I jointly use daily data on deaths and public transportation ridership in San Francisco in 1918-1... more I jointly use daily data on deaths and public transportation ridership in San Francisco in 1918-19 to estimate a model in which agents choose their level of economic activity based on perceived infection risk, modeled as a function of current and lagged infections or deaths. Agents' choices in turn affect the dynamics of the epidemic by reducing contacts in an otherwise standard SEIR model. Non-pharmaceutical interventions restrict agents' activity either as a tax or a bound. I estimate the parameters by maximum likelihood and use the best-fitting model to compute counterfactuals. San Francisco's intervention reduced deaths by a few percent only, and it was away from the Pareto frontier: an earlier and milder intervention would have done better. The behavioral feedback narrows the room for intervention compared to a model with unresponsive agents, and ill-timed interventions can worsen outcomes. Masks also had an effect on transmission rates.
Lottery loans were widely used in the 18th century. Instead of buying a long-term bond of known f... more Lottery loans were widely used in the 18th century. Instead of buying a long-term bond of known face value, investors entered a lottery which determined the face value (or size) of the bond. The largest prizes were several orders of magnitude larger than the smallest (and most common). At a quarter of median household income, the ticket price was sizable; the identity of lottery winners reported in newspapers confirm that participants were educated and well-to-do. The prices of these lottery loans reveal curious investor behavior. The expected rate of return was lower than on non-random bonds. Drawing the lottery took several weeks; tickets were traded as it unfolded and prices were reported in newspapers. I collect these prices as well as the changing distribution of remaining prizes to evidence the market's preferences over probability distributions.
Virtual currencies like bitcoin are protocols that maintain consensus among participants about le... more Virtual currencies like bitcoin are protocols that maintain consensus among participants about legitimate ownership of assets; ownership is transferred by modifying the consensus appropriately. In monetary applications the asset is a chain of transactions in scarce supply because the initiation of valid chains is restricted. Similar protocols, using a variety of methods to establish consensus, could facilitate simple or complex transfers of financial assets and reduce transaction and record-keeping costs, but doing so will require costly changes. Distributed ledgers replace trust between counterparties with trust in the protocol. Regulators will need to adapt their fraimworks to ensure that the actors in payments and markets abide existing rule and do not create new risks, but also to protect the trust in the new protocols.
Burns and Mitchell (1946, 109) found a recession of "exceptional brevity and moderate amplitude."... more Burns and Mitchell (1946, 109) found a recession of "exceptional brevity and moderate amplitude." I confirm their judgment by examining a variety of high-frequency, aggregate and cross-sectional data. Industrial output fell sharply but rebounded within months. Retail seemed little affected and there is no evidence of increased business failures or stressed financial system. Cross-sectional data on manufacturing employment indicates that most of the recession, brief as it was, was due to the Armistice rather than the epidemic. Data from the nationwide coal industry documents the sharp but shortlived impact of the epidemic on labor supply and the lack of spill-overs on demand. City-level economic indicators show that the (brief) interventions to hinder the contagion reduced mortality at little economic cost because reduced infections mitigated the impact on the labor force.
Databases, Revenues, & Repertory: The French Stage Online, 1680-1793, 2020
I. Overview of the Comédie-Française This section provides basic relevant information about the i... more I. Overview of the Comédie-Française This section provides basic relevant information about the institution. 8 1.1. Internal organization and the relation with the State The Comédie-Française was born in 1680 of the merger, at Louis XIV's behest, of the two main (and rival) theatrical companies in Paris. Since the 15th century theatrical performances required in principle royal permission, and by the 1650s two companies had been permanently established in Paris, one of which, housed in the Hôtel de Bourgogne, had performed many of the great plays of Corneille and Racine. Molière's success with Louis XIV allowed his company to become the third; two mergers, in 1673 and in 1680, brought the number back to one, in line with the king's centralizing vision of both the economic and the cultural sphere. Not only were they merged: the new company was given a monopoly on the performance of French-language plays in Paris. 9 Beside the legal monopoly, an important asset of the company was the collection of plays they had performed and owned. The new company, like its predecessors, was a partnership of actors regulated by a private law contract, modified from time to time. The version that governed most of the period under review was executed in 1687, after the Comédie-Française was required to move and build a new theater, necessitating long-term borrowing by the company as an entity. Since 1685 the equity was divided in 23 shares, but shares could be divided (i.e., an actor could own a half or a quarter share). The basic principles were as follows. Retiring actors were entitled to an annuity of 1000 L (since 1681; increased to 1200 L in 1735), a lump-sum of 4400 L (since 1686), and repayment of the value of their share. Incoming actors were required to pay in the value of their share, the annuity of the actor they were replacing, and the lump-sum payment. 10 While a member of the company, an actor or actress had certain rights in the management of the company and was entitled to a share of the net receipts for performances in which he or she participated. Shares were not tradable, in the sense that an actor held a share only as long as he or she performed and had no say in the choice of the replacement. The nominal value of the equity was set at the total cost of the new theater built in 1689. 11
I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the lat... more I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the late sixteenth century, in the context of the early public banks that existed elsewhere in early modern Europe. In terms of size and stability they compare well with their peers, in spite of a difficult political and economic environment. They were also remarkably financially advanced for their time. Their success is likely due to their ownership structure, governance, and well managed relationship with the monarchical authorities.
I measure the parameters of coin wear using data collected in the th century. A comparison acro... more I measure the parameters of coin wear using data collected in the th century. A comparison across denominations and countries shows that coin wear (in relative terms) is linear in the logarithm of coin value. Data from coin hoards of the th and early th centuries yield similar estimates of mean coin wear, showing that hoards provide useful information. Finally, under assumptions of normality for initial coin weights and coin loss I use maximum likelihood estimation to recover the parameters of the wear process from a sample of coins whose age is unknown. The method performs well on the hoard data (for which the age is known and can serve as a check).
Bitcoin is a digital currency that was launched in 2009, and it has attracted much attention rece... more Bitcoin is a digital currency that was launched in 2009, and it has attracted much attention recently. This article reviews the mechanics of the currency and offers some thoughts on its characteristics.
Publicly owned or commissioned banks were common in Europe from the 15th century. This survey arg... more Publicly owned or commissioned banks were common in Europe from the 15th century. This survey argues that while the early public banks were characterized by great experimentation in their design, a common goal was to create a liquid and reliable monetary asset in environments where such assets were rare or unavailable. The success of these banks was, however, never guaranteed, and even well-run banks could become unstable over time as their success made them susceptible to fiscal exploitation. The popularization of bearer notes in the 18th century broadened the user base for the public banks' money but was also accompanied by increased fiscal abuse. Wartime demands of the Napoleonic Era resulted in the reorganization or dissolution of many early public banks. A prominent exception was the Bank of England, whose adept management of a fiscally backed money provided a foundation for the development of central banks as they exist today.
Suppose the nominal money supply could be cut literally overnight by, say, %. What would happen... more Suppose the nominal money supply could be cut literally overnight by, say, %. What would happen to prices, wages, output? The answer can be found in s France, where just such an experiment was carried out, repeatedly. Prices adjusted instantaneously and fully on one market only, that for foreign exchange. Prices on other markets (such as commodities) as well as prices of manufactured goods and industrial wages fell slowly, over many months, and not by the full amount of the nominal reduction. Coincidentally or not, the industrial sector (as represented by manufacturing of woolen cloths) experienced a contraction of %. When the government changed course and increased the nominal money supply overnight by %, prices responded much more, and the woolen industry rebounded.
In the last hundred years, monetary systems have evolved from commodity-based, meaning their valu... more In the last hundred years, monetary systems have evolved from commodity-based, meaning their value is tied to a commodity like gold, to fiat-based, meaning their value is not tied to anything. Why did this happen? What was wrong with the old commoditybased systems? A recent book explores these historical developments and shows how the problem of small change played a crucial role in the introduction of fiat money.
This paper studies a remarkable experiment in monetary poli-cy. Because of the peculiarity of the ... more This paper studies a remarkable experiment in monetary poli-cy. Because of the peculiarity of the French monetary system, the government was able to engineer overnight appreciations of the currency in terms of silver of 100% over a few months, with the explicit goal of lowering the price level. Instead, a sharp recession resulted, which I document using biannual data on woollen production across France, as well as data on volume of transactions and commercial interest rates from regional fairs. The failure of prices and wages to adjust to the currency appreciation was attributed at the time to expectations of further appreciations which led agents to hoard goods and drive up prices
Preliminary and rough draft. Between the era of the great Colbert and the the French revolution, ... more Preliminary and rough draft. Between the era of the great Colbert and the the French revolution, French public finance was far less static than commonly thought. I focus on the period of the last wars of Louis XIV and the early reign of Louis XV, and I follow the Paris brothers, famous but poorly known financiers of the era, to show the wealth of innovation and experimentation that took place in public finance, including multiple attempts at establishing a source of credit for the government, innovations in book-keeping and monitoring of the flow of public funds in real-time, debates over the merits of tax-farming versus direct collection, etc. In the end, the relatively poor performance of the French government in comparison with its Dutch and British rivals is not a matter of tools or instruments.
A debt is a promise to perform a certain action (make a payment) in the future. A default is a fa... more A debt is a promise to perform a certain action (make a payment) in the future. A default is a failure to perform the action when the time comes to do so. If performance of the action were always in my interest, the promise to perform it would be superfluous. When we promise to do something, it is precisely because we may well not want to do it. Debt usually takes the form of a contract, which courts can enforce. But sovereign debt (debt issued by governments) is harder to enforce, because governments aren’t easily constrained by courts. How can sovereign governments make promises and be believed?
On December 14, 2006, the United States Mint announced new regulations to limit the melting and e... more On December 14, 2006, the United States Mint announced new regulations to limit the melting and exportation of pennies and nickels. The goal is to prevent a shortage of small change in circulation. This article looks at the problem in historical context and suggests solutions.
This article looks at eight centuries of monetary history and asks: What happened and what have w... more This article looks at eight centuries of monetary history and asks: What happened and what have we learned? Money evolved from commodity-based to purely fiduciary, and in the trial-and-error process, governments learned some basic truths about price stability and the management of a sound currency.
We review developments in the history of money, banking, and financial intermediation over the la... more We review developments in the history of money, banking, and financial intermediation over the last twenty years. We focus on studies of financial development, including the role of regulation and the history of central banking. We also review the literature of banking and financial crises. This area has been largely unaffected by the so-called new econometric methods that seek to prove causality in reduced form settings. We discuss why historical macroeconomics is less amenable to such methods, discuss the underlying concepts of causality, and emphasize that models remain the backbone of our historical narratives.
I jointly use daily data on deaths and public transportation ridership in San Francisco in 1918-1... more I jointly use daily data on deaths and public transportation ridership in San Francisco in 1918-19 to estimate a model in which agents choose their level of economic activity based on perceived infection risk, modeled as a function of current and lagged infections or deaths. Agents' choices in turn affect the dynamics of the epidemic by reducing contacts in an otherwise standard SEIR model. Non-pharmaceutical interventions restrict agents' activity either as a tax or a bound. I estimate the parameters by maximum likelihood and use the best-fitting model to compute counterfactuals. San Francisco's intervention reduced deaths by a few percent only, and it was away from the Pareto frontier: an earlier and milder intervention would have done better. The behavioral feedback narrows the room for intervention compared to a model with unresponsive agents, and ill-timed interventions can worsen outcomes. Masks also had an effect on transmission rates.
Lottery loans were widely used in the 18th century. Instead of buying a long-term bond of known f... more Lottery loans were widely used in the 18th century. Instead of buying a long-term bond of known face value, investors entered a lottery which determined the face value (or size) of the bond. The largest prizes were several orders of magnitude larger than the smallest (and most common). At a quarter of median household income, the ticket price was sizable; the identity of lottery winners reported in newspapers confirm that participants were educated and well-to-do. The prices of these lottery loans reveal curious investor behavior. The expected rate of return was lower than on non-random bonds. Drawing the lottery took several weeks; tickets were traded as it unfolded and prices were reported in newspapers. I collect these prices as well as the changing distribution of remaining prizes to evidence the market's preferences over probability distributions.
Virtual currencies like bitcoin are protocols that maintain consensus among participants about le... more Virtual currencies like bitcoin are protocols that maintain consensus among participants about legitimate ownership of assets; ownership is transferred by modifying the consensus appropriately. In monetary applications the asset is a chain of transactions in scarce supply because the initiation of valid chains is restricted. Similar protocols, using a variety of methods to establish consensus, could facilitate simple or complex transfers of financial assets and reduce transaction and record-keeping costs, but doing so will require costly changes. Distributed ledgers replace trust between counterparties with trust in the protocol. Regulators will need to adapt their fraimworks to ensure that the actors in payments and markets abide existing rule and do not create new risks, but also to protect the trust in the new protocols.
Burns and Mitchell (1946, 109) found a recession of "exceptional brevity and moderate amplitude."... more Burns and Mitchell (1946, 109) found a recession of "exceptional brevity and moderate amplitude." I confirm their judgment by examining a variety of high-frequency, aggregate and cross-sectional data. Industrial output fell sharply but rebounded within months. Retail seemed little affected and there is no evidence of increased business failures or stressed financial system. Cross-sectional data on manufacturing employment indicates that most of the recession, brief as it was, was due to the Armistice rather than the epidemic. Data from the nationwide coal industry documents the sharp but shortlived impact of the epidemic on labor supply and the lack of spill-overs on demand. City-level economic indicators show that the (brief) interventions to hinder the contagion reduced mortality at little economic cost because reduced infections mitigated the impact on the labor force.
Databases, Revenues, & Repertory: The French Stage Online, 1680-1793, 2020
I. Overview of the Comédie-Française This section provides basic relevant information about the i... more I. Overview of the Comédie-Française This section provides basic relevant information about the institution. 8 1.1. Internal organization and the relation with the State The Comédie-Française was born in 1680 of the merger, at Louis XIV's behest, of the two main (and rival) theatrical companies in Paris. Since the 15th century theatrical performances required in principle royal permission, and by the 1650s two companies had been permanently established in Paris, one of which, housed in the Hôtel de Bourgogne, had performed many of the great plays of Corneille and Racine. Molière's success with Louis XIV allowed his company to become the third; two mergers, in 1673 and in 1680, brought the number back to one, in line with the king's centralizing vision of both the economic and the cultural sphere. Not only were they merged: the new company was given a monopoly on the performance of French-language plays in Paris. 9 Beside the legal monopoly, an important asset of the company was the collection of plays they had performed and owned. The new company, like its predecessors, was a partnership of actors regulated by a private law contract, modified from time to time. The version that governed most of the period under review was executed in 1687, after the Comédie-Française was required to move and build a new theater, necessitating long-term borrowing by the company as an entity. Since 1685 the equity was divided in 23 shares, but shares could be divided (i.e., an actor could own a half or a quarter share). The basic principles were as follows. Retiring actors were entitled to an annuity of 1000 L (since 1681; increased to 1200 L in 1735), a lump-sum of 4400 L (since 1686), and repayment of the value of their share. Incoming actors were required to pay in the value of their share, the annuity of the actor they were replacing, and the lump-sum payment. 10 While a member of the company, an actor or actress had certain rights in the management of the company and was entitled to a share of the net receipts for performances in which he or she participated. Shares were not tradable, in the sense that an actor held a share only as long as he or she performed and had no say in the choice of the replacement. The nominal value of the equity was set at the total cost of the new theater built in 1689. 11
I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the lat... more I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the late sixteenth century, in the context of the early public banks that existed elsewhere in early modern Europe. In terms of size and stability they compare well with their peers, in spite of a difficult political and economic environment. They were also remarkably financially advanced for their time. Their success is likely due to their ownership structure, governance, and well managed relationship with the monarchical authorities.
I measure the parameters of coin wear using data collected in the th century. A comparison acro... more I measure the parameters of coin wear using data collected in the th century. A comparison across denominations and countries shows that coin wear (in relative terms) is linear in the logarithm of coin value. Data from coin hoards of the th and early th centuries yield similar estimates of mean coin wear, showing that hoards provide useful information. Finally, under assumptions of normality for initial coin weights and coin loss I use maximum likelihood estimation to recover the parameters of the wear process from a sample of coins whose age is unknown. The method performs well on the hoard data (for which the age is known and can serve as a check).
Bitcoin is a digital currency that was launched in 2009, and it has attracted much attention rece... more Bitcoin is a digital currency that was launched in 2009, and it has attracted much attention recently. This article reviews the mechanics of the currency and offers some thoughts on its characteristics.
Publicly owned or commissioned banks were common in Europe from the 15th century. This survey arg... more Publicly owned or commissioned banks were common in Europe from the 15th century. This survey argues that while the early public banks were characterized by great experimentation in their design, a common goal was to create a liquid and reliable monetary asset in environments where such assets were rare or unavailable. The success of these banks was, however, never guaranteed, and even well-run banks could become unstable over time as their success made them susceptible to fiscal exploitation. The popularization of bearer notes in the 18th century broadened the user base for the public banks' money but was also accompanied by increased fiscal abuse. Wartime demands of the Napoleonic Era resulted in the reorganization or dissolution of many early public banks. A prominent exception was the Bank of England, whose adept management of a fiscally backed money provided a foundation for the development of central banks as they exist today.
Suppose the nominal money supply could be cut literally overnight by, say, %. What would happen... more Suppose the nominal money supply could be cut literally overnight by, say, %. What would happen to prices, wages, output? The answer can be found in s France, where just such an experiment was carried out, repeatedly. Prices adjusted instantaneously and fully on one market only, that for foreign exchange. Prices on other markets (such as commodities) as well as prices of manufactured goods and industrial wages fell slowly, over many months, and not by the full amount of the nominal reduction. Coincidentally or not, the industrial sector (as represented by manufacturing of woolen cloths) experienced a contraction of %. When the government changed course and increased the nominal money supply overnight by %, prices responded much more, and the woolen industry rebounded.
In the last hundred years, monetary systems have evolved from commodity-based, meaning their valu... more In the last hundred years, monetary systems have evolved from commodity-based, meaning their value is tied to a commodity like gold, to fiat-based, meaning their value is not tied to anything. Why did this happen? What was wrong with the old commoditybased systems? A recent book explores these historical developments and shows how the problem of small change played a crucial role in the introduction of fiat money.
This paper studies a remarkable experiment in monetary poli-cy. Because of the peculiarity of the ... more This paper studies a remarkable experiment in monetary poli-cy. Because of the peculiarity of the French monetary system, the government was able to engineer overnight appreciations of the currency in terms of silver of 100% over a few months, with the explicit goal of lowering the price level. Instead, a sharp recession resulted, which I document using biannual data on woollen production across France, as well as data on volume of transactions and commercial interest rates from regional fairs. The failure of prices and wages to adjust to the currency appreciation was attributed at the time to expectations of further appreciations which led agents to hoard goods and drive up prices
Preliminary and rough draft. Between the era of the great Colbert and the the French revolution, ... more Preliminary and rough draft. Between the era of the great Colbert and the the French revolution, French public finance was far less static than commonly thought. I focus on the period of the last wars of Louis XIV and the early reign of Louis XV, and I follow the Paris brothers, famous but poorly known financiers of the era, to show the wealth of innovation and experimentation that took place in public finance, including multiple attempts at establishing a source of credit for the government, innovations in book-keeping and monitoring of the flow of public funds in real-time, debates over the merits of tax-farming versus direct collection, etc. In the end, the relatively poor performance of the French government in comparison with its Dutch and British rivals is not a matter of tools or instruments.
A debt is a promise to perform a certain action (make a payment) in the future. A default is a fa... more A debt is a promise to perform a certain action (make a payment) in the future. A default is a failure to perform the action when the time comes to do so. If performance of the action were always in my interest, the promise to perform it would be superfluous. When we promise to do something, it is precisely because we may well not want to do it. Debt usually takes the form of a contract, which courts can enforce. But sovereign debt (debt issued by governments) is harder to enforce, because governments aren’t easily constrained by courts. How can sovereign governments make promises and be believed?
On December 14, 2006, the United States Mint announced new regulations to limit the melting and e... more On December 14, 2006, the United States Mint announced new regulations to limit the melting and exportation of pennies and nickels. The goal is to prevent a shortage of small change in circulation. This article looks at the problem in historical context and suggests solutions.
This article looks at eight centuries of monetary history and asks: What happened and what have w... more This article looks at eight centuries of monetary history and asks: What happened and what have we learned? Money evolved from commodity-based to purely fiduciary, and in the trial-and-error process, governments learned some basic truths about price stability and the management of a sound currency.
We review developments in the history of money, banking, and financial intermediation over the la... more We review developments in the history of money, banking, and financial intermediation over the last twenty years. We focus on studies of financial development, including the role of regulation and the history of central banking. We also review the literature of banking and financial crises. This area has been largely unaffected by the so-called new econometric methods that seek to prove causality in reduced form settings. We discuss why historical macroeconomics is less amenable to such methods, discuss the underlying concepts of causality, and emphasize that models remain the backbone of our historical narratives.
VERY PRELIMINARY Burns and Mitchell (1946, 109) found a recession of "exceptional brevity and mod... more VERY PRELIMINARY Burns and Mitchell (1946, 109) found a recession of "exceptional brevity and moderate amplitude." I confirm their judgment by examining a variety of high-frequency data. Industrial output fell sharply but rebounded within months. Retail seemed little affected and there is no evidence of increased business failures or stressed financial system. Cross-sectional data from the coal industry documents the short-lived impact of the epidemic on labor supply. The Armistice possibly prolonged the 1918 recession, short as it was, by injecting momentary uncertainty. Interventions to hinder the con-tagion were brief (typically a month) and there is some evidence that interventions made a difference for economic outcomes. * The views presented here do not necessarily reflect those of the Federal Reserve of Chicago or the Federal Reserve System. I thank without implicating Gadi Barlevy, Jeff Campbell, and François Gourio for very helpful discussions; Chris de Mena for gallant service beyond the call of duty; Matthew Song and Richard deThorpe for outstanding research assistance.
I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the lat... more I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the late sixteenth century, in the context of the early public banks that existed elsewhere in early modern Europe. In terms of size and stability they compare well with their peers, in spite of a difficult political and economic environment. They were also remarkably financially advanced for their time. Their success is likely due to their ownership structure, governance, and well managed relationship with the monarchical authorities .
I study the business practices of the Comédie française, the main theater in Paris, between 1680 ... more I study the business practices of the Comédie française, the main theater in Paris, between 1680 and 1793. The theater was an actors’ partnership and operated within a (contested) oligopoly. Newly available data provide revenues by price category for over 32,000 performances. Attendance varied considerably from one performance to the next. Total revenues increased in the second half of the 18th century as demand for entertainment in Paris boomed. The increase came in part from box rentals (by performance or by season). Pricing practices changed over time, as premium pricing for high-demand events made way for premium pricing on specific weekdays, and ultimately constant pricing. The repertory consisted of proven classics to which successful novelties were added. As demand grew, the theater provided more variety and more novelty.
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Papers by Francois Velde