walkitout (walkitout) wrote,
walkitout
walkitout

_Lombard Street_, Walter Bagehot

Subtitled: A Description of the Money Market

The inside of this book tells me I bought it "May 1999" at Barnes & Noble. The copy I have is part of the "Wiley Investment Classics" series, of which I have numerous entries, mostly sampled, but some read through. After reading John Wood's history of Central Banking, it seemed really wrong to own this and _not_ have read it all the way through.

A lot of 19th century stuff is a big of a slog, with long, complex sentences, a rhetorical structure which is more complicated than it needs to be and not in a way that I find intellectually appealing. Bagehot reads like a blogger; the book is the assemblage of a variety of shorter pieces along with a connecting structure which I believe he wrote for this in the later years of his surprisingly short life. It would probably be helpful to read some of the last, shorter chapters before tackling the main part of the book, because then a modern reader would not necessarily find terms like bill-brokers so confusing (we would know them as traders in short-term commercial paper, unless I _really_ misunderstood).

The cover matter -- and a variety of commenters -- suggest that Bagehot invented crisis management. I think that's kinda bullshit; he mostly just described best practice of the time in a succinct (if repetitive) and memorable way.

I think books like this one (and some, but not all, others in the Wiley Investment Classics series) should be on the lists that are promulgated as "classics" to be read by high school students. It's not that hard to understand. The ideas are important ones which shaped the development of "Western Culture" in the modern/contemporary era. The interaction with political, cultural, etc. developments is rewarding to consider. And Bagehot, or at any rate the basic description of monetary policy as pursued by the Bank of England, provides the entire background for Keynes and, of course, later on, the Friedmans and our current circus of ideas of how to manage economic development. None of which are on typical "classics" lists, either, and all of which makes young people susceptible to ridiculous theories they encounter in adolescence -- because they don't know why that stuff never worked, or stopped working. Then of course they grow into middle age and know a little better, but still don't quite know why.

Bagehot makes a huge point of Not Talking about Peel's Act of 1844; he instead focuses on what the BofE did right and wrong in 1857 and 1866. Then he talks about whether or not you can have a rule for managing reserves, and why any of the rules then-proposed were dangerous. He proposes a piece of ad hockery (which he acknowledges as such), that is sort of interesting. The appendices including a _really_ self-serving bit of nonsense about why there shouldn't be auditors of the BofE; I'm not sure what Bagehot thought of that (either he didn't say, or I wasn't paying enough attention).

A variety of people have attempted to generalize the development of banking/money markets from the English (Empire) and American (Empire) experiences -- I ran across one in the early section of _Why Iceland_. I don't think it's valid to generalize; this is an area of human activity that is highly mediated by politics/culture.

And that's why I think we ought to be reading this kind of thing in high school. We need to start treating economics/banking as a cultural artifact, but we're doing that poorly as long as we don't make a solid effort to understand what the active participants are attempting to accomplish. Also, innumeracy? Not an excuse.
Tags: book review, economics, politics
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