A Review of Early American Financial History

Posted on Sep 5, 2024 in Economy

Allison’s Perspective on Early American Banking

First and Second Bank Failures

Allison’s view: Allison argues that the First and Second Banks of the United States were failures.

Counterarguments: While the banks ultimately failed to secure charter renewals, they played a crucial role in jumpstarting the economy, managing war debt, and stabilizing inflation. Their contributions suggest a more nuanced perspective on their success.

Key Financial Components

Understanding the six key financial components is crucial for comprehending the evolution of the American financial system.

True or False Questions

Let’s analyze some statements about the early American financial system:

Statement 1

According to Wright and Cowen, the U.S. financial system operated very differently under the Republicans and Federalists due to their philosophical differences.

False. While philosophical differences existed, they didn’t significantly alter the system’s functionality.

Statement 2

Sylla argues that monetary innovation in the U.S. occasionally boosted economic growth but more often led to excessive inflation and a need for more regulation.

False. Many monetary innovations contributed positively to economic growth without causing excessive inflation or necessitating increased regulation.

Statement 3

Congress’s failure to renew the charters of the First and Second Banks of the United States proves their failure, as Allison argues.

False. While not renewed, these banks helped manage debt, enabled war financing, and stabilized inflation, indicating their positive impact.

Statement 4

Sylla argues that the Dutch, British, American, and Japanese financial systems differed significantly because each was innovative for its time.

False. Sylla highlights that these countries shared six key components of a modern financial system, emphasizing similarities in their financial revolutions.

Statement 5

Wright and Cowen titled their last chapter “Apocalypse No” because they believed Andrew Jackson saved the American financial system by preventing the Second Bank of the United States’s re-charter.

False. The U.S. experienced a recession after Jackson vetoed the re-charter, suggesting the economy wasn’t saved. Re-chartering might have been beneficial.

Statement 6

The U.S. financial system between 1791 and 1850 only thrived during periods without political controversy.

False. The financial system demonstrated growth both in the presence and absence of political controversy.

Statement 7

Mishkin’s argument that financial intermediaries like banks best address asymmetric information and transaction costs is strongly supported by banking’s dominance in early American financial development.

Statement 8

Congress’s failure to renew the charters of the First and Second Banks of the United States is clear evidence of their failure, as argued by Allison.

False. Despite the non-renewal, these banks contributed to debt reduction, war financing, and inflation stabilization.

Statement 9

The rise of a modern sector in the U.S., particularly manufacturing, exemplifies the effectiveness of completely free markets.

Second Midterm Review

Let’s delve into concepts relevant for the second midterm:

Clearinghouses

Gorton’s view: Clearinghouses before the Federal Reserve thrived primarily due to issuing clearinghouse loan certificates that generated substantial profits.

Railroads and U.S. Development

Chandler’s view: Railroads were crucial for U.S. development as early adopters of transportation technology. However, their capital needs strained the U.S. financial system, hindering development.

State-Chartered Unit Banks

The increase in state-chartered unit banks after the Civil War, despite the 10% tax on their banknotes imposed by the National Banking Acts, suggests their profitability.

Deposit Insurance

It’s intriguing that large banks opposed deposit insurance for a long time in the U.S., considering they had more depositors to protect compared to smaller banks.

Direct Finance and Railroad Construction

The prevalence of direct finance in building the railroad network challenges the view of Mishkin, Eakins, and other economists who believe intermediation effectively reduces transaction costs and asymmetric information.

Inside Construction Companies

Paradoxically, “inside construction companies” exploiting asymmetric information might have led to an overly large U.S. railroad network by the 1870s, instead of reducing railroad construction investments.

Significance of Historical Events

Let’s explore the significance of key historical events:

Louisiana Purchase

A robust financial system, strengthened by the national bank, enabled the U.S. to secure the Louisiana Purchase by leveraging its creditworthiness.

Hamilton and Matsukata

Sylla’s perspective: Both Hamilton and Matsukata were instrumental in leading financial revolutions. Sylla emphasizes the importance of strong leadership in driving financial modernization.

Economic Disparity: New York vs. Canada (1828)

British Consul James Buchanan’s observation: New York thrived while nearby parts of Canada lagged economically. This contradicted the prevailing theory that capital movement without substantial gold and silver reserves would hinder growth. New York’s success challenged this notion.

First Fiat Paper Money

Sylla’s view: The introduction of fiat paper money in the Western world, initiated by Massachusetts’s “bills of credit,” facilitated economic growth even without significant gold or silver reserves.

Limited Liability Corporations

The widespread use of limited liability corporations during the “Financial Founding Fathers” era significantly impacted business organization and risk-taking.

Hamilton, Madison, and Jefferson’s “Dinner Party Deal”

Wright and Cowen’s account: The compromise between Hamilton, Madison, and Jefferson regarding the First Bank of the United States and the location of the U.S. capital exemplifies political negotiation and its lasting consequences.

Financial Concepts and Definitions

Let’s define some fundamental financial concepts:

• Financial Market: A marketplace where funds are transferred between those with excess funds and those needing funds.
• Indirect Finance: Financial intermediation where institutions facilitate the flow of funds between lenders and borrowers.
• Transaction Costs: Expenses incurred when carrying out financial transactions.
• Economies of Scale: Reduced transaction costs per dollar as transaction volume increases.
• Asymmetric Information: One party in a transaction possesses more information than the other, potentially leading to adverse selection and moral hazard.
• Adverse Selection: A situation where information asymmetry before a transaction makes it more likely that loans will be granted to high-risk borrowers.
• Moral Hazard: The risk that a borrower might engage in risky behavior after a transaction, jeopardizing loan repayment.
• Financial Intermediaries: Institutions like banks, credit unions, and insurance companies that connect savers and borrowers.
• Economies of Scope: Cost savings achieved by providing multiple financial services using the same information resources.
• Conflicts of Interest: Moral hazard issues arising when an entity has multiple objectives that clash.
• Financial Crisis: Significant disruptions in financial markets characterized by asset price declines and firm failures.
• Financial Innovation: The development of new financial products and services.
• Security: A tradable financial asset representing ownership or a debt claim.
• Bond: A debt security obligating the issuer to make periodic payments to the holder for a specific term.

Sylla’s Key Components of a Modern Financial System

Richard Sylla outlines six key components crucial for a modern financial system:

1. Sound public finances and public debt management
2. Stable monetary and payments arrangements
3. Sound banking systems
4. An effective central bank
5. Good securities markets for debt, equity, and money-market instruments
6. Sound insurance companies

Early U.S. Financial System

The early U.S. financial system, while imperfect, experienced significant growth. The Jacksonian era’s dismantling of the central bank in the 1830s posed challenges, but the system adapted and continued to evolve.

Financial Founding Fathers

Let’s examine key figures and concepts from the “Financial Founding Fathers” era:

True or False Questions

Statement 1

The U.S. financial system functioned very differently under the Republicans and Federalists because of the philosophical differences between the two political parties.

Statement 2

The last chapter is labeled “Apocalypse No” because Jackson saved the American financial system by preventing the re-charter of the Second Bank of the US.

Uncertain. The Second Bank’s dissolution didn’t cripple the system, but the subsequent depression raises questions. The chapter title might allude to the system’s resilience despite lacking a central bank.

Statement 3

Andrew Jackson’s successful veto of the charter of the Second Bank of the US was a severe setback for the American financial system in both the long and short run.

False. The system had matured by the 1830s, and its removal didn’t prevent its continued functioning.

Statement 4

The early US had stable monetary and payments arrangements primarily due to a successful mint.

False. The early U.S. mint faced challenges. The Mint Act of 1792’s establishment of a “unit of account” was more crucial for standardizing currency and facilitating trade.

Statement 5

The success of the First Bank of the US was due to a strong banking sector first, which led to an active stock market only afterward.

Statement 6

The benefits of the Second Bank of the US were not worth the political risk it posed, given that it was centrally controlled.

Statement 7

It is clear that during the period of about 80 years beginning in the 1830s when the US didn’t have a central bank, its economy suffered from frequent crises, with devastating effects that curtailed long-term growth.

False. Despite crises, the U.S. experienced significant economic growth during this period, becoming a leader in per capita income.

Statement 8

Andrew Jackson, not Nicholas Biddle, was most responsible for the demise of the Second Bank of the US and a subsequent economic depression.

Unclear. Both Jackson and Biddle share blame. While Jackson’s policies contributed, other factors like the Bank of England’s actions, international gold flows, and credit overextension also played a role.

Significance of Events and Concepts

• Widespread use of LLCs in the US: LLCs revolutionized business organization by offering limited liability and flexibility.
• “One of the great deals in American political history cut between Hamilton, Madison, and Jefferson at a ‘dinner party'” : This compromise involved assuming state debts in exchange for locating the capital on the Potomac River, highlighting political bargaining and its long-term implications.
• Assumption of state debts by the Federal government after the Revolutionary War: Hamilton’s strategy strengthened national credit, centralized financial power, and fostered economic growth.
• Loans from Rep. Aaron Burr’s Bank of Manhattan to artisans in 1800: This event illustrates the intersection of politics and finance, as Burr secured political support through targeted lending.
• Difference between the economic status of NY state and nearby parts of Canada in 1828, according to British Consul Buchanan: This observation challenged prevailing economic theories and highlighted the impact of financial development on regional disparities.
• Use of “bills of credit” issued first in Mass. in 1690 and then later amongst other colonies: These bills, initially intended to address war financing, evolved into early forms of fiat currency, demonstrating monetary innovation.

Discussion Questions: Financial Founding Fathers

Chapter 1: “In the Beginning”

1. What is the most important point you find in this chapter and why?
2. What do you think of the artisans’ decision to seek satisfaction of their grievances through the political process? What might have prevented them from another method of adjusting to their economic problems?
3. Why do the authors use religious terms to describe the various people who are the subjects of their later chapters?

Chapter 2: “The Creator”

1. What similarities do you see between Sylla’s treatment of Hamilton in his article on financial modernization and Wright & Cowen’s description of his work?
2. On pp. 17-19, Wright & Cowen explain how Hamilton managed to avoid the need for the New York legislature to formally incorporate the [First] Bank of the United States, but paradoxically speeded the process by which New York began to allow incorporations without legislative approval. Be sure you understand what is at stake in the discussion! How does this tie in with part of Sylla’s argument in his financial modernization article? Be sure you understand the discussion re the importance of the United States assuming responsibility for prior state and federal debts.
3. What do you think of Hamilton’s negotiations with the Virginians and Philadelphians with respect to the Bank of the United States and the U.S. capital? Do you see any similarities to modern political negotiations?
4. What questions do you have about the financial instruments created in connection with the Bank of the United States, and the issues connected with the creation of the U.S. mint? Consider carefully the distinction between unit of account and medium of exchange. We will revisit this when we cover chapter 3 in Mishkin’s text on money.
5. Do you see any echoes of the debate over (1) the “implied powers” in the Constitution and (2) fear of the size and power of the Bank of the United States, in modern American discussions?

Chapter 3: “The Judas”

1. Why is Tench Coxe described as “The Judas”? For how much of his career do you think he earned that distinction?
2. This chapter will introduce you to, or perhaps reacquaint you with (1) both the advantages and potential problems of paper monies, especially those with multiple issuers, (2) what we call “principal-agent problems” and how they might be solved, (3) the advantages of trade and manufacturing, (4) the issues connected with tariffs, (4) the issues raised by the “Whiskey Rebellion,” and (5) land speculation.

Chapter 4: “The Sinner”

1. Why do Wright and Cowen say Duer became “a cunning dreamer rather than a creative force,” and why did that matter?
2. Why do Wright and Cowen see the episodes connected with Duer as confirming the strength of the American financial system at even an early stage?
3. Be sure you understand the saga of the Scioto Company and Duer’s role in it.
4. Note (and try to follow) the early examples of insider trading and securities fraud illustrated in this chapter.
5. How was the activity of the Bank of the United States during the Panic of 1792 the same, and how was it different from, activities of the United States Federal Reserve system now?

Chapter 5: “The Savior”

1. Of most importance in this chapter, consider: Gallatin’s role in the Republican party with respect to the financial system; Washington’s logic in dealing with the Whiskey Rebellion; Gallatin’s role in the Louisiana Purchase; Gallatin’s actions and opinions with respect to the national debt; Gallatin’s championing of internal improvements; Gallatin’s role in attempting to re-charter the Bank of the United States.
2. Wright and Cowen make reference to the Hamilton/Burr duel. What connection is there between that duel and Union College?
3. This chapter has useful applications of the concepts of the lender of the last resort and moral hazard.

Chapter 6: “Angels Risen and Fallen”

1. In what ways was Thomas Willing a financial innovator, and why did these activities matter?
2. There is a good example of stocks and flows in the example of “ground rents.” You may find it helpful in understanding some of our material on time value of money.
3. How did Robert Morris aid the revolution, financially speaking?
4. What do you take to be the importance of the comment on p. 126 that “Even a vibrant economy, Morris understood, could get by with only a small amount of hard cash provided people and businesses were willing to extend credit”? Do you see references to this in Sylla’s articles?
5. How is this illustrated by the saga of the establishment of the Bank of North America?
6. What lessons might we learn from the reference on p. 131 to the end of a hyperinflation starting in 1781?
7. What were Willing’s innovations and how did his style contrast with that of Morris?
8. There is reference to a “first federal bankruptcy law” that freed Morris. What advantages did such a law have over prior treatment of debtors, economically speaking?

Chapter 7: “The Saint”

1. On p. 151, you will find reference to “shaving” promissory notes. Be sure you are clear on the process involved and why it violated the spirit of the usury laws. We will meet the use of promissory notes later in the term in connection with barriers to the interstate transfer of money to areas with high-interest rates after 1870.
2. This chapter details a dazzling set of financial moves by Girard, most of which benefited him but many of which also, according to Wright and Cowen, were essential to the United States. Be prepared to discuss them.

Chapter 8: “Apocalypse No”

1. Many, if not most, modern economists believe that the United States clearly should have continued to have a central bank, which we lacked for about 80 years (ending with the establishment of the Federal Reserve System in 1913). Note in this regard: The political means by which Andrew Jackson successfully vetoed the re-charter and thus ended the Second Bank of the United States; The actions of Nicholas Biddle; The verdict by Wright and Cowen on who was responsible for the demise of the bank; Their view on whether that was a problem. You may also wish to look again at Sylla’s article on financial modernization for evidence on whether the demise of the bank severely damaged the U.S. economy during the ensuing 8 decades without a central bank.
2. With respect to Jackson: Why do you suppose, based on the account in this chapter, that many modern economists and others regard Jackson as “a brutal, uneducated frontiersman” who was wrong in his campaign against the Second Bank of the United States? Do you agree with this? See if you can determine some of the economic implications of Jackson’s “strict constructionism” with respect to the U.S. Constitution. Why do Wright and Cowen think the U.S. could survive the demise of the Second Bank of the United States?
3. With respect to Biddle: In what respects, financially speaking, do Wright and Cowen compliment Biddle? Can you explain concisely how the Second Bank of the United States managed monetary policy and acted as a lender of last resort? What deal did Jackson appear to offer and why did Biddle refuse it? In what sense did Biddle’s refusal to let the Second Bank of the United States act as lender of last resort arguably give credibility to Jackson’s arguments about the bank’s role as a private institution?
4. Who was responsible, according to Wright and Cowen, for the depression of 1837-43? (We will briefly discuss that depression in class.)
5. Would Wright and Cowen agree that the United States would clearly have been better off re-chartering the Second Bank of the United States?
6. Do you understand why Wright and Cowen say that the United States was “on a specie standard, a self-equilibrating (self-righting) system largely inimical to discretionary monetary policy”? Are we on such a standard today?

Sylla’s Perspective: True or False Questions

Statement 1

According to Sylla, monetary innovation in the United States has occasionally been an important contributor to economic growth but more often has resulted in excessive inflation and a need for additional regulation.

True. Sylla acknowledges both positive and negative consequences of monetary innovation. He argues that recent innovations stem from regulations rather than genuine economic needs.

Statement 2

In his article on financial systems, Sylla argues that the Dutch, British, American, and Japanese financial systems were very different from one another because each was for its time innovative.

False. Sylla emphasizes the commonalities, stating that these countries underwent similar “financial revolutions” incorporating six key components of a modern financial system.

Statement 3

According to Sylla, a major reason why the new financial system for the United States installed by the Federalists worked so well in its first few decades was that the U.S. banking system, especially in states like New York, kept large amounts of specie in reserve.

Uncertain. Sylla highlights both the benefits and limitations of the specie standard. While it promoted price stability, there was no strict adherence to convertibility, and its disciplinary effects were debatable.

Sylla’s Perspective: Short Answer Questions

• The significance of Hamilton and Matsukata: Both were pivotal in establishing modern financial systems in their respective countries. Hamilton’s reforms in the U.S. and Matsukata’s in Japan demonstrate the importance of strong leadership in financial modernization.
• The “innovation of the first flat paper moneys in the Western World”: This innovation, starting with Massachusetts’s “bills of credit,” removed constraints imposed by limited gold and silver reserves, enabling economic expansion.

Discussion Questions: Sylla’s Articles

Financial Systems and Economic Modernization

1. Note the summary at the beginning. Do you recall studying the view of Sylla will espouse in Economics 101? Note also the context of his address; why might that matter?

2. Note some numbers from 1941; how would you go about analyzing whether the relative prices of meals and hotel rooms has risen or fallen in New Jersey since then (in concept)? It’s safe to conclude that naturally the value of money has risen significantly since the 1940s, the prices for both meals and hotel rooms has risen in New Jersey.

3. How does Sylla’s set of stories on pp. 278-280 help him reach his audience?The experiences that we observe in Sylla’s life regarding the impact of financial markets on seemingly average people leads us to believe that it affects all of us. He tells the story about himself to make a point that financial markets are a big part of everyone’s lives, which is made clear by his anecdote.

4. A. Why his view will be different from others and why that would matter? Sylla opposes the proposal made by renowned economist Richard Easterlin in saying that the reason for historical past and current differences in development came as a result of the spread of modern financial systems rather than the spread of formal schooling. This is important because it lays the foundation for Sylla’s theories going forward, which include his six crucial keys that make up a modern economic system.B.What is his definition of a “modern financial system” and how did he determine it?Sylla defines a modern financial system as one that encompasses the following components: sound public finances and public debt management, stable monetary and payment arrangements, sound banking systems, an effective central bank, good securities markets for debt, equity, money-market instruments, and sound insurance companies. He was able to develop this comprehensive list by investigating what the leading and most successful nation-state economics of modern history had in common, financially.C. How strong do you consider his arguments on the relationship between financial revolutions and subsequent economic growth?It’s hard to argue against him. He uses several examples including the British, Dutch, and the United States to prove his point that what follows financial revolutions is rapid economic growth.

5. A. Why the U.S. system was novel and how it was formed: Prior to the establishment of the United States financial system, America was in a state of economic turmoil. Hamilton led the way as he gave the government certain powers of taxation and established a central bank.B. What the argument about “modern sectors” and growth is about and how it fits Sylla’s view: Sylla defines the “modern sector” as a sector that starts off small, isn’t agriculturally based, and grows rapidly. He believes that most successful cases of modern growth in economics involve a small “modern sector” that rapidly grows and becomes an increasingly larger part of the economy. In turn, overall growth gradually accelerates and eventually becomes sustained at levels we consider to be “modern”. C. Why Consul Buchanan’s testimony helps Sylla’s argument:His interest in the U.S. economy of the 1820s helps to serve Sylla’s argument as it reiterates what he’s claiming. The insight of people outside of the United States who agree with the financial change that’s occurring within the U.S. only helps to solidify Sylla’s argument.D. Why Sylla considers Hamilton so important: Hamilton was at the head of America’s economic development. Shortly after he took office in 1789, the U.S. financial system was quickly developed.

6. A. Did Matuskata’s reforms result in a system exactly like the one in the U.S.? It was very similar in that it was somewhat modeled after the United States financial system. It also encompassed all the key components for what Sylla considers to be a modern financial system, so although they aren’t exactly the same, they are similar in their foundation. B. Why is the case of Japan an especially interesting one to economists? Japan is an interesting case because their economy is so small relative to other countries such as the United States and China. Despite that being the case, through a financial revolution they were able to go from an essentially underdeveloped country to what became a world superpower.

7. In the summary, do you understand Sylla’s critique of “neo-liberal” thought? Do you see any evidence in our current financial situation that might confirm or refute Sylla’s view on this?Sylla has proven multiple times that the flourishing of financial networks happens subsequent to when public finances and currency are stable.

8. How might Sylla’s article help us understand today’s U.S. financial system and economy?Not only does it give the historical background behind the establishment of the United States financial system but it also provides information on what it takes to maintain such a system. The relationships between stock markets, banks, public finances, and history all help the reader to understand how much goes into sustaining an economic market

9. Where do you see connections between Sylla’s article and the early chapters in Financial Founding Fathers?

Monetary Innovation in America

1. What is Sylla’s “framework” for analysis? He starts off by putting an idea in place which states that if the practice of using gold and silver as the only forms of currency continued to the present day, we could assume certain patterns about our economic development. He then provides a solution to the problem which he calls monetary innovation, which essentially challenges regulations that increase instability and constrain the growth and development of an economic system.

2. Do Sylla’s assumptions matter? Are they all equally important? His assumptions are important as they set the basis for his monetary innovation theory. He assumes that if gold and silver was the only form of currency, it would have eventually led to a deflation as there would be an unprecedented increase in the long-run demand for money as a means of exchange and a store of wealth.

3. In a small way, Sylla is testing a “counterfactual” argument. Explain why:Sylla bases his notion off of his assumptions. The entire foundation of his article is off the basis of a supposition, a situation where we’re asked to picture a world in which the only form of currency was gold and silver.

4. What are the economic advantages of reducing the use of gold and silver? It’s an expensive and inelastic resource. By reducing the use of gold and silver a lot of people save money because they don’t have to pay more to supply this asset. Also, since it’s a limited resource, the value over time would have increased which would ultimately have led to a deflation.

5. According to Sylla, what typically follows monetary innovation and why? Subsequent to monetary innovation is a new set of regulations. These new regulations are put in place in order to avoid opposite error, the instability and negative externality that would arise from too much money, and price-level inflation.

6. Colonial Era: Colonists were able to expand the economy through a series of experiments that provided a local media of exchange. In the eyes of Sylla, the Colonial Era is the perfect example of monetary innovation in practice. It was a rational, purposive activity motivated by perceived economic opportunities and directed toward utility maximization.

• The Specie Standard and State Banking Era: Although it did provide some positives such as promoting price stability for real-sector developments, generally speaking the specie standard didn’t pan out. He claims there was no great commitment on the part of the American people and ultimately this resulted in the inability of the specie standard to exert its purported discipline when it was put to the test

• The National Banking Era: The diffusion of banking, remarkable as it was, was hindered in the late nineteenth century by regulation, Sylla claims. It seem as though he thoroughly believes in the intentions of the banking system, he just also thinks that the new banking laws and regulations that put constraints on national and state banks ruined the process.

• The Federal Reserve Era: The more recent forms of monetary innovation are derived from regulations as opposed to the demands of real economic development. “It is something of a paradox that Americans of this century, who have come so close to making monetary innovation unnecessary for purposes of sustaining their further economic development, should give the innovative process such great and unneeded incentives through regulation.”

1. (7) In what respect does Sylla consider modern episodes of monetary innovation to be different than earlier ones?As time went on, Sylla argues that monetary innovation came as a result of regulation as opposed to the actual development of economies. It was a method initially put into place to help neutralize constraints and help economics prosper and grow, but it’s turned into a policy of simply eradicating already existing regulations.

2. (8) How might Sylla’s article be relevant to some modern controversies regarding money supply and the Federal Reserve policy?

3. (9) Why is the explanation by Michael Bordo an alternative to Sylla’s view of regulation?  

Kindleberger and Aliber

1. Kindleberger and Aliber discuss the process by which profit opportunities can sometimes lead to “manias” and eventually to “panics” and “crashes.” See if you can explain the various stages and the role each plays in creating a room followed by a crisis:

   1. A “displacement”

A displacement is an event that shocks or changes financial horizons and market expectations. Examples of this can range anywhere from deregulations to war, and notable historical examples that have lead to crises include World War 1, the economic boom of the 20’s, the dotcom bubble etc.

2. Credit expansion

Credit expansion, they argue, is the exponential rise in short-term borrowing that occurs before a crisis. It’s a simple behavioral curve of increased optimism in risk taking and less stable borrowing – perfect example, the housing market leading up to 2008. Credit bubbles are when similarly placed groups of borrowers

3. Rise in prices and possible positive feedback loops

4. Speculative buying that occurs only because an anticipated rise in prices

5. A break in prices

6. “Heading for the doors” collectively and a negative feedback loop

7. What might end the crisis and why

2. What else do you see that might be relevant to the functioning and regulation of financial markets in this process?

Questions on McCloskey’s Article

• Though he does not directly cite Allison, McCloskey would probably agree with Allison that the primary routes to prosperity are savings and capital accumulation and stable property rights and institutions, these being sufficient to increase our standards of living

  • False because McCloskey believes you initially need freedom and liberty. Richard Sylla would be more suitable to agree with Allison’s statements based off of his 7 components for an economy to prosper. McCloskey believes ideas should have sex and come together for innovation, in result of an increase in our standards of living. Nice work yas…