessons from Japan During the 1920s 131 Masato Shizume Economic and Social Backgrounds of Top Executives of the Federal Reserve Before and After the Great Depression 149 Isao Suto ix Editors and Contributors About the Editors Hugh Rockoff is Distinguished Professor of Economics at Rutgers University in New Brunswick, New Jersey and a research associate of the National Bureau of Economic Research He received his A.B from Earlham College in 1967 and his Ph.D from Chicago in 1972 He has written many articles and several books on banking and monetary history and wartime economic controls His most recent paper is “War and Inflation in the United States from the Revolution to the Persian Gulf War.” In Economic History of Warfare and State Formation, eds Jari Eloranta, Eric Golson, Andre Markevich, Nikolaus Wolf His recent working papers can be found at www.nber.org Isao Suto is Professor of Economic History at Meiji University, Tokyo He gained his Ph.D in economics from Nagoya University He recently coedited American economic history, 1929–2008: the emergence of a troubled superpower, with Akitake Taniguchi His books include Shaping of the post-war Federal Reserve Policy: from New Deal to “the Accord” (2008) and American Big Business and Banking: The Formation and Reorganization of the Federal Reserve System, 1863–1935 (1997) Among his many articles are “U.S International Monetary Policy for the IMF,” and “Early twenty-century Japanese worker saving: precautionary behaviour before a social safety net,” and “Savings and early economic growth in the United States and Japan” written with John A James Contributors Michael D Bordo Department of Economics, Rutgers University, New Brunswick, NJ, USA Samuel Maveyraud University of Bordeaux, GREThA College, Bordeaux, France Antoine Parent Institut d’Etudes Politiques de Lyon, Sciences Po Lyon, Lyon, France Hugh Rockoff Department of Economics, Rutgers University, New Brunswick, NJ, USA xi xii Editors and Contributors Masato Shizume Faculty of Political Science and Economics, Waseda University, Tokyo, Japan Isao Suto School of Political Science and Economics, Meiji University, Tokyo, Japan Anders Ögren Department of Economic History, Lund University, Lund, Sweden ... Hugh Rockoff Isao Suto • Editors Coping with Financial Crises Some Lessons from Economic History 123 Editors Hugh Rockoff Department of Economics Rutgers University New Jersey, NJ USA Isao Suto. .. macro -economic history, financial history, labor history, industrial history, agricultural history, the history of institutions and organizations, spatial economic history, law and economic history, ... 101-8301 Tokyo, Japan e-mail: suto@ meiji.ac.jp © Springer Nature Singapore Pte Ltd 2018 H Rockoff and I Suto (eds. ), Coping with Financial Crises, Studies in Economic History, https://doi.org/10.1007/978-981-10-6196-7_7