top of page


Free People, Free Markets: Can Democracy & Capitalism be Reconciled?
with Sidney M. Milkis, Forthcoming in 2024, Oxford University Press

Far from popular perception, United States’s place as an economic power was far from assured after independence. In reality, the resource-rich, capital- and labor-poor early American economy suffered from many of the maladies of modern developing economies. It broke free of the post-colonial trap not simply by exporting its natural wealth to its former imperial masters, but rather by building a vibrant domestic market and economic culture defined by flexible and specialized entrepreneurialism.

This book tells the story of how the United States transitioned from a dependent developing economy to a rising economic power. For 150 years of imperial control, Britain used its North American colonies as little more than a source of natural resource extraction and the Americans’ dependence on their former imperial master became evident after independence in 1783. With a non-existent “domestic economy” and foreign market access reliant on the whims of powers like Britain and France, the nascent American economy collapsed into the Depression of the 1780s. Yet out of this period of economic and political crisis came widespread reforms. Merchants and traders began integrating markets at a rapid pace. Public and private institutions forged new systems of capital allocation, investment, and risk diversification. Firms changed their business practices to specialize and become more productive. And commercial actors built coalitions to exert political power. In so doing, the new United States avoided the post-colonial developing economy trap and forged a path toward economic growth in the next century.

At its heart, this book relays a story of successful economic development, though one routed in profound historical contingency. Rejecting the determinism of previous accounts of American economic growth, this book argues that people—and quite a bit of luck—created the means by which economic potential translated into growth.

This book provides a multidisciplinary examination of the intersection of capitalist economic systems and democratic societies across time and space. Featuring 24 essays from scholars across 9 different academic fields, the volume interrogates the ideas, history, and policy behind these two principal elements of liberal society. By providing wide-ranging investigations across scholarly disciplines and ideological spectra, we aim to determine whether democracy and capitalism can co-exist, the places where they thrive and diverge, and the systemic adjustments needed to sustain democratic capitalism in the future.

The volume will examine how democratic and capitalist systems have changed and are changing and apply those lessons to our present circumstances. In addition to examining past frictions at the intersection of democracy and capitalism, this volume shows how democratic and capitalist forces influence how institutions work, develop, and change. Since democracy and capitalism are evolving concepts that vary in both practice and theory, the absence of common definitions has prevented sophisticated multidisciplinary evaluation. Indeed, although there has been considerable work on democracy and capitalism, the relationship between them is surprisingly under-examined. To the degree that there is an existing literature, it shies away from multidisciplinary and comparative analysis. This volume, and the conference that undergirds it, aims to provide a lingua franca that will make further scholarship and debate possible while contributing its own conclusions and analysis.

This volume examines the foundational yet fluid meaning of democracy and capitalism and consider the inherent tensions in reconciling them, followed by five pathologies including climate change, political polarization, inequality and opportunity, and governance and consolidation. Contributors will address the underlying causes of, and solutions to, these pathologies. In so doing, the conference and edited volume will provide a rounded understanding of why these pathologies arose, how they have influenced society, and how free people can reform their political economy to bring it more in line with their values. Underlying the examination of these questions is the belief that it is possible to understand the dissonance in societies, know that humans have wrestled with these questions before, and combine the tools of theory and history to chart a course for democratic capitalism into a new age.

In 1720, Britain and France convulsed in the South Sea and Mississippi bubbles.  Manias and crashes have stalked financial markets ever since, demonstrating the profound difficulty of preventing or mitigating them.  Conventional narratives depict the crises as the product of hubris, folly, and greed, emerging from “Insanity born of optimism and self-serving illusion.” We argue for a more nuanced view.  Human foibles should not obscure the powerful influences of institutions, interests, ideologies, and government policies.  The events of 1720 embodied a transition to a new era defined by financial innovations and by profound civic reactions to the crises.  The 300th anniversary invites a reconsideration of how and why these crises emerged, how they affected their host societies, and what lessons they have for us today.

This essay answers to several questions that can help us understand these seminal events including: 1) was there more to the origins of bubbles than hubris, folly, and greed?; 2) were the market manias of 1719-20 “bubbles?”; 3) What triggered the crashes in 1720?; and 4) how did the crises impact financial development in their societies? The 300th anniversary of the great crises of 1720 provided an opportunity to reconsider conventional views of manias and crashes.  Revolutions in institutions, waves of financial innovation, and state intervention figure importantly in crisis episodes, alongside themes of hubris, folly and greed.  The crises of 1720 reveal that the political, institutional, and social character of societies play a significant role in their long-term financial legacies. The contrasting 18th century experiences of Britain and France should caution us that single crises, and the way their societies handle them, can change the course of empires.

“The Great Crash of 1929: A 90th Anniversary Reassessment” 
with Robert F. Bruner, Journal of Applied Corporate Finance, Vol. 31, No. 4 (Fall 2019), 43-55.

The autumn of 2019 marked the 90th anniversary of the Great Crash of 1929.  It ranks as one of the climactic events of the last 100 years that marked the end of one age and the beginning of another.  As such, it is fitting to revisit why the Great Crash became so deeply etched the American memory, how the U.S. government responded, and what we can learn from the experience.  Just as the Great Crash loomed over policy makers in 2008, it will inevitably surface again and again in the public mind with each new market tumble.  Therefore, we can benefit from revisiting the past as a way of anticipating the future and avoiding the policy errors of the past. 


In this essay, we examined five simple questions about the Great Crash including, 1) why did the “Roaring 20s” roar?; 2) was the boom in equities a “bubble?; 3) what caused the sudden reversal in the fall of 1929?; 4) did the Crash cause the Great Depression as popular opinion has long maintained?; and 5) did public officials respond appropriately? This retrospective suggests that the complexity of this episode, the great influence of chance and contingency, and the gaps in information make the Great Crash a difficult standard by which to assess future events. Also, the implications of financial crises change as we acquire new information, more rigorous analysis, and emotional distance from such events.  The use of historical precedent warrants caution and great humility in the makers of public policy.

Developing Economy, Emerging Republic: Crisis, Opportunity, and the Struggle for American Economic Power, 1765-1812
Forthcoming in 2024, University of Chicago Press

“The First Modern Crises: The South Sea and Mississippi Bubbles in Historical Perspective”  
with Robert F. Bruner, Journal of Applied Corporate Finance, Vol. 32, No. 4 (Fall 2020), 17-33.

“An Almost Total Stagnation of Business”: The Depression of the 1780s,” in Cambridge History of the American Revolution, Vol. 3
Forthcoming in 2023, Cambridge University Press

This essay presents the Depression of the 1780s as one of, if not the, formative events of the Revolutionary era. The Depression shook Americans’ post-Revolutionary confidence and forced them to make fundamental changes to their economic and political institutions. For generations, scholars have struggled to understand the underlying causes and subsequent effects of the Depression. Patchwork or nonexistent data have prevented sophisticated statistical analysis of the crisis. Most accounts are descriptive at best—they depict the malaise of the 1780s but do not articulate a comprehensive framework for how the Depression emerged and why it produced so much economic damage. Scholars agree that a combination of rampant inflation, a near-complete cessation of trade, and tremendous damage to American physical, financial, in human capital stocks caused economic collapse during the War itself. However, scholars diverge when interpreting the drivers of the post-Revolutionary contraction. Historians have offered interpretations based on the collapse of market access for American exports, the bust of a speculative import boom upon independence, the diminishment of American productive capacity, and a post-war contraction of the American labor force. While traditional interpretations based on trade flows and capital stocks deserve consideration, they assume a robust new American economy that could assume a dominant position in the Atlantic economic system. Rather, shorn of its place in the British commercial empire, the new United States resembled a vulnerable “developing economy” subject to intense pressure from British financial hegemony. American susceptibility to the whims of British monetary policy-makers, and the Atlantic financial system they controlled, converted wartime contraction into depression.


Contrary to previous interpretations, this essay argues that the Depression arose from a major contraction of America’s deficient money supply rather than flaws in the real economy. British postwar monetary retrenchment resulted in currency, credit, bills, and notes racing eastward across the Atlantic, leaving American markets devoid of money and halting economic activity. Put simply, the new nation’s financial institutions, if they existed at all, could not defend the American economy against British financial power. The collapsing money supply curtailed transactions, forestalled investment, and produced a deflationary spiral that hit every corner of the American economy. The abatement of British retrenchment and creation of stronger American financial institutions helped ease the crisis, but the Depression revealed the profound vulnerability of the Confederation’s fragmented economic system.

“Transatlantic Monetary Shocks and the Depression of the 1780s” 
Working Paper, Darden School of Business

“'Never Did I See So Universal a Frenzy': The Panic of 1791 and the Republicanization of Philadelphia” 
Pennsylvania Magazine of History and Biography, Vol. 142, No. 1 (January 2018), 7-48.” 

This paper presents a new interpretation of the Depression of the 1780s by focusing on the cascading impact of a massive monetary contraction. This paper proposes that postwar deflation, sparked by a British policy-caused money supply shock, drove the Depression of the 1780s. While past historians have noted significant postwar deflation, the historiographical consensus attributes falling prices in the 1780s to widespread commodity gluts resulting from a brief postwar import boom and the subsequent collapse of foreign demand for American products.  This paper argues that efforts by the Bank of England and Royal Treasury to rebuild British gold stocks and broader monetary base after the American Revolution drew money out of the new United States at a remarkable rate. The transatlantic monetary vacuum exacerbated a secular contraction of the American money supply, sparked by the abandonment of the Continental Dollar and widespread volatility among numerous state currencies. All told, British financial power overwhelmed the new nation’s meager financial defenses and exacerbated a perfect storm of negative postwar demand shocks and scarce domestic sources of money. Without a consolidated monetary authority or private financial institutions capable of countering British monetary retrenchment, monetary scarcity produced a deflation cycle that devastated an already wounded American economy.

This paper refocuses causal examination of the postwar Depression on British policy influencing the transatlantic monetary system. This study examines price patterns in commodity baskets with distinct domestic or local and Atlantic money supply exposures to parse the impact of domestic and British monetary forces on American deflation. America’s historical dependence on, and integration with, the British commercial empire, made British monetary flows the primary driver of the monetary level in the new United States. The discordant nature of state and federal monetary regimes, as well as unintegrated markets, made unified price movements based on domestic sources of money highly unlikely. Yet across three American cities in 1783-1789, a basket of “domestic” commodities—i.e. goods not traded internationally and thus not subject to international monetary factors but still subject to British monetary forces in America—declined an average of 9.3 percent. Quite the contrary, a similar average of “foreign” goods—i.e. those cushioned from the effects of adverse British monetary policies by robust global markets—fell only 2 percent over the same period. Most importantly, price movement in the American domestic and foreign baskets converged after 1786 when British authorities ended their policy of monetary retrenchment. The parallel deflationary movements of “domestic” prices across three distinct regions with different domestic currency environments signal the primacy of British money, and thus British monetary policy, in post-Revolutionary America. Furthermore, the delta between American domestic and foreign commodity baskets during 1783-1786 provide new evidence that British monetary policy caused a widespread monetary contraction and subsequent deflation in the new United States.

Can Rational Market Reactions to Legislative Liberalization Explain the Runup in British Share Prices, 1844 to 1845?
with Robert F. Bruner and Vaska Atta-Darkua, Under Review at Financial History Review

This study examines the impact of changes in government policy during Britain’s railway “mania” of 1844-45. We find that liberalizing policy actions were associated with significantly positive above-trend returns to equity holders in a diversified portfolio of stocks and portfolios of five industry sectors.  The returns during the liberalization episodes account for 55.4 percent of the entire runup of the market composite portfolio and 61.4 percent of the railway sector, both of which are materially and significantly greater than the number of observation days as a percentage of all days in the runup (42.2 percent).  We find that for the railway portfolio and the market portfolio, returns associated with policy innovation events are significantly higher than for other days during the runup.  Looking at specific event days, returns are significantly higher for news associated with regulations of corporations and railways in particular, and with proposed changes to promote free trade.   The findings in this case invite researchers to consider the possible role of liberalization across society in stimulating equity market runups. 

This paper charts the final financial panic in American history which took place in the late summer and early fall of 1791. Amid frenzied demand for Bank of the United States script, the Philadelphia General Advertiser proclaimed on July 11, “an inveterate madness for speculation seems to possess this country!” When the script bubble burst on August 12, asset prices collapsed, liquidity dried up, and speculators who had realized massive profits just twenty-four hours before found themselves buried in debt. What William Seton, cashier of the Bank of New York, described to US Treasury Secretary Alexander Hamilton as “that universal panic & want of money which now prevails” drove men to literal tears, madness, and suicide.


With public confidence in the constitutional regime already low, the Hamilton Treasury faced a collapse in the prices of Bank of the United States script and US securities. Low barriers to entry and a culture of innovative entrepreneurialism drew “new adventurers”—including many Revolutionary War veterans—and middle-class laborers into Philadelphia’s financial community. Many of these new entrants suffered ruination when the script market crashed, and they often blamed Hamiltonian finance and its Federalist backers for their plight. The crisis played a pivotal role in converting Philadelphia from a Federalist stronghold into the epicenter of early American Jeffersonian Republicanism.

bottom of page