The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble (review)

The turn of the eighteenth century is one of the most fascinating moments in English history. Many historians have spent their careers fruitfully studying the Glorious Revolution, England's emergence as a firstrate military power, and the accompanying debates in the nascent public sphere. A major reason for the period's vibrancy is the Financial Revolution. The introduction of a widely circulating credit currency, the creation of a long-term funded national debt, and the emergence of an active market in securities contributed to a radically altered culture of credit, which in turn had a profound impact on England's commerce, politics, and geopolitical standing. Since Dickson's classic statement on the topic in 1967, there has been a steady stream of important contributions, highlighted by the works of Brewer, North and Weingast, Neal, and Carruthers.¹ In her book, The Origins of English Financial Markets, Murphy revisits and critically comments on this body of literature, as well as incorporates more recent scholarly findings, including her own, generating a succinct and accessible account that historians of all specialties will find useful.

Instead of focusing equally on all facets of the Financial Revolution, Murphy concentrates on the development of financial markets. She begins by exploring London's first stock-market boom and the introduction of tradable public securities in the 1690s, and the debate surrounding these innovations, in particular the derision of the dreaded stock jobbers (Chapters 1-3). One of the many virtues of this book is that it not only offers a sophisticated treatment of such financial mechanisms, but it also informs us about many of the surrounding cultural transformations that were essential for the development of a more sophisticated system of finance, such as the birth of a financial press and the creation of informational networks (Chapters 5-6). The most original feature of this book is its rare insight into investors' thought processes, decision making, and trading strategies (Chapters 6-8).

Murphy invites her readers to reconsider the degree to which England's financial system was—as is often claimed—indebted to so-called Dutch Finance, the extent to which the Glorious Revolution's changes to the constitution affected the development of confidence in public credit, the plausibility of the idea that changes to public credit were more revolutionary than those pertaining to private credit, and the question of whether early modern investors exhibited rationality in their decisions.

Although Murphy's carefully constructed arguments on all of these issues deserve the attention of scholars, the intervention that likely will prove most enduring is her highlighting of investors' subjectivity and agency, as well as the political and cultural context in which they operated. Instead of relying solely on the movement of debt and equity prices, as many previous contributors to the debate about early modern investor rationality have done, Murphy offers a rich analysis of who the investors, projectors, brokers, and stock-jobbers were and how they gathered and processed information; decided and implemented their strategies; and influenced and, at times manipulated, the trade in debt and equity instruments, as well as derivatives. Murphy's delightful prose, insightful syntheses, and careful research make her book deserving of a wide readership.