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"Investments England History 17th century."
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Portfolio choice and longevity risk in the late 17th century: a re-examination of the first English tontine
Tontines and life annuities both insure against longevity risk by guaranteeing (pension) income for life. The optimal choice between these two mortality-contingent claims depends on personal preferences for consumption and risk. And, while pure tontines are unavailable in the twenty-first century, the first longevity-contingent claim (and debt) issued by the English government in the late seventeenth century offered a choice between the two. This article analyzes financial and economic aspects of King William's 1693 tontine that have not received attention in the literature. In particular, it compares the stochastic present value (SPV) of the tontine vs the life annuity and discusses characteristics of investors who selected one versus the other. Finally, the article examines the issue of whether high reported tontine survival rates should be attributed to anti-selection or fraud. In sum, this article is an empirical examination of annuitization decisions made by actual investors in the late seventeenth century. Reprinted by permission of Cambridge University Press. An electronic version of this article can be accessed via the internet at http://journals.cambridge.org
Journal Article
FROM CREDIT TO SAVINGS? AN EXAMINATION OF DEBT AND CREDIT IN RELATION TO INCREASING CONSUMPTION IN ENGLAND (C.1650 TO 1770)
In sixteenth-and seventeenth-century England much poverty was related to the fact that the poor were extremely vulnerable to over-indebtedness. However, in the period after 1650 a combination of factors, including low population growth and a movement of rural labour into tertiary and primary occupations while agricultural production continued to rise, meant that there were greater opportunities for secure employment and higher wages. As a result more poor labourers became what contemporaries termed «honest» or «painful» labourers, meaning that they were earning enough not only to get by but to improve their standard of living after the previous century of hardship before 1650. According to Adam Smith it was saving on the part of the broad labouring population which allowed a virtuous circle of rising production to be created. Labourers' savings, which increased their creditworthiness, allowed them to buy more, which in turn led to increased manufacture, which provided more work and wages, and in turn the production of more goods. This article looks at the period after 1650 and argues that there was indeed a growing accumulation of capital by labours, held in the form of savings which contributed to an increase in broad based consumption.
Journal Article
Dealing with Uncertainty: Managing Personal Investment in the Early English National Debt
During the late seventeenth century there was a 'Financial Revolution' in England. Prompted by the exigencies of the Nine Years War (1689–97), the state marked the beginnings of a permanently funded National Debt by introducing a series of measures, the most important of which was the foundation of the Bank of England in 1694. The state's financial innovations were enthusiastically supported by London's business community and also attracted the capital and the trust of investors of more limited means and financial knowledge. Through the surviving papers of Samuel Jeake, a merchant from the East Sussex town of Rye, this article considers the strategies used by those less prominent investors, and examines the methods they used to obtain financial information and the costs they faced. Jeake's experiences reveal much about the factors that led ordinary investors to commit their capital to the newly established public funds but show that, during the formative period of the Financial Revolution, the costs of placing faith in the state's financial promises often outweighed the benefits.
Journal Article
THE GLORIOUS REVOLUTION'S EFFECT ON ENGLISH PRIVATE FINANCE: A MICROHISTORY, 1680–1705
The lending portfolio of a London banker is analyzed to better understand the relationship between public and private finance during England's Financial Revolution. The Glorious Revolution's political settlement appears to have reduced the risk premium on sovereign debt; but it seems to have raised, not lowered, rates on private debt. Two explanations for these higher private rates are suggested. During the war years 1690–1697, the government's improved capacity to borrow seems to have “crowded out” private borrowing. After peace was restored and the government's borrowing retrenched, the new political regime seems to have stimulated demand for loanable funds.
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