Showing posts with label Economic History. Show all posts
Showing posts with label Economic History. Show all posts

Sunday, July 25, 2010

Effective Habits of Ernest Gellner - 'cold intellectual honesty'

A review of another Gellner biography;

In common with so many other émigrés, Gellner served in the war (in his case in a Czechoslovak armored unit), and he was grateful to Britain for defeating Nazism and offering him a home after the end of hostilities. Unlike many such émigrés, however, he showed no interest in acquiring the outward trappings of social success and acceptance. Instead, as Mr. Hall shows, Gellner made his watchword "cold intellectual honesty." This was matched by a strong dose of warm and passionate courage.

Gellner was by training and profession an anthropologist. He began his career by conducting fieldwork among the Berbers of Morocco, sometimes accompanied by his intrepid wife, Susan. But Gellner was really a classic polymath whose interests ranged across several disciplines at a time when it was still (just) possible to feel a mastery of more than one field of study. Gellner launched forays into philosophy, sociology, psychoanalysis and history.

The fields might have been diverse, but the method of inquiry was similar in each case: analytical rigor combined with a strict commitment to reason. Those who knew Gellner recall that this commitment could result in truly nerve-racking conversations, in which they found themselves under relentless interrogation as Gellner tried to get to the heart of a problem. There was not much small talk, and there was nowhere to hide as he chipped away at the position of his interlocutor—or, to put it another way, his opponent. As one might imagine, Gellner did not suffer fools gladly. He told the assembled doyens and divas who constituted the celebrated Cambridge History of Political Thought school, for example, that there were simply too many of them.

When he started his writing career, Gellner's targets were mainly on what was perceived to be the right side of the cultural-political spectrum: In particular, Gellner attacked the philosopher Michael Oakeshott and the intellectual historian Isaiah Berlin for their romantic traditionalism...

Gellner was at odds with Oakeshott's belief that only tradition could guarantee civilized rule and Oakeshott's related claim that the imposition of rationality would lead to fanaticism. As for Berlin, Gellner was a critic of his argument for value- pluralism, which Gellner saw as something that could be achieved only at the expense of reason. In Berlin's hands, as Gellner saw it, "the history of ideas," Mr. Hall writes, "became something of a game, in which thinkers were damned as dangerous because anti-pluralist or praised for endorsing the incommensurability of values." Gellner was particularly angered, Mr. Hall says, that "a fellow exile from the disaster zones of Europe" (Isaiah Berlin was born in Riga, Latvia, then part of the Russian Empire) could be "so infuriatingly complacent."...

Gellner's most celebrated demolition was of the literary critic Edward Said (1935-2003). When Said accused Gellner of writing about North Africa without having a command of the native language, Gellner was too modest to respond that he was in fact conversant in the language of the Berbers. He did, however, make a strong case that the whole theory of "orientalism"—Said's idea that Western interpretations and depictions of the East were designed not to understand the East but to control it—was based on erroneous assumptions about the political power of literature. The viceroys of India, he pointed out brutally, were not known for eagerly scanning the pages of late-19th-century literary magazines....

"No nation," he once wrote, "is fit to rule itself. . . . [Nations] fight each other, and they oppress their own minorities." For this reason, and others, Gellner was no Zionist; he did not believe that his Jewishness determined his identity. He was prepared to fight for Israel, he quipped, but not to live there...

As Mr. Hall demonstrates, Gellner believed that there really was a clash between "liberty and pluralism," on the one hand, and "authoritarianism and oppressiveness" on the other. In a passionate riposte to Noam Chomsky, who had accused him of ignoring Western crimes, Gellner charged that his critic had "obscured" the fact that "the survival of freedom and accountable, limited government is an enormously important value even when some of its defenders are occasionally tarnished."

Excerpts from the book.

He had separate reputations as scholar of Islam, theorist of nationalism, philosopher of history, and historian of ideas. He ended his career in Prague, the city in which he had grown up as a boy, though in his final years he was most interested in developments in Russia. His status as public intellectual rested on this background, that of a multilingual polymath, a modern philosophe. He was sometimes cited as one of the last great thinkers from Central Europe whose Jewish background meant a direct experience of the twentieth century's horrors....

I found him to be an exceptionally attractive human being: witty, extremely kind, modest, and blessed with a genius for creating something of a tribe around himself, cemented by an endless stream of postcards – sent, one felt, to counteract a sense of loneliness.

Saturday, February 13, 2010

Book Recommendation



In an essay in his just-published Natural Experiments of History, Jared Diamond puts the question the way you want it to be asked – comparatively. He examines the histories of Haiti and the Dominican Republic, the two halves of the island of Hispaniola, the first place Columbus stopped in the New World. Natural Experiments is an exemplary book, short and graceful, conveying a broad swathe of the most interesting work going on today around the world in departments of economics, political science and anthropology, under the heading of comparative political economy. The story of Haiti is especially compelling.

- David Warsh

Jared Diamond's Natural Experiments of History- podcast

Contents:
* Prologue: Natural Experiments of History
Jared Diamond and James A. Robinson

1. Controlled Comparison and Polynesian Cultural Evolution
Patrick V. Kirch
2. Exploding Wests: Boom and Bust in Nineteenth-Century Settler Societies
James Belich
3. Politics, Banking, and Economic Development: Evidence from New World Economies
Stephen Haber
4. Intra-Island and Inter-Island Comparisons
Jared Diamond
5. Shackled to the Past: The Causes and Consequences of Africa's Slave Trades
Nathan Nunn
6. Colonial Land Tenure, Electoral Competition, and Public Goods in India
Abhijit Banerjee and Lakshmi Iyer
7. From Ancien Régime to Capitalism: The Spread of the French Revolution as a Natural Experiment, Daron Acemoglu, Davide Cantoni, Simon Johnson, and James A. Robinson
* Afterword: Using Comparative Methods in Studies of Human History
Jared Diamond and James A. Robinson

Tuesday, July 15, 2008

Book Recommendation


The Street Porter and the Philosopher; Conversations on Analytical Egalitarianism
Sandra J. Peart and David M. Levy, editors

Include essays by:

* James M. Buchanan
* Tyler Cowen,
* Eric Crampton, University of Canterbury, New Zealand
* M. Ali Khan, Johns Hopkins University
* Thomas Leonard, Princeton University
* Deirdre McCloskey, University of Illinois, Chicago
* Warren J. Samuels, Professor Emeritus, Michigan State University
* Gordon Tullock, George Mason University

Monday, May 26, 2008

Podcasts

The Black Death;
In October 1347, a Genoese trading ship arrived at the busy port of Messina in Sicily. Readying to dock, it would have nosed in among many similar ships doing similar things. But this ship was special because this ship had rats and the rats had fleas and the fleas had plague. Within four years, over a third of the population of Europe lay dead. This was the Black Death and its terrible progress was captured by the Florentine writer Giovanni Boccaccio who declared “in those years a dead man was then of no more account than a dead goat”.

The Black Death devastated Europe, changed its economics and broke up its society, but did the disease also bring subtler transformations in its art, its religion and its intellectual outlook?


Hanson on Signalling

Saturday, May 17, 2008

Branding

Brand Names Before the Industrial Revolution;
In medieval Europe, manufacturers sold durable goods to anonymous consumers in distant markets, this essay argues, by making products with conspicuous characteristics. Examples of these unique, observable traits included cloth of distinctive colors, fabric with unmistakable weaves, and pewter that resonated at a particular pitch. These attributes identified merchandise because consumers could observe them readily, but counterfeiters could copy them only at great cost, if at all. Conspicuous characteristics fulfilled many of the functions that patents, trademarks, and brand names do today. The words that referred to products with conspicuous characteristics served as brand names in the Middle Ages. Data drawn from an array of industries corroborates this conjecture. The abundance of evidence suggests that conspicuous characteristics played a key role in the expansion of manufacturing before the Industrial Revolution.


Related;

Sunday, May 11, 2008

The industrial revolution and the democratic transition

The industrial revolution and the democratic transition. -- Aubhik Khan

In the 19th century, the United Kingdom began a period of economic transformation known as the Industrial Revolution. It’s commonly believed that this era opened as new inventions improved the technologies used to produce goods and provide services. However, we now know that such improvements affected only a relatively small part of the economy. Nonetheless, output rose during the first stage of the Industrial Revolution because of capital accumulation. One explanation for this increase in capital may be that another revolution occurred in Britain around the same time: the demographic transition. In this article, Aubhik Khan outlines some evidence on the Industrial Revolution and the demographic transition, then presents two economic theories that link the two phenomena.

Friday, May 9, 2008

Enter the Dragon: Understanding the History and Future of Chinese Development


Dr. Christopher Lingle Visiting Professor Ramkhamhaeng University in Bangkok Napoleon once referred to China as the "Sleeping Dragon," and he advised European leaders from his era that they would be better off to let it sleep.

* What factors were responsible for China's remarkable economic progress?
* What adjustments have the Communist Party made to accommodate this growth?
* How are China's neighbors coping with its success?
* What challenges stand in the way of future progress?

Monday, May 5, 2008

Economic History Talk of the Day

John Nye on Wine, War and Trade

The Enclosures in Brittain

In the early 19th century, the Northamptonshire poet John Clare took a good look at the countryside and didn’t like what he saw. He wrote:

"Fence meeting fence in owners little bounds
Of field and meadow, large as garden-grounds,
In little parcels little minds to please,
With men and flocks imprisoned, ill at ease."


He was referring to the effects of the Enclosures – literally the fencing in of land to stop others from using it. This apparently simple act has been hugely controversial. For some Enclosure underpinned the economic and agricultural development of Modern Britain. For others it was an act of theft – the turning of common land into private property that impoverished the many for the sake of the few.

But what really happened during the era of 18th and 19th century enclosures? Who gained, who lost and what role did Enclosures play in the agricultural and industrial transformation of this country?


Listen to the podcast from BBC.

References;

E. P. Thompson, Customs in Common (The Merlin Press, 1991)

Christopher A. Whatley, Scottish Society, 1707-1830 (Manchester University Press, 2000)

Paul Langford, Public Life and the Propertied Englishman 1689-1798 (OUP, 1991)

Murray G. H. Pittock, Inventing and Resisting Britain: Cultural Identities in Britain and Ireland, 1685-1789 (London: Routledge, 1997)

R. C. Allen, Enclosure and the Yeoman: The Agricultural Development of the South Midlands, 1450-1850 (Oxford, 1992)

M. E. Turner, Enclosures in Britain, 1750-1830 (London, 1984)

J. Neeson, Commoners: Common Right, Enclosure and Social Change in England, 1700-1820 (Cambridge University Press, 1993)

G. E. Mingay, Parliamentary Enclosure in England (London, Longman 1997)

Susanna Wade Martins, Farmers, Landlords and Landscapes: Rural Britain, 1720-1870 (Windgather Press, 2004)

Tuesday, April 8, 2008

Memo to Self

Summer Institute for the Preservation of the Study of the History of Economics- July 2008

Some picks;

Case Studies at the World Bank
Michele Alacevich (World Bank)

The Spread of Institutionalism in Italy: the Case of Mr. Amintore Fanfani and the "Catholic University of the Sacred Heart"
Giovanni Michelagnoli (University of Rome, PhD. Candidate)

Rawls + Economics = Buchanan
Jacco Van Seumeren (University of St. Gallen, PhD. Candidate)

Men Talk Samuelsonian Men Austrian
Deirdre McCloskey (University of Illinois at Chicago)

Saturday, April 5, 2008

Random Economist- M. Ali Khan

M. Ali Khan from John Hopkins;
I continue to pursue interests in economic interaction, as formalized in general equilibrium theory: models with a representative agent, as well as those with a finite number and a continuum. In particular, those situations in which an individual agent is "numerically negligible" but is nevertheless influenced by actions, or summary statistics of actions, of all other agents in the game, and where individual and social outcomes are uncertain.

Questions of risk and uncertainty have led me to models of asset-pricing, again with an arbitrary index set of assets. In collaboration with Professor Yeneng Sun, I am exploring questions having to do with arbitrage and with the distinction between systematic and idiosyncratic risk. We hope that this work in financial economics will also lead to applications in other applied fields such as cost-benefit analysis for economic development.

I see issues in development economics alongside those in methodology and the history of ideas. Interests in population, education and the environment have led me to consider the robustness of disciplinary boundaries, and more broadly, to the relationship between economic development and cultural change. Which subsumes the question of how markets handle, or fail to handle, basic issues of resource allocation; and has also led me to the Scottish Enlightenment, and to the "economics of the eighteenth century."

My interests in theory and epistemology are complemented by those in mathematics, where I am working with methods of nonstandard analysis (Loeb spaces), nonsmooth analysis and optimization (Mordukhovich-Ioffe cones), and stochastic processes (law of large numbers with a continuum of random variables).

Friday, April 4, 2008

When US was an emerging market


Three different statistical procedures for measuring average share price appreciation tell about the same story. NYSE shares rose little in price for forty years. This is because most stocks paid out profits in dividends, rather than retaining earnings. Share prices got a big lift from the Civil War, and the market was about as volatile as in the 1900s. The more things change, the more they stay the same.


Old New York Stock Exchange Project

Wednesday, April 2, 2008

Which Nobel Laureate was rejected by The Economist magazine?

Arthur Lewis. The Economist (around 1937) gave the following reason;
They said that they could not hire a black journalist since he would have to interview people who might refuse to see him because of his color.

The British Colonial Office also refused as the positions in the colonial service were reserved for persons of European parentage.

The Liverpool University rejected him and suggested that he visit Liverpool several times during the next academic year so that the faculty, students and community could get to know him. In other words, as Lewis says;
“so that public may be able to look at me and decide whether they can stand my appearance”


During his time at LSE, one of the faculty pushed for greater recognition of him.
Hayek wrote the director about Lewis’s “anomalous” position on the faculty". He argued that Lewis deserved an “exceptional promotion” since he was doing the work of senior members of the department “and doing it with conspicuous success”. In Hayek’s view, Lewis was “one of the best teachers,” who at the least, deserved formal recognition in the form of a teaching citation, for “uncommon versatility and by his teaching, ranging over practically the whole field of economics.”


Source; W. Arthur Lewis and the Birth of Development Economics, By Robert L. Tignor

Related;
I got into the history of the world economy because Frederick Hayek, then Acting Chairman of the LSE Department of Economics suggested that I teach a course on "what happened between the wars" to give concreteness to the massive doses of trade cycle theory which then dominated the curriculum. I replied to Hayek that I did not know what happened between the wars; to which he replied that the best way of learning a subject was to teach it.

So I lectured on this subject for some years, and published a book on it in 1949. Among the questions that the book did not answer was whether the great depression of 1929 was sui generis, or one of a cycle stretching back into the nineteenth century. This I was determined to find out. However, data for the years before 1914 were sparse and unreliable, and I could not proceed faster than additions to the data and revisions would permit. I spent a lot of time with the data, and, between 1952 and 1957, published a stream of articles on world production, prices and trade from 1870 to 1914. However, I could never get the book done. In 1957, just as I was ready to start, I went off into administration for six years, never touching the subject. I returned to it in 1963, in my new professorship at Princeton University, to find that the four or five researchers of 1952 had now multiplied into a crowd of writers on this subject. I returned to improvement of the data and was just about ready to write my book when I went off to Barbados for four years setting up the Caribbean Development Bank. Returning to Princeton in 1974, I finally published in 1978 my account of growth and fluctuations in the world economy between 1870 and 1914. My Nobel Lecture derives from this sector of my intellectual interests.


St.Lucia Nobel laureates

Expensive Economics Books on Amazon

Economic Survey 1919-1939 (Routledge Library Editions-Economics, 57)
by W. Arthur Lewis

Price: 220 dollars

Saturday, March 29, 2008

Was League of Nations better than IMF?

Rogoff and Reinhart's forthcoming book is a real gem-This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises. Some excerpts related to data issues on public debt below;

Until very recently, domestic debt was not on the radar screen of the multilateral institutions. Neither the International Monetary Fund nor the World Bank systematically collected such data. In fact, cross-country historical time series on domestically issued debt are also absent from private data collections. Reinhart, Rogoff and Savastano (2003), with extensive help from IMF staff and country sources, put together an annual series going back to 1990 for a limited number of emerging market countries.

The topic of domestic debt is so important, and the implications for existing empirical studies on inflation and external default are so profound, that we have broken out our data analysis into an independent companion piece (Reinhart and Rogoff, 2008). Here, we focus on a few major points. The first is that contrary to much contemporary opinion, domestic debt constituted an important part of government debt in most countries, including emerging markets, over most of their existence…

One would think that with at least 250 sovereign external default episodes during 1800– 2007 and at least 70 cases of default on domestic public debt (not to mention the significant economic disruption associated with these events), it would be relatively straightforward to find a comprehensive long time series on public sector debt. Yet, this is not the case—far from it.

Government debt is among the most elusive of economic time series. For the advanced economies, the most comprehensive data comes from the OECD, which provides time series on general government debt since 1980. However, this data has several important limitations: it only includes a handful of emerging markets; for many advanced economies (France, Finland, Greece, and the U.K., to name a few), the data actually begins much later in the 1990s, which cannot be considered as much of a time series; and only total debt is reported, with no particulars provided of the composition of debt (domestic versus foreign) or its maturity (long-term versus short-term). To state that the IMF’s well-known World Economic Outlook (WEO) database extends to public debt requires a stretch of the imagination. Data is only provided for the G-7 from 1980 onward (out of 180 countries covered in the WEO).

The most comprehensive data on public debt comes from the World Bank’s Global Development Finance (GFD, known previously as the World Debt Tables). It is an improvement on the other databases in that it begins (for most countries) in 1970 and it provides extensive detail on the particulars of external debt. Yet, GFD also has serious limitations. There are no advanced economies included in the database (nor newly-industrialized countries (such as Israel, Korea, or Singapore, for that matter) to facilitate comparisons. Unlike data from the IMF and the World Bank for exchange rates, prices, government finances, etc., there is no data prior to 1970. Last, but certainly not least, these data only cover external debt. In a few countries, such as Panama or Côte
D’Ivoire, external debt is a sufficient statistic on government liabilities, since domestic public debt levels are relatively trivial. As Reinhart and Rogoff (2008) illustrate, however, for most countries domestic debt accounts for an important share of total government debt. The all-country average oscillates between 40 to 80 percent during 1900–2006.

In search of the elusive data on total public debt, we examined the archives of the global institutions’ predecessor, the League of Nations, and found that this institution collected information on, among other things, public domestic and external debt in its Statistical Yearbook (1926–1944). While, neither the IMF nor the World Bank continued this practice after the war, the newly-formed United Nations (UN) inherited the data collected by the League of Nations and in 1948 its Department of Economic Affairs, published a special volume on public debt, spanning 1914–1946. From that time onwards the UN continued to collect and publish the domestic and external debt data in the same format as their pre-war predecessor on an annual basis in their Statistical Yearbooks. As former colonies became independent nations, the database expanded accordingly. This practice continued until 1983, at which time the domestic and external public debt series were discontinued altogether. In total, these sources yield time series that span 1914– 1983 for the most complete cases. It covers advanced and developing economies. For the most part, it also disaggregated domestic debt into its long-term and short-term components. To the best of our knowledge, this data is not available electronically in any database, hence it required going to the original publications. This data provides the starting point for our public debt series, which have been (where possible) extended to the period prior to 1914 and post-1983.

For data prior to 1914 (including several countries that were then colonies), we consulted numerous sources, both country-specific statistical and government agencies and individual scholars. Data Appendix II provides details or the sources by country and time period. When no public debt data is available prior to 1914, we proceed to approximate the foreign debt stock by reconstructing debt from individual international debt issues. This debenture data also provide a proximate measure of gross international capital inflows. Much of the data come from scholars including Lindert and Morton, Marichal, Miller, and Wynne, among others. From these data, we construct a foreign debt series (but, not total debt). This exercise allows us to examine standard debt ratios for default episodes for several newly-independent nations in Latin America as well as Greece and important defaults such as that of China in 1921, and Egypt and Turkey in the 1860s– 1870s. These data are most useful for filling holes in the external debt time series, when countries first tap international capital markets. Their usefulness (as measures of debt) is acutely affected by repeated defaults, write-offs, and debt restructurings that introduce disconnects between the amounts of debt issued and the subsequent debt stock.

For some countries (or colonies in the earlier period) where we have only relatively recent data for total public debt, but have reliable data going much further back on central government revenues and expenditures, we calculate and cumulate fiscal deficits to provide a rough approximation to the debt stock.31
To update the data for post-1983, we mostly rely on GFD for external debt. Two very valuable recent studies facilitate the update: Jeanne and Guscina (2006) compile detailed date on the composition of domestic and external debt for 19 important emerging markets for 1980–2005; Cowan, Levy-Yeyati, Panizza, Sturzenegger (2006) perform a similar exercise for all the developing countries of the Western hemisphere for 1980–2004. Last, but certainly not least, are the official government sources themselves, which are increasingly forthcoming in providing domestic debt data, often under the IMF’s 1996 initiative, Special Data Dissemination Standard.


It is all the more interesting since both Rogoff and Reinhart have worked at the IMF's Research Department. Let us hope they put their dataset online.

One of the takeaways from the paper; it's the same old story. Look at what's happening in Argentina right now - a defacto partial default on domestic domestic debt by playing around with inflation numbers.

Five-year credit default swaps based on Argentina's debt increased 13 basis points to 576 basis points, the highest since March 17, according to Bloomberg data. That means it costs $576,000 to protect $10 million of the country's debt from default.


Related;
Lessons From Prior Banking Crises

The great emerging market inflation of 2007 and 2008

IMF asks Argentina to clarify inflation figures

Argentina 2008: Is the (already High) Inflation Rate Accelerating?
So far what the government is doing is clearly not going to control inflation. It does not anchor inflation expectation neither with its monetary policy, nor with its exchange rate policy or its fiscal policy. On the contrary, it looks more likely to make it get worse—inflation seems to be accelerating. The median voter seems to be happy with this policy, though. But it’s the policy maker’s role to appropriately consider and internalize the future effects of the current policies and adjust its present behavior accordingly—something not seen yet with the current administration.

It could be much better if the government would focus on reducing government expenditures (not just reduce the rate of growth to be lower than the growth rate of tax revenues—which are just casually high do the unusually high commodities’ prices) to achieve not only a higher and stronger primary fiscal surplus but also to enhance its sustainability. It should also let all relative prices be really free to adjust to equilibrate demand and supply (i.e. eliminate all the price controls and any type of capital controls) and let the exchange rate float. If relative prices are let to adjust, as well as the exchange rate, they will stop the growth rate of prices (i.e. inflation) and contribute, together with a non spurious fiscal surplus to contain inflation expectations—and thus wage negotiation adjustment (in quantity and frequency.) Core inflation would then be tackled with an inflation targeting regime, letting an independent central bank focus on its only goal: to preserve the value of the (domestic) currency. As of now, it will probably be better to raise interest rates to control the inflation in the short run while the rest of the reforms are put in place (including property rights that we could believe in—i.e. proper long-term institutions.). The question is, will this government be interested in implementing these and thus pursuing long-term and sustainable growth? I truly hope it. Unfortunately, I still have my doubts


Credit derivatives provide useful early warnings for the macroeconomy

Is Argentina turning the corner?- Dani Rodrik
Not at all clear, according to Guillermo Calvo. I am sitting at a colloqium on Argentina organized by my colleague Federico Sturzenegger. Argentina has recovered nicely from its crash and has been growing at Asian rates since. Calvo thinks this is just a process of recovery: the country is only making up for lost time. But could this time be different? What is encouraging is that this recovery is export and investment- led, and investment focuses on tradables instead of nontradables. The government has had an active policy of keeping the currency undervalued. So an alternative, more optimistic view would be that Argentina is turning itself into an Asian country. But there is a long way to go...

Friday, March 28, 2008

Hamilton vs Jefferson

From the recent Obama speech;
In a city of landmarks, we meet at Cooper Union, just uptown from Federal Hall, where George Washington took the oath of office as the first president of the United States. With all history that's passed through the narrow canyons of Lower Manhattan, it's worth taking a moment to reflect on the role that the market has played in the development of the American story. The great task before our founders was putting into practice the ideal that government could simultaneously serve liberty and advance the common good. For Alexander Hamilton, the young secretary of the treasury, that task was bound to the vigor of the American economy. Hamilton had a strong belief in the power of the market, but he balanced that belief with a conviction that human enterprise, and I quote, "may be beneficially stimulated by prudent aids and encouragements on the part of the government." Government, he believed, had an important role to play in advancing our common prosperity. So he nationalized the state Revolutionary War debts, weaving together the economies of the states and creating an American system of credit and capital markets. And he encouraged manufacturing and infrastructure, so products could be moved to market. Hamilton met fierce opposition from Thomas Jefferson, who worried that this brand of capitalism would favor the interests of the few over the many. Jefferson preferred an agrarian economy, because he believed that it would give individual landowners freedom and that this freedom would nurture our democratic institutions. But despite their differences, there was one thing that Jefferson and Hamilton agreed on: that economic growth depended upon the talent and ingenuity of the American people; that in order to harness that talent, opportunity had to remain open to all; and that through education in particular, every American could climb the ladder of social and economic mobility and achieve the American dream. In the more than two centuries since then, we've struggled to balance the same forces that confronted Hamilton and Jefferson.: self-interest and community, markets and democracy, the concentration of wealth and power and the necessity of transparency and opportunity for each and every citizen. Throughout this saga, Americans have pursued their dreams within a free market that has been the engine of America's progress. It's a market that's created a prosperity that is the envy of the world, and opportunity for generations of Americans; a market that has provided great rewards to innovators and risk-takers who've made America a beacon for science and technology and discovery.

But the American experiment has worked in large part because we guided the market's invisible hand with a higher principle. A free market was never meant to be a free license to take whatever you can get, however you can get it. That's why we've put in place rules of the road: to make competition fair and open, and honest. We've done this not to stifle but rather to advance prosperity and liberty. As I said at Nasdaq last September, the core of our economic success is the fundamental truth that each American does better when all Americans do better; that the well-being of American business (OOTC:ARBU) , its capital markets and its American people are aligned. I think that all of us here today would acknowledge that we've lost some of that sense of shared prosperity. Now, this loss has not happened by accident. It's because of decisions made in board rooms, on trading floors and in Washington. Under Republican and Democratic administrations, we've failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practice. We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth; a market that favors Wall Street over Main Street, but ends up hurting both. Nor is this trend new. The concentrations of economic power and the failures of our political system to protect the American economy and American consumers from its worst excesses have been a staple of our past: most famously in the 1920s, when such excesses ultimately plunged the country into the Great Depression. That is when government stepped in to create a series of regulatory structures, from FDIC to the Glass-Steagall Act, to serve as a corrective, to protect the American people and American business.