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The Emergence of a Capital Market in Rural Massachusetts, 1730–1838

Published online by Cambridge University Press:  03 March 2009

Winifred B. Rothenberg
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Abstract

This study is part of a continuing effort to document and date the emergence of a market economy in rural Massachusetts. It uses a probate data base to test for evidence of increased portfolio liquidity, decreased transactions costs, and the appearance of developmental institutional change. A regional capital market, so critical for the industrialization of New England, is found to have emerged in the early 1780s.

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Articles
Information
The Journal of Economic History , Volume 45 , Issue 4 , December 1985 , pp. 781 - 808
Copyright
Copyright © The Economic History Association 1985

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References

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5 That the southern economy was unable in the antebellum period to generate a comparable growth spurt may have been due to its failure to evolve a comparable capital market, a failure due, perhaps, to the anomaly of increasing risk aversion in the South over time, even into the 1870s. So suggest Jeremy Atack, Fred Bateman, and Thomas Weiss in their “Risk, the Rate of Return, and the Pattern of Investment in Nineteenth Century American Manufacturing,” Bureau of Economics and Business Research of the University of Illinois, Reprint No. 464 (Champaign-Urbana, n.d.).Google Scholar

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7 This is an issue definitively explored by Jones in American Colonial Wealth, pp. 1878–1901. For Jones's purposes it was imperative that her probate sample be made as nearly as possible a mirror image of the living universe: America on the eve of the Revolution.Google Scholar

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26 I say weakening, not disappearance. These inhibitions remain to this day. A major factor affecting household portfolio behavior of even the very wealthy as recently as 1978 “may be the costs of acquiring and processing the information required to make decisions about how best to allocate resources across different assets. We would expect such costs to vary among households and, in particular, with observable variables such as the level of educational attainment and occupation.” Mervyn A. King and Jonathan I. Leape, “Wealth and Portfolio Composition: Theory and Evidence,” NBER Working Paper No. 1468 (Sept 1984), p. 34. If this is true of a sample whose mean net worth was a quarter of a million dollars (in 1978). how much truer it must have been of my sample whose mean net worth, in 1800 dollars, was $3,600.Google Scholar

27 Because of the ubiquity of parent-naming and Bible-naming in Massachusetts, the pool of names was not large, and it would have been a mistake to have assumed that all appearances of the same name referred to the same individual. John Adamses, for example, abounded. To avoid this problem, various algorithms were employed, but in the end the distinction was made by time: It was assumed that the same name denoted the same individual only if the time interval between appearances of that name was less than 20 years. By holding to this perhaps too stringent rule, the 11,956 names reduced to 8,515 presumably different debtors and creditors, of whom 1.873 or 22 percent appear as partners of two or more sample decedents. and 627 as partners of three or more.Google Scholar

28 It appears that Concord occupied the center of gravity of the grid in the first period. Not only were there more instances of Concord residents transacting with each other than of any other pairing, but more decedents from all over the county were linked to Concord borrowers and lenders than to any other. While it is true that Concord is both centrally located in the county and was a shire town in the colonial period, the centrality of Concord in the county's credit networks may be an artifact of a local tradition of painstaking estate administration. If such were the case, Concord ties would dominate a subset like this one which, in naming the towns of both credit partners, is unusually painstaking. Incidentally, credit flows between Cambridge and Worcester County ran second to Concord/Concord networks. Thirty decedents owned outlying property in at least one town in Worcester County.Google Scholar

29 Thevariable ACRES in these regressions is carrying added freight as a proxy for that elusive thing, a noncommercial mentalité. A simple farmer/nonfarmer occupational dummy would have been preferable. but it is compromised by the ubiquity of by-employments: and investment in farm versus nonfarm physical capital raises simultaneity problems with TOTAL WEALTH of which they are components. I am grateful to Robert Margo and an anonymous referee for bringing the simultaneity problem to my attention.Google Scholar