Showing papers by "Philip T. Hoffman published in 2003"

Finance, intermediaries, and economic development

Abstract: Preface: This volume contains papers first presented at a conference, "In Data Veritas: Institutions and Growth in Economic History," held in honor of Lance Davis at the California Institute of Technology, November 6-8, 1998. In addition to the presenters, also attending , as formal or informal discussions, were Karen Clay, Robert Cull, Price Fishback, Albert Fishlow, Stephen Haber, John James, Shawn Kantor, Zorina Khan, Margaret Levenstein, Rebecca Menes, Clayne Pope, and John Wallis. The Introduction and the Afterword were written by the editors at a later date. We wish to thank Frank Smith from Cambridge University Press and the two anonymous referees for the Press for very helpful suggestions. We wish to acknowledge the administrative help of Susan G. Davis and the financial help of the Division of Humanities and Social Sciences, California Institute of Technology, in the conference arrangements. In preparing the final manuscript we were aided by the Department of Economics, University of Rochester; the Department of Economics, UCLA,; and the Division of Humanities and Social Sciences, California Institute of Technology. In the process of publication, we benefited from the editorial work of Michie Shaw of TechBooks, the copyediting of Carol Sirkus, and the preparation of the index by Kathleen Paperchonits. But most of all we gained form the scholarship and enthusiasm of Lance Davis.

No Exit: Notarial Bankruptcies and the Evolution of Financial Intermediation in Nineteenth Century Paris

Abstract: In early nineteenth-century Paris, notaries and bankers competed for the business of financial intermediation. They did so in an environment full of uncertainty and risk, for between 1808 and 1855, 143 bankers failed, and 26 notaries declared bankruptcy (Table 3.1). On average, nearly 12 percent of all banking houses and 3 percent of notarial businesses (etudes) went belly up in each five-year period between 1815 and 1855 – large figures in financial circles. Surprisingly, it was the bankers who emerged victorious from this competition even though they were the ones who failed more often. Here, we study the notaries they vanquished, in order to learn more about the interaction between competition, asymmetric information, and financial regulation. To explain the initial institutional evolution of notaries and bankers, we stress the importance of clients' learning, at least up to 1843. Thereafter, we examine how government intervention eliminated notarial bankruptcies and produced a fundamentally different equilibrium. Our interest in how financial intermediaries and clients interacted is inspired by Lance Davis's research on the role of competition and government regulation in financial markets. Davis, it is true, works on different topics, comparing distinct markets or analyzing financial flows from one location to another. Yet he, too, stresses clients' learning and savers' heterogeneity (in his words, “rubes and sophisticates”), and his approach has a direct echo in our model with two types of clients.