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Abstract:
Research on trust now forms a prominent part of the research agenda in history and the social sciences. Although this research has generated useful insights, the idea of trust has been used so widely and loosely that it risks creating more confusion than clarity. This essay argues that to the extent that scholars have a clear idea of what trust actually means, the concept is, at least for economic questions, superfluous: the useful parts of the idea of trust are implicit in older notions of information and the ability to impose sanctions. I trust you in a transaction because of what I know about you, and because of what I can have done to you should you cheat me. This observation does not obviate what many scholars intend, which is to embed economic action within a framework that recognizes informal institutions and social ties. I illustrate the argument using three examples drawn from an area where trust has been seen as critical: credit for poor people.

Trust, Social Capital, Credit Cooperatives, Uniform Laws

Abstract:
We use the history of private limited liability companies (PLLCs) to challenge two pervasive assumptions in the literature: (1) Anglo-American legal institutions were better for economic development than continental Europe's civil-law institutions; and (2) the corporation was the superior form of business organization. Data on the number and types of firms organized in France, Germany, the UK, and the US show that that the PLLC became the form of choice for small- and medium-size enterprises wherever and whenever it was introduced. The PLLC's key advantage was its flexible internal governance rules that allowed its users to limit the threat of untimely dissolution inherent in partnerships without taking on the full danger of minority oppression that the corporation entailed. The PLLC was first successfully introduced in Germany, a code country, in 1892. Great Britain, a common-law country followed in 1907, and France, a code country, in 1925. The laggard was the US, a common-law country whose courts had effectively killed earlier attempts to enact the form.

limited company, partnership, corporation, legal regime, common law, civil law

Abstract:
Economic enterprises face two, related, managerial problems: effective management of the enterprise's activities, and communicating to outsiders that the enterprise is in fact well-run. These problems were especially difficult in the credit cooperative movement that grew up in Germany in the second half of the nineteenth century. These successful cooperatives thrived because they could harness the information and ties among local people to obviate many of the problems that faced other lenders. Doing so required managers who were themselves local people. Yet few if any locals had any banking experience, and most were not even familiar with basic accounting methods. These local managers created internal management problems and enhanced outside suspicion of the cooperatives as banking enterprises. The methods developed to overcome these problems relied on a combination of local initiative and regional assistance that was typical of the movement as a whole. The movement's ability to train its own talent suggests a broader impact not captured by statistics on membership or financial assets.

Credit cooperative; External audit

Abstract:
The Princeton Project on the Decline of Fertility in Europe
(or European Fertility Project, hereafter EFP) was carried out
at Princeton University's Office of Population Research in the
1960s and 1970s. This project aimed to characterize the
decline of fertility that took place in Europe during the
nineteenth and early twentieth centuries. The project's
summary statements argued that social and economic forces
played little role in bringing about the fertility transition.
The statement stresses instead a process of innovation and
diffusion. A central feature of the EFP argument is a series
of statistical exercises that purport to show that changes in
economic and social conditions exerted little influence on
fertility. Two recent papers on Germany for this period have
used similar data and methods to draw different conclusions.
These findings echo those of researchers working in other
contexts, who increasingly find that economic and social
factors play a strong role in fertility. We show that one
reason for the new findings is some general statistical
problems in the Princeton methodology. These are reason
to temper acceptance of the Princeton project's larger message.

fertility transition

Abstract:
The 1953 London Debt Agreement settled Germany's debts from the period between the two world wars, and allowed the country to re-establish its role in international capital markets. The Agreement wrote-down the overall debt by about 50 percent and gave the debtors a much longer period to repay. One interesting clause in the Agreement allowed Germany to postpone some payments until such time as re-unification. The Agreement reflects a subtle and responsible understanding of the problems associated with the reparations and debt crises of the 1920s and 1930s, as well as fears about the moral hazard problems that would arise with making any part of the Agreement contingent on events Germany could influence. Recent advocates of third-world debt relief have held up the London Debt Agreement of 1953 as a precedent for debt relief for poor countries today. That argument reflects a misunderstanding of the historical circumstances of the early 1950s, as well as the economic principles reflected in the Agreement.

Germany, London Debt Agreement, sovereign debt, debt overhang, HIPC initiative

Abstract:
Simple Malthusian models remain an important tool for understanding pre-modern demographic systems and their connection to the economy. But most recent literature has lost sight of the institutional context for demographic behavior that lay at the heart of Malthus's own analysis. This paper estimates a short-run version of a Malthusian model for two Württemberg communities from 1646 to 1870. Württemberg differed institutionally from the northwest European societies analyzed in previous studies. The impact of institutional differences shows clearly in differing demographic reactions to economic shocks. Mortality was less sensitive to shocks than one would expect, while nuptiality was especially sensitive.

Malthusian models, mortality, fertility, nuptiality, guilds

Abstract:
The decline of human fertility that occurred in Europe and North America in the nineteenth century, and elsewhere in the twentieth century, remains a topic of debate largely because there is no accepted explanation for the event. Disagreement persists in part because researchers have rarely used the detailed quantitative information necessary to form adequate tests of alternative theories. This paper uses district-level data from Bavaria to study the correlates of the decline of fertility in that German kingdom in the nineteenth century. Bavaria's fertility transition was later and less dramatic than in other parts of Germany. The European Fertility Project, the most influential study of the European fertility transition, used very large units of analysis and unrefined measures of economic and social conditions. This project concluded that the fertility transition reflected the simultaneous adoption of new ideas about contraception, and was not caused by adaptation to changing economic and social circumstances. We use smaller units of analysis, better measures of the possible determinants of fertility, and more appropriate econometric methods to study Bavaria's fertility transition. Our results indicate that the European Fertility Project was right about the role of religion and secularization, but missed an important role for the economic and structural effects stressed by economic historians.

fertility transition, migration, Germany

Abstract:
Ireland's relatively late and feeble fertility transition remains poorly understood. The leading explanations stress the role of Catholicism and a conservative social ethos. This paper reports the first results from a project that uses new samples from the 1911 census of Ireland to study fertility in Dublin and Belfast. Our larger project aims to use the extensive literature on the fertility transition elsewhere in Europe to refine and test leading hypotheses in their Irish context. The present paper uses a sample from the Dublin suburb of Pembroke to take a first look at the questions, data, and methods. This sample is much larger than those used in previous studies of Irish fertility, and is the first from an urban area. We find considerable support for the role of religion, networks, and other factors stressed in the literature on the fertility transition, but the data also show a role for the social-class effects downplayed in recent discussions.

Ireland, Fertility, Demography

Abstract:
In most western societies, marital fertility began to decline in the nineteenth century. But in Ireland, fertility in marriage remained stubbornly high into the twentieth century. Explanations of Ireland's late entry to the fertility transition focus on the influence of the Roman Catholic Church in Irish society. These arguments are often backed up by claims that the Irish outside of Ireland behaved the same way. This paper investigates these claims by examining the marital fertility of Irish Americans in 1910 and produces three main findings. First, the Irish in America had smaller families than both the rural and urban Irish and their fertility patterns show clear evidence of fertility control. Second, despite the evidence of control,
Irish-Americans continued to have large families, much larger,
in fact, than the U.S. native-born population. The fertility
differential between these populations was not due to differences in other population characteristics. Rather it was due to the fact that conditional on characteristics, Irish-Americans chose to have larger families. Third, the differential fertility patterns of Irish-Americans were not just due to the effects of being immigrants. Germans and English immigrants also had higher fertility than the native-born population, but to a much larger extent than for the Irish, this higher fertility could be explained by the population characteristics of these groups.

Ireland, United States, Fertility, Demography, Immigration

Abstract:
Debate about the adequacy of public action during the Great Irish Famine is hampered by a lack of detailed information on its impact at local level. This study addresses the question of local agency with a case study of the North Dublin Union, which was responsible for administering the Irish poor law in the northern half of Dublin city. We use workhouse records to study the Union's functioning during the famine. High mortality of workhouse inmates mainly reflected the crisis outside its walls: the guardians and the managers did reasonably well in preserving human life in difficult circumstances.

Abstract:
Responsibility for the tremendous excess mortality associated with the Great Irish Famine of 1846-51 is a continuing topic of debate. One view blames an inadequate government response for much of the tragedy. These debates are hampered by a lack of detailed information on how well relief efforts performed at a local level. Excess mortality ranged from one quarter of the entire population in parts of the west to negligible levels along much of the eastern coastline. Much of this cross-section variation reflects relative wealth. But another theme in the historiography stresses the importance of sympathetic or negligent local figures such as a landlord or priest. This study addresses the question of local agency with a case study of the North Dublin Union, the administrative unit responsible for administering the Irish poor law in the northern half of Dublin city and some adjacent parishes. North Dublin Union is unusual for the quality of its surviving administrative records. We use those records to study the Union's day-to-day functioning during the famine and to estimate mortality rates in the workhouse during the crisis. We find that the tremendous mortality of the North Dublin workhouse inmates during the famine primarily reflects the crisis outside the workhouse's walls; the guardians and managers did reasonably well in preserving human life under these trying circumstances.

Ireland, famine, mortality, workhouses

Abstract:
Collective reputation and its associated free-rider problem have been invoked to justify state licensing of professions and to explain the incidence of franchising. We examine the conditions under which it is possible to create a Pareto-improving collective reputation among groups of heterogeneous producers. If the regulator or franchisor cannot credibly commit to high quality then a common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups benefit most from forming a common regime.

Quality regulation, Licensing, Collective reputation, Reputational externality, Franchising

Abstract:
The Uniform Small Loan Law (USLL) was the Russell Sage Foundation's primary device for fighting what it viewed as the scourge of high-rate lending to poor people in the first half of the twentieth century. The USLL created a new class of lenders who could make small loans at interest rates exceeding those allowed for banks under the normal usury laws. About two-thirds of the states had passed the USLL by 1930. This paper describes the USLL and then uses econometric models to investigate the state characteristics that influenced the law's passage. We find that urbanization and state-level economic characteristics played significant roles. So did measures of the state's banking system. We find no evidence that party-political affiliations had any effect, which is consistent with the USLL's "progressive" character. Finally, we find little evidence that the passage of the USLL in one state made passage more likely in neighboring or similar states. If anything, the cross-state influences were negative. Our findings suggest that the Russell Sage Foundation only imperfectly understood the political economy of the USLL, and that a different overall approach might have produced a result closer to their aims.

Uniform law, small loans, consumer credit, usury laws

Abstract:
This paper studies moral hazard in a sickness-insurance fund that provided the model for social-insurance schemes around the world. The German Knappschaften were formed in the medieval period to provide sickness, accident, and death benefits for miners. By the mid-nineteenth century, participation in the Knappschaft was compulsory for workers in mines and related occupations, and the range and generosity of benefits had expanded considerably. Each Knappschaft was locally controlled and self-funded, and their admirers saw in them the ability to use local knowledge and good incentives to deliver benefits at low costs. The Knappschaft underlies Bismarck’s sickness and accident insurance legislation (1883 and 1884), which in turn forms the basis of the German social-insurance system today and, indirectly, many social-insurance systems around the world. This paper focuses on a problem central to any insurance system, and one that plagued the Knappschaften as they grew larger in the later nineteenth century: the problem of moral hazard. Replacement pay for sick miners made it attractive, on the margin, for miners to invent or exaggerate conditions that made it impossible for them to work. Here we outline the moral hazard problem the Knappschaften faced as well as the internal mechanisms they devised to control it. We then use econometric models to demonstrate that those mechanisms were at best imperfect.

sickness insurance, moral hazard, Knappschaft, social insurance

Abstract:
In early 1862, the United States government began issuing Greenbacks, a legal tender currency that was not convertible into gold. The government promised to redeem the Greenbacks in gold eventually, but speculators understood that the probability of redemption depended on Union Army military fortunes and political developments that affected the total cost of the war. To serve the speculative interest in gold, a market emerged for the purpose of trading Greenbacks for gold dollars. Because the market price of a Greenback reflected the public's perceptions of future war costs, the movement of these prices provides unique insights into how people at the time perceived various events. We use daily quotations of the gold price of Greenbacks to identify a set of dates during the Civil War that market participants regarded as turning points. In some cases, these dates coincide with events familiar from conventional historical accounts of the war. In other instances, however, market participants reacted strongly to events that historians have not viewed as very significant.

Abstract:
This article challenges the idea that the corporation is a globally superior form of business organization and that the Anglo-American common-law is more conducive to economic development than the code-based legal systems characteristic of continental Europe. Although the corporation had important advantages over the main alternative form of organization (partnerships), it also had disadvantages that limited its appeal to small- and medium-sized enterprises (SMEs). As a result, when businesses were provided with an intermediate choice, the private limited liability company (PLLC) that combined the advantages of legal personhood and joint stock with a flexible internal organizational structure, most chose not to organize as corporations. This article tracks the changes that occurred in the menu of business organizational forms in two common-law countries (the UK and the US) and two countries governed by legal codes (France and Germany) and presents data showing the rapidity with which firms in each country responded to enabling legislation for PLLCs. We show that the PLLC was introduced first and most easily in a code country (Germany) and last and with the most difficulty in a common-law country (the US). Late introduction was associated with prolonged use of the partnership form, suggesting that the disadvantages of corporations did indeed weigh heavily on SMEs.

Abstract:
In 1892 Germany introduced a new legal form for enterprise, the Gesellschaft mit beschränkter Haftung or GmbH. This form was aimed at small and medium-sized enterprises that did not want to be partnerships but did not want to incorporate, either. To understand the value of this innovation we examine the takeup the GmbH in Germany. We then look at how French entrepreneurs in like industries solved their organizational problems. In 1926 France created a new legal form quite similar to the GmbH - the SARL, or Societe Anonyme a Responsabilite Limitee. The French, however, explicitly refused to copy the GmbH but rather created their own statute that appealed to bulk of small multi-owner firms. We then look at how German firms (who did not have access to the SARL) in like industries drew up their articles of association. Our preliminary conclusion is that while both the GmbH and the SARL were remedies to the most severe problems of partnerships and corporations, they differed sufficiently that they had two different constituencies. It is likely that had both forms been available in both countries both would have been used.

Abstract:
Much empirical social-science research, including work in economic and demographic history, has relied on the analysis of published information on administrative districts. One famous example of this type of research, the Princeton Project on the Decline of Fertility in Europe (EFP), was carried out at Princeton Universitys Office of Population Research in the 1960s and 1970s. This project aimed to characterize the decline of fertility that took place in Europe during the nineteenth and early twentieth centuries. The projects summary statements argued that social and economic forces played little role in bringing about the fertility transition. A central feature of the EFP argument is a series of statistical exercises which purport to show that changes in economic and social conditions exerted little influence on fertility. Two recent articles on Germany for this period have used similar data and methods to draw different conclusions. We show that the difference reflects problems in the Princeton projects statistical methods. Those problems affect, potentially, virtually all quantitative research of this type. Our findings suggest cautious re-thinking of conclusions based on this type of evidence, starting with the EFP.

Abstract:
This article challenges the idea that the corporation is a globally superior form of business organization and that the Anglo-American common-law is more conducive to economic development than the code-based legal systems characteristic of continental Europe. Although the corporation had important advantages over the main alternative form of organization (partnerships), it also had disadvantages that limited its appeal to small- and medium-sized enterprises (SMEs). As a result, when businesses were provided with an intermediate choice, the private limited liability company (PLLC) that combined the advantages of legal personhood and joint stock with a flexible internal organizational structure, most chose not to organize as corporations. This article tracks the changes that occurred in the menu of business organizational forms in two common-law countries (the United Kingdom and the United States) and two countries governed by legal codes (France and Germany) and presents data showing the rapidity with which firms in each country responded to enabling legislation for PLLCs. We show that the PLLC was introduced first and most easily in a code country (Germany) and last and with the most difficulty in a common-law country (the United States). Late introduction was associated with prolonged use of the partnership form, suggesting that the disadvantages of corporations did indeed weigh heavily on SMEs.

Abstract:
Germany's financial system differs in many respects from those of the United States or Britain. One key difference is the banking system, which plays a relatively greater role in Germany. Germany has long had universal banks, institutions that provide a full range of financial services. Some economic historians attribute Germany's economic success, in part, to these institutions. In the United States arguments for the deregulation of banking often stress the supposed advantages of German-style universal banks. A long tradition in economic history focuses on close connections between large banks and industrial firms that allegedly allowed the banks to play an unusual role in industrial finance. This view of the German banking system misses some important parts of the story, including the relatively late development of the current institutions and the important role of other banking institutions such as savings banks and credit cooperatives. This paper traces the development of the German banking system in the century prior to World War I, stressing those aspects of the history that inform both discussions in the economics of information and banking, and debates about the deregulation of banking today.

Banks, financial intermediation, German economic history

Abstract:
This note examines a situation in which hedging may actually increase a bank's exposure to risk. Especially in the case of financial institutions, there exists only a limited number of delivery dates for each futures contract and the delivery dates may not coincide with it the planning horizon of the firm. Therefore a cross-hedge often becomes necessary in financial institutions. However, a cross-hedge may increase the level of noise, and with it the banking firm's income risk.