FINANCE (FINA 4900w, Sec. 10) FINANCIAL HISTORY SPRING 2014 PROFESSOR: ARTHUR WILSON
CLASS HOURS AND ROOM: TTh., 12:45-2:00 PM DUQUES 259 OFFICE HOURS: MW 12-3 TTh 11:30 to 12:30 PM, before or after class, or by appt. OFFICE: FUNGER 501Q, OFFICE PHONE: (202)994-8058, EMAIL: [email protected]. We will use Blackboard for ALL out of class assignments.
REQUIRED TEXT: THE ORIGINS OF VALUE: THE FINANCIAL INNOVATIONS THAT CREATED MODERN CAPITAL MARKETS, edited by WILLIAM N. GOETZMANN and K. GEERT ROUWENHORST, 2005
RECOMMENDED TEXTS: A HISTORY OF CORPORATE FINANCE, by JONATHAN BARRON BASKIN AND PAUL J. MIRANTI, (1st ed., 1999, Cambridge University Press).
THE COMPANY: A SHORT HISTORY OF A REVOLUTIONARY IDEA, by JOHN MICKLETHWAIT AND ADRIAN WOOLDRIDGE, (1st ed., 2003, Modern Library).
FUN READS (not necessarily in bookstore, and not required for anything): THE HOUSE OF MORGAN: AN AMERICAN BANKING DYNASTY AND THE RISE OF MODERN FINANCE, by RON CHERNOW (Atlantic Monthly Press, 1990)
STRONG MANAGERS, WEAK OWNERS: THE POLITICAL ROOTS OF AMERICAN CORPORATE FINANCE, by MARK J. ROE (Princeton University Press, 1994)
OTHER PEOPLE’S MONEY AND HOW THE BANKERS USE IT, by LOUIS D. BRANDEIS (Bedford Books of St. Martin’s Press, 1995)
EXTRAORDINARY POPULAR DELUSIONS AND THE MADNESS OF CROWDS by CHARLES MACKAY, (1841) and CONFUSION DE CONFUSIONES by JOSEPH DE LA VEGA (1688) (republished by John Wiley and Sons, 1996)
SAVING CAPITALISM FROM THE CAPITALISTS: UNLEASHING THE POWER OF FINANCIAL MARKETS TO CREATE WEALTH AND SPREAD OPPORTUNITY, by RAGHURAM G. RAJAN and LUIGI ZINGALES, (Princeton University Press, 2003)
THE TRANSFORMATION OF WALL STREET: A HISTORY OF THE SECURITIES AND EXCHANGE COMMISSION AND MODERN CORPORATE FINANCE by JOEL SELIGMAN, (3rd ed., 2003, Wolters Kluwer),
THIS TIME IS DIFFERENT: EIGHT CENTURIES OF FINANCIAL FOLLY, by CARMEN M. REINHART AND KENNETH S. ROGOFF (Princeton University Press, 2009) THE ASCENT OF MONEY: A FINANCIAL HISTORY OF THE WORLD by NIALL FERGUSON, (Penguin Press, 2008).
CORPORATE GOVERNANCE: PROMISES KEPT, PROMISES BROKEN, by JONATHAN R. MACEY (Princeton University Press, 2008)
LORDS OF FINANCE: THE BANKERS WHO BROKE THE WORLD by LIAQUAT AHAMED, (2009, Penguin Press) .
MANIAS, PANICs and CRASHES: A HISTORY OF FINANCIAL CRISES by CHARLES P. KINDLEBERGER AND ROBERT ALIBER, (6th ed., 2011, Wiley).
DEBT: THE FIRST 5,000 YEARS, by DAVID GRAEBER (Melville House, 2012)
This is a relatively new semester course, developed because we believe that there is substantial interest in the history of finance among GWU students. Even so, as an experimental course, it is open to Undergraduates, Masters, and PhD students as well. It will be organized around the above required text, supplemented with quite a few shorter articles. We look forward to your interest, and your feedback. For now, there are no prerequisites for this course, but it would surely be helpful to have some familiarity with the broad outlines of finance. You should also note that this is a “writing in the disciplines” course, which implies a good bit of writing.
Finance can be regarded as having several major areas: Financial Institutions, most analogous to macroeconomics and money and banking; Corporate finance, focused on the financial needs of firms, and sometimes called business finance; Investments, focused on markets and the financial needs of investors; and Derivatives and Financial Engineering, concerned with the use of financial derivatives to manage risks and to design securities for specific needs. Each area has its own history, at least some of which will be addressed in this course.
Our goal is to complement your knowledge of these areas with an appreciation of how they have changed over time. We'll begin with a brief overview, and then explore 1-3 chapters or articles each week. Even history can become dull if we are reduced to me lecturing and you scribbling. It would be better if we could engage in spirited discussion of the material of the course. To that end you should carefully read each subject chapter before class, as well as relevant articles posted to Blackboard, and come prepared to discuss them in detail. I'll supplement the text with shorter readings as warranted, posted to Blackboard.
Grades will be determined by: a) three short essay and multiple choice based quizzes to explore your familiarity with the readings, b) two or three short research papers, and c) your active class participation. Quizzes will count for 30% of the grade, research papers, 60%, and class participation, the remainder. Short of extraordinary and well documented hardships, makeup quizzes will not be offered. Please don’t miss the quizzes.
Your papers should be done individually and for this class. Each will count for 30% of the grade. Proceed as follows: early in the course, choose and motivate a topic in a 1 page proposal in which you cite at least four high quality scholarly finance, economics, history, or related disciplinary sources that you expect to use, for 2% of the total grade. Given the nature of the topic, some sources may be quite old. Here, proper citation means include author, journal, title, volume, number, pages, etc. Revised proposals may be resubmitted once as time permits. The topic chosen may reflect your career plans after graduation, topics from other courses, or just curiosity, but ought to have some significant financial and historical dimensions. Some of the best suitable scholarly journals are listed below. You will also be encouraged to give/get feedback from classmates concerning your proposal.
For each paper, you should expect to use and cite sources comprising a minimum of 100-150 pages. If you intend to rely heavily on unusual sources, you should check with me beforehand, to make sure that they are suitable. Second, I'll want you to do a careful reading of your sources, culminating in a synthesis of the academic literature on the topic, and the relevant professional and popular literature. The WID nature of the course requires that students get substantial feedback on their writing. That will necessitate a tight schedule and some overlap between preparation time for the several short papers. Please pay close attention to the schedule constrains in the provisional schedule below.
When you have a rough draft (not too rough), I will ask you to post it to Blackboard discussion space. There, you and your classmates will be encouraged to comment on each other’s papers. I will grade the draft, for 8% of the total grade. Your comments will also be considered - each of you should produce five (5) comments on other student’s drafts, consisting of 2 or 3 paragraphs, each. Together, these will count for 5% of the total grade.
After considering feedback from me, the TA, and your classmates, your efforts should result in a complete 1800-2500 word research paper, making significant use of the scholarly finance/history literature, which will count for 15% of the total grade. Include footnotes, and a complete, annotated list of sources cited. Feel free to come by my office to discuss ideas or rough drafts. We will go through this cycle three times, for three short papers. Students will be expected to do at least 2 of the 3. Grades will be determined by the best 2 of 3. There may also be time to discuss your final papers in class on the last several days.
To get ideas, you may want to search ECONLIT or JSTOR, or skim recent issues of some of the top finance, economics, and history journals or other sources. These include: Accounting History, American Economic Review, Business History, Business History Review, Economic History Review, Financial History Review, Financial Management, Financial Review, Journal of Accounting and Economics, Journal of Business, Journal of Economic Literature, Journal of Economic Perspectives, Journal of Finance, Journal of Financial and Quantitative Analysis, Journal of Financial Economics, Journal of Political Economy, NBER Working papers, Oxford Economic Papers, Review of Financial Studies,... and many, many others.
On the other hand, Wall Street Journal, Financial Times, Economist, Business Week, etc. are NOT scholarly journals. While you can use them, they do not count toward the "significant use of the scholarly finance/history literature" required.
If you are unsure about a given source, check with me early on. Be especially careful with online sources. Some of them have surprising agendas. Fortunately, most of the major scholarly finance journals are available in hard copy in the library, free online, or via interlibrary loan. Regrettably, some journals charge for online versions. Such charges can be easier to avoid if you plan ahead - interlibrary loan takes time, and hard copies are not always on the shelves.
We will use Blackboard, as follows. Proposals and papers must be posted as attachments to the link for the assignment in Blackboard. Usually, these will be Word documents. Note that they will be automatically time-stamped. In the event of a dispute, these will be the official version of your work. I make a point of not deleting from Blackboard unless you ask me to, or until the semester is over. Please include your first initial and surname in the file name, and please use page numbering. Submissions should be in Word 2007 or earlier format. Please do not send "ascii", "text", " rtf" or "jpg" files.
For research purposes, and to encourage academic integrity, I reserve the right to compare papers submitted here to those submitted at other times or places. Your papers will be posted to SafeAssign, which is a type of "plagiarism prevention software" in Blackboard. In SafeAssign papers are linked to an assessment of how much of the paper is identifiably from other sources. If these sources are properly quoted and cited, that is fine. If not, there may be a problem. While it is important to note that there may be innocent reasons for any such findings, it is best to take care to ensure that your writing is your own, and credit is given where credit is due.
Class participation will determine the balance of the grade (10%). About 5% of that will be based on attendance, which will be noted on most days by sign-up sheet. Further, depending on how many students there are, some time during the first few weeks, I may ask you to post simple photos of yourselves to Blackboard. The rest will reflect active participation. This semester, I will offer an additional avenue for class participation - written questions. Specifically, I will make available 3x5 index cards for students who wish to ask questions without drawing attention to themselves. I’ll want you to note the date and context, clearly print your question, and if you wish to be recognized, your name. Periodically, I will address these in class. Makeup quizzes will not usually be offered except by prior, mutual arrangement. For well documented hardship cases, 1000-2000 word papers on an suitable topic may be assigned (at my option) in lieu of a missed quiz. For fairness, such papers will be graded on the same curve as the quiz they replace.
Course grades will be curved. If the usual curve develops, the average will be 75-85 overall and will earn a B+. Typically, about 30-40% of the class will earn A or A-, 50-60% or so will earn a B+, B, or B-, 5-10% might earn 'C's (or worse). I reserve the right to shift the curve for very strong or very weak classes.
Announcements or changes of this syllabus or the course will be made at the start of class sessions or via BLACKBOARD or email to the class. It is your responsibility to be aware of such changes.
Please, make every effort to stay current with the readings, and your paper. Provisional Schedule (subject to change, in particular, quiz and chapter dates are approximate - firm quiz dates will be announced with at least 1 day notice.) Be flexible.
Week Subject Chapters ------+------+------1 1/14 Introduction, Historical Overview Introduction Early Finance 1/16 When do we start? Polanyi (1957) 2 1/21 Interest in Sumer Chapter 1 1/23 Coins? Readings: (Schaps, 2006; Schoenberger, 2008) 3 1/28 Roman “Shares” Chapter 2 1/30 Rome Readings: (Malmendier 2009, Abatino, et al., 2010) 4 2/04 Finance in Classical Greece (Cohen, chapters 1-3, 5) Early “Modern” Finance 2/06 Middle Ages(?) (1st proposal due) (Greif, 1993) 5 2/11 Silk road, Chapter 3 2/13 Paper money in China Chapter 4 6 2/18 Paper money in China Chapter 5 2/20 Finance in Mediterranean, Southwest Asia (Quiz#1) (Pryor, 1977) 7 2/25 Fibonacci and “commercial arithmetic” (1st draft) Chapter 7 2/27 Government Debt in Italy Chapter 8 “Modern” Finance 8 3/04 Dutch East Indies Company, (and kindred), Chapter 9 3/06 Perpetuities, 2nd proposal due (1st Final Paper) Chapter 10 ------[ Spring Break 3-10 - 3/15 ] ------9 3/18 Derivatives in Amsterdam? Chapter 11 3/20 Annuities Chapter 12 10 3/25 John Law, South Seas, Mississippi Bubble Chapter 13, readings(?) 3/27 Mutual Funds (Quiz #2) Chapter 15 11 4/01 Emergence of American Capital Markets, (2nd Draft) Chapter 16 4/03 New York Stock Exchange, (3rd proposal) Chapter 17 12 4/08 19th Century Finance in America readings(?) 4/10 Panic of 1907- events of 1914 readings(?) 13 4/15 Great Depression, (2nd final paper) readings(?) 4/17 First Eurobonds Chapter 18 14 4/22 Financial Crises, special topics (3rd Draft) readings 4/24 Financial Crises, special topics readings 15 4/29 Financial Crises, special topics (3rd Final Paper) readings 5/?? Finals Week (quiz#3) readings