Overview

Financial disasters often have long-range institutional consequences. When financial institutions - banks, insurance companies, brokerage firms, stock exchanges - collapse, new ones take their place, and these changes shape markets for decades or even generations. Surviving Large Losses explains why such financial crises occur, why their effects last so long, and what political and economic conditions can help countries both rich and poor survive - and even prosper - in the aftermath. Looking at past and more recent financial disasters through the lens of political economy, the authors identify three factors critical to the development of financial institutions: the level of government debt, the size of the middle class, and the quality of information that is available to participants in financial transactions. They seek to find out when these factors promote financial development and mitigate the effects of financial crises and when they exacerbate them. Although there is no panacea for crises - no one set of institutions that will resolve them - it is possible, the authors argue, to strengthen existing financial institutions, to encourage economic growth, and to limit the harm that future catastrophes can do.

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9780674024694

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Reviews

This is a timely book. It is also provocative in trying to do something no one has done before, namely provide a comprehensive political economy analysis of several centuries of financial crises and their effects on the development of financial systems. It aims to bridge the gap between the modern economics literature on finance and growth, and more traditional historical studies... Surviving Large Losses is a step forward in the social-scientific analysis of financial crises and historical financial development. -- Richard Sylla Journal of Economic History (03/01/2008)

The excitement of Surviving Large Losses is not easy to convey. It is a different kind of thinking cap, that's all. On every page it reflects the substantial changes wrought by political economists during the past thirty years or so in the way we understand the sources of the wealth and poverty of nations. It delivers a profoundly optimistic message, however--that eventually we get wise to ourselves; that gradually financial knavery is reduced; that by learning from our mistakes we are creating a more stable financial order, and perhaps even a more just world.--David Warsh Economicprincipals.com (07/01/2007)

The authors of this book, academics in the fields of history, social sciences, and economics, have done more than write a history of financial crises; rather, they explain the nature of these crises by putting economic theory into plain English.--R. J. Phillips Choice (08/01/2007) The excitement of Surviving Large Losses is not easy to convey. It is a different kind of thinking cap, that's all. On every page it reflects the substantial changes wrought by political economists during the past thirty years or so in the way we understand the sources of the wealth and poverty of nations. It delivers a profoundly optimistic message, however--that eventually we get wise to ourselves; that gradually financial knavery is reduced; that by learning from our mistakes we are creating a more stable financial order, and perhaps even a more just world.--David Warsh Economicprincipals.com (07/01/2007) This is a timely book. It is also provocative in trying to do something no one has done before, namely provide a comprehensive political economy analysis of several centuries of financial crises and their effects on the development of financial systems. It aims to bridge the gap between the modern economics literature on finance and growth, and more traditional historical studies... Surviving Large Losses is a step forward in the social-scientific analysis of financial crises and historical financial development.--Richard Sylla Journal of Economic History (03/01/2008)

Author Information

Philip T. Hoffman is Professor of History and Social Science, California Institute of Technology. Gilles Postel-Vinay is Director of studies at Ecole des Hautes Etudes en Sciences Sociales. Jean-Laurent Rosenthal is Professor of Economics at the California Institute of Technology.

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