Category Archives: Economic History

No man can serve two masters

Rogue Trading at Lloyds Bank International, 1974: Operational Risk in Volatile Markets

By Catherine Schenk (Glasgow)

Abstract Rogue trading has been a persistent feature of international financial markets over the past thirty years, but there is remarkably little historical treatment of this phenomenon. To begin to fill this gap, evidence from company and official archives is used to expose the anatomy of a rogue trading scandal at Lloyds Bank International in 1974. The rush to internationalize, the conflict between rules and norms, and the failure of internal and external checks all contributed to the largest single loss of any British bank to that time. The analysis highlights the dangers of inconsistent norms and rules even when personal financial gain is not the main motive for fraud, and shows the important links between operational and market risk. This scandal had an important role in alerting the Bank of England and U.K. Treasury to gaps in prudential supervision at the end of the Bretton Woods pegged exchange-rate system.

Business History Review, Volume 91 (1 – April 2017): 105-128.


Review by Adrian E. Tschoegl (The Wharton School of the University of Pennsylvania)

Since the 1974 rogue trading scandal at Lloyds’s Lugano branch we have seen more spectacular sums lost in rogue trading scandals. What Dr Catherine Schenk brings to our understanding of these recurrent events is the insight that only drawing on archives, both at Lloyds and at the Bank of England, can bring. In particular, the archives illuminate the decision processes at both institutions as the crisis unfolded. I have little to add to her thorough exposition of the detail so below I will limit myself to imprecise generalities.

Marc Colombo, the rogue trader at Lloyds Lugano, was a peripheral individual in a peripheral product line, in a peripheral location. As Schenk finds, this peripherality has two consequences, the rogue trader’s quest for respect, and the problem of supervision. Lloyds Lugano is not an anomaly. An examination of several other cases (e.g. Allied Irish, Barings, Daiwa, and Sumitomo Trading), finds the same thing (Tschoegl 2004).

In firms, respect and power come from being a revenue center. Being a cost center is the worst position, but being a profit center with a mandate to do very little is not much better. The rogue traders that have garnered the most attention, in large part because of the scale of their losses were not malevolent. They wanted to be valued. They were able to get away with their trading for long enough to do serious damage because of a lack of supervision, a lack that existed because of the traders’ peripherality.

In several cases, Colombo’s amongst them, the trader was head of essentially a one-person operation that was independent of the rest of the local organization. That meant that the trader’s immediate local supervisor had little or no experience with trading. Heads of branches in a commercial bank come from commercial banking, especially commercial lending. Commercial lending is a slow feedback environment (it may take a long time for a bad decision to manifest itself), and so uses a system of multiple approvals. Trading is a fast feedback environment. The two environments draw different personality types and have quite different procedures, with the trading environment giving traders a great deal of autonomy within set parameters, an issue Schenk addresses and that we will discuss shortly.

Commonly, traders will report to a remote head of trading and to the local branch manager, with the primary line being to the head of trading, and the secondary line being to the local branch manager. This matrix management developed to address the problem of the need to manage and coordinate centrally but also respond locally, but matrix management has its limitations too. As Mathew points out in the New Testament, “No man can serve two masters, for either he will hate the one, and love the other; or else he will hold to the one, and despise the other” (Matthew (6:24). Even short of this, the issue that can arise, as it did at Lloyds Luggano, is that the trader is remote from both managers, one because of distance (and often time zone), and the other because of unfamiliarity with the product line. A number of software developments have improved the situation since 1974, but as some recent scandals have shown, they are fallible. Furthermore, the issue still remains that at some point the heads of many product lines will report to someone who rose in a different product line, which brings up the spectre of “too complex to manage”.

The issue of precautionary or governance rules, and their non-enforcement, is a clear theme in Schenk’s paper. Like the problem of supervision, this too is an issue where one can only do better or worse, but not solve. All rules have their cost. The largest may be an opportunity cost. Governance rules exist to reduce variance, but that means the price of reducing bad outcomes is the lower occurrence of good outcomes. While it is true, as one of Schenk’s interviewees points out, that one does not hear of successful rogue traders being fired, that does not mean that firms do not respond negatively to success. I happened to be working for SBCI, an investment banking arm of Swiss Bank Corporation (SBC), at the time of SBC’s acquisition in 1992 of O’Connor Partners, a Chicago-based derivatives trading house. I had the opportunity to speak with O’Conner’s head of training when O’Connor stationed a team of traders at SBCI in Tokyo. He said that the firm examined too large wins as intently as they examined too large losses: in either case an unexpectedly large outcome meant that either the firm had mis-modelled the trade, or the trader had gone outside their limits. Furthermore, what they looked for in traders was the ability to walk away from a losing bet.

But even small costs can be a problem for a small operation. When I started to work for Security Pacific National Bank in 1976, my supervisor explained my employment benefits to me. I was authorized two weeks of paid leave per annum. When I asked if I could split up the time he replied that Federal Reserve regulations required that the two weeks be continuous so that someone would have to fill in for the absent employee. Even though most of the major rogue trading scandals arose and collapsed within a calendar year, the shadow of the future might well have discouraged the traders, or led them to reveal the problem earlier. Still, for a one-person operation, management might (and in some rogue trading scandals did), take the position that finding someone to fill in and bring them in on temporary duty was unnecessarily cumbersome and expensive. After all, the trader to be replaced was a dedicated, conscientious employee, witness his willingness to forego any vacation.

Lastly, there is the issue of Chesterton’s Paradox (Chesterton 1929). When a rule has been in place for some time, there may be no one who remembers why it is there. Reformers will point out that the rule or practice is inconvenient or costly, and that it has never in living memory had any visible effect. But as Chesterton puts it, “This paradox rests on the most elementary common sense. The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable.”

Finally, an issue one needs to keep in mind in deciding how much to expend on prevention is that speculative trading is a zero-sum activity. A well-diversified shareholder who owns both the employer of the rogue trader and the employers of their counterparties suffers little loss. The losses to Lloyds Lugano were gains to, inter alia, Crédit Lyonnais.

There is leakage. Some of the gainers are privately held hedge funds and the like. Traders at the counterparties receive bonuses not for skill but merely for taking the opposite side of the incompetent rogue trader’s orders. Lastly, shareholders of the rogue traders firm suffer deadweight losses of bankruptcy when the firm, such as Barings, goes bankrupt. Still, as Krawiec (2000) points out, for regulators the social benefit of preventing losses to rogue traders may not exceed the cost. To the degree that costs matter to managers, but not shareholders, managers should bear the costs via reduced salaries.


Chesterton, G. K. (1929) ‘’The Thing: Why I Am A Catholic’’, Ch. IV: “The Drift From Domesticity”.

Krawiec, K.D. (2000): “Accounting for Greed: Unraveling the Rogue Trader Mystery”, Oregon Law Review 79 (2):301-339.

Tschoegl, A.E. (2004) “The Key to Risk Management: Management”. In Michael Frenkel, Ulrich Hommel and Markus Rudolf, eds. Risk Management: Challenge and Opportunity (Springer-Verlag), 2nd Edition;

Blame it on the Jews? Economic Incentives and Persecutions during the Black Death

Negative Shocks and Mass Persecutions: Evidence from the Black Death

by Remi Jedwab (George Washington University), Noel D. Johnson (George Mason University) and Mark Koyama (George Mason University)

ABSTRACT- In this paper we study the Black Death persecutions (1347-1352) against Jews in order to shed light on the factors determining when a minority group will face persecution. We develop a theoretical framework which predicts that negative shocks increase the likelihood that minorities are scapegoated and persecuted. By contrast, as the shocks become more severe, persecution probability may actually decrease if there are economic complementarities between the majority and minority groups. We compile city-level data on Black Death mortality and Jewish persecution. At an aggregate level we find that scapegoating led to an increase in the baseline probability of a persecution. However, at the city-level, locations which experienced higher plague mortality rates were less likely to engage in persecutions. Furthermore, persecutions were more likely in cities with a history of antisemitism (consistent with scapegoating) and less likely in cities where Jews played an important economic role (consistent with inter-group complementarities).


Distributed by NEP-HIS on 2017‒04‒02

Review by Anna Missiaia  (Lund University)

Both history and the current world provide several examples of ethnic and religious minorities becoming the target of persecutions by the majority. Especially after the Holocaust, a growing number of scholars from different fields have inquired into the causes of these persecutions. In particular, the question is whether the chance of persecution against minorities is directly related to negative shocks such as harvest failures, economic depressions or plague. This paper by Jedwab, Johnson and Koyama addresses this question by looking at the persecutions against Jews during the Black Death (1347-1352) in Europe. The authors adopt a theoretical framework in which the negative shock represented by the Black Death has two possible effects on the probability of persecutions: on the one hand, the scapegoating effect leads to attributing the responsibility of the plague to the Jews, decreasing the preference for diversity in society and therefore leading to persecutions. On the other hand, if the minority represents some value to the majority (for instance because of money lending or because of high-skill jobs in which they cannot be easily replaced), the incentive to persecute decreases, with the complementarity effect prevailing. The two effects compete and the decision to persecute Jewish communities depends on the comparison between the utility that the majority derives from persecution and the economic benefit that the minority provides if left untouched.

The authors compile a dataset for 124 locations containing plague mortality rates from Christakos et al. (2005) and information on Jewish persecutions mainly from Encyclopedia Judaica. The aim is to test the effect of mortality caused by the Black Death on the probability of persecution of the local Jewish community. To assure the reader on the soundness of their identification strategy, the authors collect an impressive number of geographical and institutional controls to capture the effect of several other elements that could trigger persecutions. The paper of course cannot take into account all potential sources of bias but the authors thoughtfully address several potential problems using anecdotal and scientific evidence, proposing some convincing arguments to defend their choices. For instance, they spell out in detail the characteristics of the contagion proving that its pattern was largely determined by chance. The virulence of the plague was also unaffected by human behavior (by both Jews and non-Jews), ruling out the possibility of some causality running from the presence of Jews to the intensity of the plague.  The instruments for mortality are also quite convincing:  the two IV proposed are distance from Messina (a Sicilian port city where the first contagion was recorded) and month of the first infection. If it is true that the geographical origin and pattern of propagation of the Black Death were random, the instruments appear exogenous.

Figure 1: Pogrom of Strasbourg (1349) by Emile Schweitzer

Unsurprisingly, the authors find that the period 1347-1352 has indeed seen an unpreceded (and unrepeated until WWII) wave of persecutions against Jewish communities in Europe (Figure 2).

Figure 2: Total Number of Jewish Persecutions in 1100-1600.

What is far more surprising is that there is indeed a general increase in the baseline level (basically, on the intercept) but this effect does not grow stronger as mortality rates are higher. In the model, the constant is 0.831 which indicates a high risk of being persecuted on average but the effect of mortality of the persecution probability is negative and quite substantial (minus 0.34 standard deviations for one standard deviation increases in mortality). The shock appears to have a counter-veiling effect, as cities with the highest mortality were less likely to persecute Jews. In essence, in cities where Jews have a strong economic role, the complementarity effect prevailed. The take home message is therefore that persecutions have a general ideological origin but economic incentives can at least reduce violence against minorities.

This paper is nested into a very large literature on the origins and determinants of persecutions. On the Jewish case, a recent paper by Voigtländer and Voth (2012) has shown that the location of the persecutions during the Black Death in Germany is a strong predictor of the location of episodes of violence against Jews in the 1920s. This paper fills a gap by looking at the determinants of the medieval persecutions in first place. This work is also well connected to the body of research looking at the economic aspects of Jewish history, to which Botticini and Eckstein (2012) provided a seminal contribution. On a more general note, this paper represents a call for the inclusion of a microeconomic perspective when studying how persecutions of minorities arise.


Botticini, Maristella and Zvi Eckstein, The Chosen Few. Princeton, NJ: Princeton University Press, 2012.

Christakos, George, Richardo A. Olea, Marc L. Serre, Hwa-Lung Yu, and Lin-Lin Wang, Interdisciplinary Public Health Reasoning and Epidemic Modelling: The Case of Black Death, Berlin: Springer, 2005.

Voigtländer, Nico and Hans-Joachim Voth, “Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany,” Quarterly Journal of Economics, 2012, 127 (3), 1–54.

Assessing the Determinants of Economic Growth in South East Asia

The Historical State, Local Collective Action, and Economic Development in Vietnam

By Melissa Dell (Harvard University), Nathaniel Lane (Stockholm University), Pablo Querubin (New York University)

Abstract – This study examines how the historical state conditions long-run development, using Vietnam as a laboratory. Northern Vietnam (Dai Viet) was ruled by a strong centralized state in which the village was the fundamental administrative unit. Southern Vietnam was a peripheral tributary of the Khmer (Cambodian) Empire, which followed a patron-client model with weaker, more personalized power relations and no village intermediation. Using a regression discontinuity design across the Dai Viet-Khmer boundary, the study shows that areas historically under a strong state have higher living standards today and better economic outcomes over the past 150 years. Rich historical data document that in villages with a strong historical state, citizens have been better able to organize for public goods and redistribution through civil society and local government. This suggests that the strong historical state crowded in village-level collective action and that these norms persisted long after the original state disappeared.


Circulated by nep-his on 2017/03/19

Review by Fernando Arteaga (George Mason University)

What was the impact of the ancient Vietnamese Dai Viet empire in promoting long-term economic development? That is the main question the authors try to assess. Their inquiry is embedded within the now large literature on the importance of culture and institutions, as deep determinants of growth. The contribution the paper makes is, however, not restricted to adding one more piece of evidence in favor of it, but, more importantly, in providing empirical support for a specific transmission channel: how state capacity can be built through time via the fostering of local self-organization capabilities.

The paper’s main story builds on the idea that two distinct meta-societies existed within East Asia, and idea around which, by the way, there is general agreement. One of these societies based on Chinese precepts, prevalent in the Northeastern region; and other spread in the Southeast throughout the Indian Ocean.  Societies of the former category were historically constituted around a sort of Weberian professional bureaucracy that consolidated the working of a central state. The latter depended more on informal networking mechanisms among local elites to survive, and hence, tended to promote hierarchical patriarchal relationships.

Today’s Socialist Republic of Vietnam (henceforth Vietnam) is an interesting case study precisely because it arose out of the union of those two distinct cultures. The northern part, the Dai Viet, is an example of a Sino-style state, while the southern part of Vietnam (initially part of the Champa State and later as part of the larger Khmer Empire) resulted from a Indo-style society.  Figure 1 below offers map of present day Vietnam aligned with the size of the historical Dai Viet empire. Figure 1 suggests the Dai Viet expanded southwards through time but ended up establishing its final frontier in 1698 (orange color). It is this border the authors think provides a natural experiment that allows a clean regression discontinuity (RD) strategy that permits the disentanglement of the effect of being part of a bureaucratized state vis a vis a patriarchal state.


Figure 1: Dai Viet Historical Boundaries (Dell et al., 2017)

The use of the RD design is appropriate, the authors argue, because the chosen border resulted from exogenous contingencies that do not reflect any difference in future economic potential. The 1698 demarcation was settled on the ridges of a river, but there was nothing else particular to it that made that boundary preferable to other potential borders. The Dai Viet stopped its expansion because of constrains imposed by a local civil war (something that has nothing to do with the river itself). Moreover, the environmental characteristics of both sides of the river are almost identical (or vary smoothly), so there is no important geographical difference either. The only thing that changes abruptly is that on the east shore of the 1698 border, Dai Viet settlers occupied and controlled the land, while Khmer villagers occupied and controlled the land to the west of the river. Another possible counterargument to the use of the 1698 border as a natural experiment is the relevance of migration: if settlers moved across villages (at any time after the establishment of the original border), then the boundary becomes inconsequential. The authors argue that, even though they do not have historical data to control for it, there is qualitative evidence that refers to negative attitudes towards outsiders within the villages, which constitutes an important constraint to any major migratory flow. Today, both sides are part of Vietnam. It is then possible to assess if Die Viet institutions still exert some type of effect in current economic outcomes.

Figure 2 portraits the main outcome of the paper. Using household expenditure data from recent censuses (2002-2012), the authors find that today, villages situated along the historical Die Viet side of the border earn a third more than those communities that are situated on the historical Khmer side (Within the figure, the darker the zone depict lower earnings).


Figure 2a: Household Consumption, RD Graph (Dell et al., 2017)

The authors, however, not content with establishing the effects on current outcomes, look for historical evidence too. They collect data from different periods of Vietnamese history: 1878-1921 for the French Colonization, 1969-1973 for the South Vietnam State, and 1975-1985 for the early Communist Period; and find that the pattern is persistent through time: The Diet Viet zone is, in general, more developed than the Khmer side.

How can these results be interpreted?  The income differences must be due to the Die Viet heritage of greater state capacity that acted through local community self-organization that made them more co-operative and facilitated the resolution of local collective action problems. To test whether this transmission channel matters, the authors looked for data on social capital. Their main sources were the surveys and census of the South Vietnamese period. What they find corroborates their story: villagers on the Diet Viet side were more prone to participate in community activities, to collect more taxes (that at the time were local responsibility, not provincial), to have greater access to public goods (health, school and law enforcement), to be skeptical of central government in favor of local, and to give more to charity.


All in all, the authors do a thorough job in assessing the robustness of their main story. They control for several of potential alternative stories and/or possible variables that could affect the results and mechanisms.  Any critique of it may sound redundant or unreachable.  Yet, I would point to three different aspects that may be important.

First, and perhaps most importantly, I would stress that although the argument makes sense, the narrative is unclear as to how specifically the Dai Viet, which supposedly was a centralized bureaucratized state, fostered local governance. As the authors mention in the introduction, the literature on social capital is ambivalent on its effects on economic outcomes. As it is, the paper’s contribution is the finding of empirical evidence on the presence of a particular transmission channel (from state to local governance), but without a clear model and/or an analytical narrative, we are left in the dark about how explicitly this mechanism worked its way throughout society.

Second, and pushing the level of pickiness even further, one can always speak of a potential omitted variable bias. I must ask then: what about genes? The authors minimize ethnic fragmentation as a problem because they find the studied area is cataloged as being almost entirely composed of homogeneously ethnic Vietnamese. The problem is that censuses and surveys may under-report true ethnicity, and cannot capture genetic differences at all. By the authors’ own account, we are told the Diet Viet State originated as, and remained for a long time, Chinese. Moreover, as Tran (1993) attests, Chinese ethnicity may conflate the results of the paper in other several ways:

  • the largest Chinese migration occurred between the late 17th century and early 19th century, just at the time that the Dai Viet-Khmer border was being established;
  • The Chinese settled mostly in southern Vietnam, the part that the authors use as study case;
  • Chinese early importance resided precisely in that they helped establish new villages and trade outposts. They (not merely the Diet Viet heritage) helped to build local governance structures.

If ethnicity has been underreported and/or Chinese genetics matter in fostering economic development in any way (as suggested by Ashraf-Galor, 20013a, 2013b) then the interpretation of the paper could dramatically change: the importance of the Dai Viet state would be downplayed in favor of just being more ethnic/genetic Chinese. After all, it is known that there is a correlation between having larger ethnic Chinese minority and larger economic growth (Priebe and Rudulf, 2015).

Third, related to the last point: one would expect that given the importance of the result – the long-term reach of Diet Viet institutions–, its impact would feel more broadly across all the territory, not only in the immediate zones of the frontier which were the last to be incorporated into the state.  Figure 3, for example, shows the level of poverty in Vietnam (Epprecht-Heinmann,2004). It is visible that the area under study (along the last border of the historical Diet Viet) has the lowest share of poverty in the whole country. The immediate area to the left (which coincides with the area that historically belonged to the Khmer Empire) is poorer indeed. But the differences are minor if we compare them to the rest of current Vietnam, which belonged almost entirely to the Diet Viet, and has the largest poorer areas.  The RD design may be identifying a non-observable variable that is concentrated in the southern part (like ethnicity or/and genes) and is not broadly distributed across the rest of Vietnam.


Figure 3: Incidence of Poverty in Vietnam (Epprecht-Heinmann, 2004: 155).

Additional References

Ashraf, Q., Galor, O., 2013a. Genetic Diversity and the Origins of Cultural Fragmentation. The American Economic Review: Papers on Proceedings 103, 528–533.

Ashraf, Q., Galor, O., 2013b. The “Out of Africa” Hypothesis, Human Genetic Diversity, and Comparative Economic Development. American Economic Review 103, 1–46.

Epprecht, M., Heinemann, A., 2004. Socioeconomic Atlas of Vietnam: A depiction of the 1999 Population and Housing Census. Swiss National Centre of Competence in Research, Bern.

Priebe, J., Rudolf, R., 2015. Does the Chinese Diaspora Speed Up Growth in Host Countries? World Development 76, 249–262.

Trần, K., 1993. The Ethnic Chinese and Economic Development in Vietnam. Institute of Southeast Asian Studies, Singapore.

How do we eliminate wealth inequality and financial fragility?

The market turn: From social democracy to market liberalism

By Avner Offer, All Souls College, University of Oxford (

Abstract: Social democracy and market liberalism offered different solutions to the same problem: how to provide for life-cycle dependency. Social democracy makes lateral transfers from producers to dependents by means of progressive taxation. Market liberalism uses financial markets to transfer financial entitlement over time. Social democracy came up against the limits of public expenditure in the 1970s. The ‘market turn’ from social democracy to market liberalism was enabled by easy credit in the 1980s. Much of this was absorbed into homeownership, which attracted majorities of households (and voters) in the developed world. Early movers did well, but easy credit eventually drove house prices beyond the reach of younger cohorts. Debt service diminished effective demand, which instigated financial instability. Both social democracy and market liberalism are in crisis.


Distributed by NEP-HIS on: 2017-01-29

Review by: Sergio Castellanos-Gamboa, Bangor University


This paper emerged from Avner Offer’s Tawney Lecture at the Economic History Society’s annual conference, Cambridge, 3 April 2016 (the video of which can be found here).

In this paper Offer discussed two macroeconomic innovations of the 20th century, which he calls “the market turn”. These are the changes in fiscal policy and financialisation that encompassed the shift  from social democracy to market liberalism from the 1970s onwards. Social democracy is understood as a fiscal innovation which resulted in the doubling of public expenditure (from aprox. 25 to 50 per cent of GDP between 1920 and 1980). Its aim was reducing wealth inequality. Market liberalism encompassed a monetary innovation, namely the deregulation of credit which allowed households to increase their indebtedness from around 50 to 150 per cent of personal disposable income, mainly for the purpose of home ownership. According to Offer the end result of market liberalism was increasing wealth inequality. See Offer’s depiction of this process in the graph below.

Two macroeconomic financial innovations in the 20th century, UK calibration. (Note: Diffusion curves are schematic, not descriptive.)

Two macroeconomic financial innovations in the 20th century, UK calibration.
(Note: Diffusion curves are schematic, not descriptive.)

Offer considers that both social democracy and market liberalism are norms captured by the single concept of a “Just World Theory” (Offer & Söderberg, 2016).The ideals behind social democracy are said to be supported by ideas found in classical economics, while the ideals behind market liberalism are said to have emerged from a redefinition of the origins and nature of economic value found in neoclassical economics. Contrasting the ideas behind social democracy and market liberalism brings about  questions such as:

  • Where does value come from?,
  • Is it from production or is it from personal preferences and demand for the good/service?,
  • What is just and fair?,
  • What do we as individuals deserve as reward?, and
  • Is there really a trade-off between equality and efficiency?

Answering any of these question is not simple and heated debates abound around them. Offer, however, rescues the idea of life-cycle dependency, where the situation of the most vulnerable individuals is alleviated through collective risk pooling rather than financial markets. According to Offer,  life-cycle dependency was the dominant approach to reducing poverty in most developed countries until the oil crisis of the early 1970s. Then collapse of the Bretton Woods accord that followed, led to the liberalization of credit by removing previous constraints. This in turn resulted in the “market turn”.

Avner Offer

Professor Avner Offer (1944). MA, DPhil, FBA. Emeritus Fellow of All Souls College, Oxford since 2011.

Offer then turns to analyse the events after the collapse of Bretton Woods that led to the increase of household indebtedness while focusing on the UK. The 1970s was a very volatile decade for Britain.  For instance, oil price increases and the secondary banking crises of 1973 resulted in the highest annual increase of the inflation rate on record. Offer argues, while citing John Fforde (Executive Director of the Bank of England at that time), that the Competition and Credit Control Act 1971 was as a leap of faith in the pursuit of greater efficiency in financial markets. This Act was accompanied by a new monetary policy where changes in interest rates (the price of money) by the central bank was to bring about the control of the quantity of money. Perhaps unexpectedly and probably due to a lack of a better understanding of the origins of money, that was not the case. Previously lifted credit restrictions had to be reinstated.

Credit controls were again lifted in the 1980s. This time policy innovations went further by allowing clearing (ie commercial) banks to re-enter the personal mortgage market. The Building Societies Act 1986  allowed building societies to offer personal loans and current accounts as well as opened a pathway for them to become commercial banks (which many did after 1989 and all those societies that converted  either collapsed or were taken over by clearing banks or both). Initially and up to the crash of house prices in September, 1992, personal mortgage credit grew continuously and to levels never seen before in the UK. According to Offer, during this period both political parties supported the idea of homeownership and incentivised it through programs like “Help to Buy”. However, the rise in the demand for housing combined with the stagnation in the supply of dwellings pushed up house prices, making it more difficult for first-time buyers to become homeowners. Additionally, according to Offer, the wave of easy credit of the 1980s brought with it an increase in wealth inequality and an increase in the fragility of the financial system. As debt repayments grew as proportion of income, consumption was driven down, with subsequent effects on production and services. On this Offer opined:

“In the quest for economic security, the best personal strategy is to be rich.” (p. 17)

The paper ends with possible and desirable futures for public policy initiatives to deal with today’s challenges around wealth inequality and mounting personal credit. He argues that personal debt should be reduced through rising inflation,  a policy driven write-off or a combination of both. He also argues to reinstate a regime where credit is rationed. He states that financial institutions should not have the ability to create money and therefore the housing market funding should return to the old model of building societies. He has a clear preference for social democracy over market liberalism and as such argues that austerity should end, since it is having the exact opposite effects to what was intended.

Brief Comment

Offer’s thought provoking ideas comes at a time when several political and economic events are taking place (e.g. Brexit, Trump’s attack on Dodd-Frank, etc.) which, together, could be of the magnitude as “the market turn”. Once again economic historians could help better inform the debate. Citing R. H. Tawney, Offer opened the lecture (rather than the paper) by stating that:

“to be an effective advocate in the present, you need a correct and impartial understanding of the past.”

Offer clearly fulfils the latter, even though some orthodox economists might disagree with his inflationary and credit control proposals. As per usual his idea are a great contribution to the debate around market efficiency in a time when the world seems to be in constant distress. Perhaps we ought to generate more and better research to understand the mechanisms through which market liberalism generated the current levels of wealth inequality and financial instability that Offer describes. More importantly though, is analysing if social democracy can bring inequality down as it did in the past. In my view, however, in a world where productivity seems to be stagnated, real wages are decreasing, and debt keeps growing, it is highly unlikely that the public sector can produce the recipe that will set us in the path of economic prosperity for all.

Additional References

Offer, A., & Söderberg, G. (2016). The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn. Princeton University Press.
(Read an excellent review of this book here)

On Social Tables, Inequality and Pre-Industrial Societies

“Towards an explanation of inequality in pre-modern societies: the role of colonies and high population density”

by Branko Milanovic (City University of New York)

Abstract: Using the newly expanded set of 40 social tables from pre-modern societies, the paper tries to find out the factors associated with the level of inequality and the inequality extraction ratio (how close to the maximum inequality have the elites pushed the actual inequality). We find strong evidence that elites in colonies were more extractive, and that more densely populated countries exhibited lower extraction ratios. We propose several possibilities linking high population density to low inequality and to low elite extraction.


Distributed by NEP-HIS on: 2016-11-13

Guido Alfani (Bocconi University, Milan)

Given the recent increase in the availability of good-quality data on pre-industrial (or pre-modern) societies, there is much need for works of synthesis aimed at discovering the factors shaping long-term inequality trends. Branko Milanovic has been particularly active in this field, with the publication of a recent book on Global Inequality: A New Approach for the Age of Globalization (2016, Harvard University Press) [see the reviews here – Ed]. In this new working paper, Milanovic tries to move forward, using a large database of social tables to single out the potential causes of differences in historical inequality levels and in inequality extraction. He focuses in particular on institutional factors (inequality in colonies vs other areas) and on demographic factors (population density). The results are very interesting and represent a useful step forward in our understanding of inequality change in preindustrial societies.

This paper was distributed by NEP-HIS on 2016-11-13. It makes use of a relatively large collection of social tables for preindustrial societies, including overall 40 social tables for about 30 distinct countries/world areas over a very long time: from Athens in 330 BCE to British India in 1938. As is well known, social tables allow us to roughly estimate income inequality. They are particularly useful in situations of relative scarcity of data and although they have been in use for centuries – the first example is Gregory King’s social table dating 1688 – many new ones have recently been produced for a variety of preindustrial societies across the world (see Lindert and Williamson 2016 for the U.S., Saito 2015 for Japan, Broadberry et al. 2015 for England, and Alfani and Tadei 2017 for Ivory Coast, Senegal and the Central African Republic). Although estimating complete distributions is the better option (see for example the accurate reconstruction of income distribution in Old Castile around 1750 by Nicolini and Ramos 2016, the impressive work by Reis 2017 on Portugal from 1565 to 1770, and finally, the estimates of wealth inequality in the period 1300-1800 produced by the EINITE project for a variety of Italian pre-unification states and other European areas: Alfani (2015, 2017); Alfani and Ryckbosch (2016); Alfani and Ammannati (2017), this is not always possible or feasible and social tables must be considered a good alternative especially when there is a relative scarcity of data.


As rightly argued by Milanovic, the recent accumulation of new evidence has not been accompanied by equal advances in the work on causal factors driving inequality change in preindustrial times. The seminal article by Van Zanden (1995), in which long-term inequality growth in the Dutch Republic was explained by long-term economic growth, has later been nuanced by works demonstrating that during the early modern period, in many parts of Europe inequality grew also in phases of economic stagnation, or even decline (Alfani 2015; Alfani and Ryckbosch 2016). The role played by large-scale mortality crises, particularly plague epidemics, has been underlined and the Black Death of 1347-51 has been shown to be the only event able to produce large-scale and enduring inequality decline in the period from ca. 1300 to 1800 (Alfani 2015; Alfani and Ammannati 2017). In a very recent book, Scheidel (2017) has taken this line of reasoning further, arguing that all substantial declines in inequality recorded in human history are due to catastrophic events (epidemics, wars, revolutions…).

Milanovic’s aim is to find further regularities, looking for possible economic, institutional or demographic drivers of inequality change in preindustrial times. He adopts the theoretical framework of the Inequality Possibility Frontier (introduced in Milanovic, Lindert and Williamson 2011), arguing that we should focus not only on how unequal a society is, but also on how much inequality it manages to “extract” compared to the maximum inequality it could achieve given that everybody needs to reach at least the subsistence level. Hence, as an economy manages to increase the per-capita surplus produced, it also acquires a potential for becoming more unequal. A first relevant empirical finding is that colonies tend to be exceptionally extractive, especially at low levels of per-capita GDP. As Milanovic points out, this is not surprising and can be explained by colonies being more exploitative, i.e. being pushed closer to the inequality possibility frontier by rapacious elites. This is apparent when looking at inequality extraction (being a colony raises the “inequality extraction ratio” by almost 13 percent points), but not necessarily when looking at overall inequality as measured by a Gini index.

Branko Milanovic

Branko Milanovic

A more novel finding is the negative correlation between population density and both inequality and inequality extraction. In fact, a “high number of people per square kilometer seems to be a strong predictor of relatively egalitarian economic outcomes” (p. 16). Explaining this empirical finding is not easy and Milanovic resorts to two conjunctures: 1) in a less extractive economy, the poor enjoy relatively good living conditions and this might lead to greater population growth; or 2) a particularly dense population might be better able to make the position of the elite/of the ruler relatively precarious, enjoying de facto some sort of control over the actions of the elite and forcing it to adopt less extractive policies. As is clear, the direction of causality is the opposite in the two explanations – which are probably to be considered not mutually exclusive. Other correlates of inequality and inequality extraction include per-capita GDP and urbanization rates, which turn out being borderline significant (per-capita GDP) or positively but non-significantly correlated (urbanization rate), coherently with what was found by other recent comparative studies (Alfani and Ryckbosch 2016; Alfani and Ammannati 2017).


Undoubtedly, Milanovic’s new article helps to fill in a real need for more comparative research on preindustrial societies. The findings, albeit provisional, are very interesting and either they provide useful confirmation of what has already been argued by others – for example about the inability of per-capita GDP to explain preindustrial inequality growth in a satisfying way– or they lead us to think along new lines, especially regarding the impact on inequality of demographic variables. In fact, as urbanization rates proved to be a far poorer explanatory variable for inequality change than we expected (see in particular Ryckbosch 2016; Alfani and Ryckbosch 2016; Alfani and Ammannati 2017), demographic factors came to be perceived as probably relevant, but also somewhat puzzling (exception made for mass-mortality events like the Black Death, whose inequality-reducing effects now stand out very clearly). Population density offers us a novel perspective and in time, might prove to be the right path to follow.

However, there is also some space for constructive criticism. A first point to underline is that, differently from what Milanovic argues, the time might not yet be ripe for the kind of definitive and encompassing comparison that he seems to have in mind. The data available is still relatively scarce, including for Europe, which is the world area that has attracted the greatest amount of recent research. Additionally, social tables, albeit easily comparable, are not perfectly comparable – for example because they can include a greatly varying number of classes/groups. In some instances, classes are very few and we have no hint at within-class inequality. These are two reasons why, as argued above, complete distributions are strictly preferable to social tables. Finally, in the current version of Milanovic’s database, for the vast majority of countries only one social table is available, whereas multiple social tables for the same country at different time points would make for sounder statistical analyses. There are ongoing projects, especially EINITE and related projects, whose aim is to provide comparable state-level information on wealth and income inequality for large areas of the world at different points in time in the long run of history, but these projects are heavily dependent on new archival research and require time to be completed.


Secondly there are other possible common factors shaping long-term inequality change which Milanovic cannot consider in the context of the current article. Some of these have been underlined by a recent comparative paper by Alfani and Ryckbosch (2016) which, although focusing on “only” four European states during 1500-1800, nevertheless had the advantage of having recourse to inequality measures produced with a common methodology and covering all states continuously in time. This study underlined two factors common to all the areas covered: 1) “proletarianization”, i.e. the progressive disappearance of small peasant ownership, which occurred throughout Europe during the early modern period, and 2) the inequality-increasing consequences of the rise of the fiscal-military states from ca. 1500. These factors might have played a role also in other world areas, from the broader Mediterranean to East Asia and maybe elsewhere – but at present that is no more than speculation.

Obviously, such criticism in no way negates the considerable usefulness of Milanovic’s new paper – which is also a further demonstration of how his relatively new concept of the inequality possibility frontier allows for a deeper understanding of the actual conditions and consequences of distribution. It does, however, indicate that we are still a long way from being able to identify without ambiguity the main causes of inequality change in preindustrial societies that so many international economic historians are now attempting to discover.

Selected bibliography

Alfani, G. (2015), “Economic inequality in northwestern Italy: A long-term view (fourteenth to eighteenth centuries)”, Journal of Economic History, 75(4), 2015, pp. 1058-1096.

Alfani, G. (2017), “The rich in historical perspective. Evidence for preindustrial Europe (ca. 1300-1800)”, Cliometrica 11(3), forthcoming (early view: ).

Alfani, G., Ryckbosch, W. (2016), “Growing apart in early modern Europe? A comparison of inequality trends in Italy and the Low Countries, 1500–1800”, Explorations in Economic History, 62, pp. 143-153.

Alfani, G., Ammannati, F. (2017), “Long-term trends in economic inequality: the case of the Florentine State, ca. 1300-1800”, Economic History Review, forthcoming.

Alfani, G., Tadei, F. (2017), Income Inequality in Colonial Africa: Building Social Tables for Pre-Independence Central African Republic, Ivory Coast, and Senegal, IGIER Working Paper, forthcoming.

Broadberry, S., Campbell, B., Klein, A., Overton, M, Van Leeuwen, B. (2015), British Economic Growth 1270-1870, Cambridge University Press.

Lindert, P.H. and Williamson, J.G., Unequal gains. American growth and inequality since 1700, Princeton University Press, Princeton 2016.

Milanovic, B. (2016), Global Inequality: A New Approach for the Age of Globalization, Harvard University Press.

Milanovic, B., Lindert, P.H., Williamson, J.G. (2011). “Pre-Industrial Inequality”, The Economic Journal, 121, pp. 255-272.

Nicolini, E.A., Ramos Palencia, F. (2016), “Decomposing income inequality in a backward pre-industrial economy: Old Castile (Spain) in the middle of the eighteenth century”, Economic History Review, 69(3), pp. 747–772.

Reis, J. (2017), “Deviant behaviour? Inequality in Portugal 1565–1770”, Cliometrica, 11(3), forthcoming (early view:

Ryckbosch, W. (2016), “Economic inequality and growth before the industrial revolution: the case of the Low Countries (fourteenth to nineteenth centuries)”. European Review of Economic History, 20(1), pp. 1-22.

Saito, O. (2015), “Growth and inequality in the great and little divergence debate: a Japanese perspective”, Economic History Review, 68(2), pp. 399–419.

Scheidel, W. (2017), The Great Leveller: Violence and the Global History of Inequality from the Stone Age to the Present, Oxford University Press.

Van Zanden, J.L. (1995), “Tracing the Beginning of the Kuznets Curve: Western Europe during the Early Modern Period”, Economic History Review 48(4): 643-664.

A Tale of Two Wages: Spinners and the Industrial Revolution

Spinning the Industrial Revolution

by  Jane Humphries (Oxford) and Benjamin Schneider (Cornell)

The prevailing explanation for why the Industrial Revolution occurred first in Britain is Robert Allen’s (2009) ‘high-wage economy’ view, which claims that the high cost of labour relative to capital and fuel incentivized innovation and the adoption of new techniques. This paper presents new empirical evidence on hand spinning before the Industrial Revolution and demonstrates that there was no such ‘high-wage economy’ in spinning, a leading sector of industrialization. We quantify the working lives of frequently ignored female and child spinners who were crucial to the British textile industry in the Early Modern period with evidence of productivity and wages from the late sixteenth to the early nineteenth century. Our results show that spinning was a widespread, low-wage, low-productivity employment, in line with the Humphries (2013) view of the motivations for the factory system.


Distributed by NEP-HIS on 2016‒07‒23

Review by Thales Zamberlan Pereira

In Spinning the Industrial Revolution, Humphries and Schneider last words are: “the route to mechanization and factory production was a response to low not high wages.” This is a direct statement against Robert Allen’s high wage economy (HWE) explanation for the Industrial Revolution. The low wage authors (LWA) argue that the wages Allen uses were only available to a “rare group of spinners” and, therefore, were not a representative sample, which should include lower wages from women and children. There was a direct link between productivity and remuneration, and only a limited number of spinners could produce several pounds of fiber in a week and/or had the ability to make finer counts of yarns.


Water Frame, about 1775

Humphries and Schneider present an important discussion about different sources for spinner’s wages and how we should measure their earnings, but what does their evidence mean for Allen’s HWE? I leave to Allen himself to respond: “Humphries never analyses the British labour supply from an international perspective.”[i] Even considering the lower wages from women and children in spinning, the important question is if real wages in Britain were higher than other parts of the world. The authors avoid this discussion, making the alternative argument that “there should have been an increase/jump” in spinners’ wages before the innovations period (around 1760s). But since Allen’s explanation for the Industrial Revolution has a “global perspective”, what matters is if wages in Britain (or in the northwest regions) were higher than in comparable regions in Europe (we can also add Asia here). Humphries and Weisdorf ‘s paper (“Unreal Wages”), along with many other recent research (Broadberry et al. latest book), shows that real wages were slowly increasing for centuries, so why there is a need for a spike? In addition, since inventions in spinning were largely associated with cotton, one important limitation of the paper is that most of the primary sources used for spinning productivity are not for cotton (See Table 4). As pointed out by John Styles, there is even no proper data for Lancashire, the main cotton region.

The LWA also make the argument that inventors (such as Arkwright) never expressed concern about high wages in spinning. But if spinners did not have wages higher than the British average, even if Britain had the highest wages in the world, one would not expect this demand. In the age before spinning machinery, when the “earnings in weaving were constrained” by low productivity, how much the average wages should be used to measure the connection between high costs and innovation? There are two aspects here that deserve some attention: higher wages for those workers with higher productivity, and a “wage premium” for those who produced finer yarns. Humphries and Schneider argue that, since spinners were paid piece rates, there was a demand for more “experienced spinners” to produce finer counts of yarn. As the long debate between Nick Harley and Javier Cuenca Esteban has showed, finer cotton textiles were the first wave of products that came out of the new inventions. The low productivity of a spinner to produce a 20-count yarn (a high count at the time), presented in the paper, suggests that to use averages wages to test its impact on innovation may be misleading in the case of textiles. The average spinner could not produce a yarn with the quality (and quantity) required to test the HWE hypothesis. This, I think, is part of the argument that John Styles makes when he writes about the “general tendency in much of the literature to think about spinning as if were a single activity – unskilled women’s work.”


Humphries and Schneider conclude that “overcoming the low productivity and inconsistent quality in spinning and taking advantage of low wages for spinners
and female and child workers more generally may have been the spur for tinkerers
and inventors in the late eighteenth-century textile industry.” While the first part of this sentence is an important one, it would be interesting to see more evidence on the latter part. The reason for this is that recent projects to reconstruct the famous spinning machines showed that they were “uncomfortable” to use and needed “a fair degree of strength to operate.”[ii] Since some of the locations for the author’s spinning records contain a large proportion of children, it would be useful to know if they really could operate the spinning machines.

The debate between the LWE and the HWE hypotheses prompted a series of very interesting replies during the last few weeks (see Judy Stephenson, Vincent Geloso, John Styles, Psedoerasmus). There are still a lot of questions to be answered, but maybe the next step for this debate to move forward is to have better real wages for France. New French real wages would present the “global perspective” that Humphries and Schneider’s paper lack. My take on this debate is that we should be conservative about what new pieces of evidence really mean for our broader interpretations of historical events. Otherwise we will just be jumping to the next omitted variable as the “real explanation.” The fact that the average wage for spinners was lower than the one presented by Allen does not imply that British high-wage economy was a statistical artifact. We need better data for other countries before claiming that “the route to mechanization and factory production was a response to low not high wages.”

[i] Robert C. Allen, “The High Wage Economy and the Industrial Revolution: A Restatement,” The Economic History Review 68, no. 1 (February 1, 2015): 14, doi:10.1111/ehr.12079.

[ii] R. L. Hills, “Hargreaves, Arkwright and Crompton. Why Three Inventors?,” Textile History 10, no. 1 (October 1, 1979): 114–26, doi:10.1179/004049679793691321.


Publication cultures in economic, business and financial history: Comparing apples and oranges?

1.)Quantifying the heterogeneity of publication cultures in economic, business and financial history


by Eline Poelmans and Sandra Rousseau, Faculty of Economics and Business, KU Leuven, campus Brussels



Researchers working in the interdisciplinary field of ‘economic, business and financial history’ come from at least two different disciplinary backgrounds, namely history and economics. These two backgrounds may lead to differences in research practices, as there are potentially other demands for tenure and promotion requirements. We performed a survey to assess whether there is heterogeneity in the submission and publication culture (i.e. one multi-faceted culture, or simply multiple cultures) between respondents working in an economics versus a history department. Among other things, we found differences in their motivation for publishing, the type of publications they aim for, and their journal selection strategies. Our results show that the department the respondents work at—irrespective of their disciplinary focus and background—determines most of their research and publication decisions. Hence working successfully in an interdisciplinary field or working in a department different from the main field of research requires researchers to learn the (in)formal rules and practices of an unfamiliar field.

Published on: Essays in Economic & Business History (2016) Volume XXXIV pp. 95-135.



2.)Factors determining authors’ willingness to wait for editorial decisions from economic history journals


by Eline Poelmans and Sandra Rousseau, Faculty of Economics and Business, KU Leuven, campus Brussels



In this contribution, we measure how long researchers are willing to wait (WTW) for an editorial decision on the acceptance or rejection of a submitted manuscript. This measure serves as a proxy for the expected value of a publication to a researcher in the field of economic, business and financial history. We analyze how this WTW measure varies with the characteristics of the submitting authors themselves. We distinguish the impact of personal characteristics (including age, gender and geographic location) as well as work-related characteristics (including research discipline, affiliation and academic position). To identify the factors determining economic history authors’ WTW for editorial decisions, we use a valuation technique known as stated choice experiments. Our results show that respondents found the standing of the journal to be at least as important as its ISI impact factor. Moreover, we find differences in publication culture between economic and history departments. Overall, researchers’ willingness to wait is influenced to a greater extent by the research discipline in which the respondents are active (history vs. economics), than by their personal characteristics (e.g. the education or the type of Ph.D. they obtained).

Published on: Scientometrics (2015) 102: pp. 1347–1374

DOI 10.1007/s11192-014-1469-2


Summarised by Eline Poelmans and Sandra Rousseau


When authors choose a journal to submit a manuscript, the submission process is influenced by several author and journal characteristics. Also time pressure is an influencing factor, since academic job offers, promotions and tenure decisions tend to be based on researchers’ publication and citation records. Hence, both journal editors and prospective authors want to reduce the time between the initial submission and the final editorial decision.

Moreover, within interdisciplinary fields – such as the field of ‘economic, business and financial history’, a field at the intersection of two major social sciences – there can be large differences in both research attitudes, skills, focus and practices depending on the different backgrounds of researchers (such as having a PhD in history or in economics) as well as varying requirements for tenure, promotion or funding in the different departments the researchers are working (such as the department of history versus that of economics) that can also influence an author’s submission and publication decisions.


In the first paper, the authors conducted a survey to investigate whether working in the interdisciplinary field ‘economic history’ implies an additional challenge to the researcher in this field compared to those working in a more homogeneous field. The authors used data in order to quantify this heterogeneity (or ‘duality’) of the publication culture in economic history by investigating the impact of the disciplinary focus of researchers’ doctoral dissertation and current affiliation (history, economics or other) on respondents’ submission and publication behavior: their preferred publication outlets, their reasons for publishing, and their journal selection strategies.


In the second paper, the authors assessed the impact of time constraints on the submitting author’s willingness to wait (WTW) for a publication in a journal with specific characteristics in the field of economic history and they analyzed whether and how this WTW measure varied with journal and personal characteristics. They studied the main effects of the different journal characteristics on the willingness-to-wait for a publication, as well as the interaction effects with the respondents’ characteristics to estimate the different values researchers attach to publications with particular characteristics in this field.


The first paper shows that the department the respondents work at determines most of their research and publication decisions. Hence, working in an interdisciplinary field such as economic history clearly comes at a cost: researchers with a PhD in one discipline who work in a department of another discipline may have to change their research and publication behavior significantly in order to obtain tenure or get promoted. These insights imply that it is inappropriate to use a strategy based on the conventions of a single discipline to evaluate researchers in a multidisciplinary field since it is unlikely that ‘one size fits all.’


The second paper found that respondents’ decisions on manuscript submission were dependent on specific journal characteristics, such as ISI impact factor and standing. Moreover, the respondents’ institution type with which they were affiliated (history versus economics) influenced the respondent’s willingness to wait to a greater extent than their personal characteristics (such as the type of Ph.D. they obtained).


Hence, as requirements with regard to tenure and promotion often differ between departments and disciplines, it is important to develop measurement methods to hire and evaluate researchers working in an interdisciplinary field that have obtained a PhD in one field (such as (economic) history) and end up in an economics department, and vice versa. In this respect it is important to develop and use multidisciplinary assessment strategies to evaluate the quality of researchers in a multidisciplinary field. For instance, it may be advisable to include researchers from both disciplinary backgrounds in selection committees.

Possibilities for future research

Obtaining a larger data set with more respondents can improve the paper. Moreover, checking whether (and making sure that) the dataset is representative for the discipline would be useful (e.g. the division male/female, the share of American, European, Asian, … researchers in this specific field, the share of people with a PhD in economics versus a PhD in history that work in the field of economic history, the division of permanent versus temporary contracts, etc…).

With regard to future research attaining more PhD students would be useful to see whether their research decisions are already formed during their PhD by the publication culture of the department they work at. It is also interesting to analyze whether there is a difference if the PhD student is conducting his PhD on an independent (governmental) scholarship.

A more in-depth analysis about how the researchers perceive the advantages and disadvantages of working in an interdisciplinary environment as well as measuring attitudes and opinions through multidimensional scales can improve insight into the challenges and rewards of performing interdisciplinary research. By identifying drivers and barriers to interdisciplinary research in the field of economic history – for instance by using the framework developed by Siedlok and Hibbert (2014) – advice for research institutions, funding agencies and policy makers could be formulated.


Moreover, the results of these papers only apply to researchers active in the field of economic history. Thus, it would be interesting for future research to investigate whether these findings could be generalized to other (interdisciplinary) fields, such as law and economics or environmental economics.

Stated choice experiments could, for instance, be used to investigate the relative importance of factors influencing the decision to collaborate with a particular type of researcher (gender, rank, national or international) or research institution. They could also help in identifying classes of researchers that show similar collaborative behavior. Moreover, choice experiments could help in analyzing decisions to fund particular projects or to hire particular researchers. Further, they could also be useful in comparing authors’ citation behavior: such as studying the relative importance of different articles’ characteristics (such as familiarity with the authors, standing of the journal, time of publication, content fit, innovativeness, etc.) in the decision to cite a particular source in a text. Finally, choice experiments can be used to analyze the editors’ decision in matching referees with submitted manuscripts, depending on characteristics, such as specialization, maturity and past experience with a particular referee.

Finally, the crisis of 2007 showed that the knowledge of historical facts could maybe not have prevented the crisis, but at least have made the banks more cautious in their decision making process. However, so far, interdisciplinary research – such as economic, financial and business history – is unfortunately still considered by the academic world as a ‘side business’, most often not really belonging to a department, but as a research field floating somewhere in between economics and history. As long as the demands for tenure and the promotion requirements in different departments differ, researchers will be guided in their motivation to work on certain topics by these external evaluation criteria, instead of by the interest of historical facts that need to be researched in order to learn lessons for the future.

Given the value of interdisciplinary research in tackling complex real-life problems, it is important to understand the dynamics of such interdisciplinary research fields. Thus it is interesting to study the formal and informal sets of rules that guide the selection of research topics, collaborations, funding decisions and publication behavior. Such empirical – and repeated – studies allow us to identify positive and negative trends and provide the opportunity to react in a timely manner so that interdisciplinary research is – and continues to be – rewarding for researchers.


Additional References

Siedlok, F. and Hibbert, P., 2014. The organization of interdisciplinary research: modes, drivers and barriers. International Journal of Management Reviews16(2), pp.194-210.