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Interest Rates and Crowding-Out During Britain's Industrial Revolution

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  • Heim, Carol E.
  • Mirowski, Philip

Abstract

Available evidence on interest rates and government borrowing during Britain's industrial revolution, while limited, does not support the idea that war spending crowded out private investment. This article demonstrates the importance of using data on net receipts from borrowing, rather than changes in government debt. Weaknesses of the crowding-out model concerning capital markets and investment, openness of the economy, and full employment are identified for the historical case. The case raises broader issues of whether conceptions of saving and investment based in neoclassical supply-constrained models are as appropriate as theories of capital accumulation.

Suggested Citation

  • Heim, Carol E. & Mirowski, Philip, 1987. "Interest Rates and Crowding-Out During Britain's Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 47(1), pages 117-139, March.
    • Handle: RePEc:cup:jechis:v:47:y:1987:i:01:p:117-139_04
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    Cited by:

    1. Zhengyang Jiang & Hanno Lustig & Stijn Van Nieuwerburgh & Mindy Z. Xiaolan, 2020. "Manufacturing Risk-free Government Debt," NBER Working Papers 27786, National Bureau of Economic Research, Inc.
    2. Jaume Ventura & Hans-Joachim Voth, 2015. "Debt into growth: How sovereign debt accelerated the first Industrial Revolution," Economics Working Papers 1483, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Temin, Peter & Voth, Hans-Joachim, 2005. "Credit rationing and crowding out during the industrial revolution: evidence from Hoare's Bank, 1702-1862," Explorations in Economic History, Elsevier, vol. 42(3), pages 325-348, July.
    4. Nuno Palma & Carolyn Sissoko, 2022. "Crowding in During the Seven Years' War," Economics Discussion Paper Series 2211, Economics, The University of Manchester.
    5. P.Antipa, 2014. "How Fiscal Policy Affects the Price Level: Britain’s First Experience with Paper Money," Working papers 525, Banque de France.
    6. Crafts, N.F.R. & Leybourne, S.J. & Mills, T.C., 1988. "Economic Growth In Nineteeth Century Britain: Comparisons With Europe In The Context Of Gerschenkron'S Hypotheses," The Warwick Economics Research Paper Series (TWERPS) 308, University of Warwick, Department of Economics.
    7. Shingo Watanabe, 2019. "What Do British Historical Data Tell Us About Government Spending Multipliers?," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1141-1162, April.
    8. Voth, Joachim, 2005. "Credit Rationing and Crowding Out During the Industrial Revolution," Department of Economics, Working Paper Series qt4qw3v8q6, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    9. Gregor Semieniuk & Emanuele Campiglio & Jean‐Francois Mercure & Ulrich Volz & Neil R. Edwards, 2021. "Low‐carbon transition risks for finance," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 12(1), January.
    10. Michael D. Bordo & Eugene N. White, 1990. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
    11. Deleidi, Matteo & Mazzucato, Mariana & Semieniuk, Gregor, 2020. "Neither crowding in nor out: Public direct investment mobilising private investment into renewable electricity projects," Energy Policy, Elsevier, vol. 140(C).
    12. François M. Crouzet, 1989. "Les conséquences des guerres de la Révolution et de l'Empire pour l'économie britannique (1793-1815)," Revue Économique, Programme National Persée, vol. 40(6), pages 1119-1136.
    13. Nicholas A. Curott & Tyler A. Watts, 2018. "A Monetary Explanation for the Recession of 1797," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(3), pages 381-399, June.
    14. Patricia Gomez-Gonzalez & Gabriel Mathy, 2024. "The World's First Global Safe Asset: British Public Debt, 1718-1913," Fordham Economics Discussion Paper Series dp2024-01er:dp2024-01, Fordham University, Department of Economics.
    15. Visser, H., 1990. "Crowding out and the government budget," Serie Research Memoranda 0006, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    16. Robert C. Allen, 2005. "Capital Accumulation, Technological Change, and the Distribution of Income during the British Industrial Revolution," Economics Series Working Papers 239, University of Oxford, Department of Economics.

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