Booms and Busts: An Encyclopedia of Economic History from the First Stock Market Crash of 1792 to the Current Global Economic Crisis

Booms and Busts: An Encyclopedia of Economic History from the First Stock Market Crash of 1792 to the Current Global Economic Crisis- With more than 360 entries, this set covers the extremes of economic cycles, with emphasis placed on the twentieth and twenty-first centuries. Although geographic coverage is international, U.S.-related articles make up a large portion of entries. A “Topic Finder” in volume 1 organizes entries under 16 headings. Three headings with the largest number of articles are “Economists, Financiers, Policy Makers” (83 entries); “Economic Terms and Concepts” (50); and “Nations, Regions, Economic Blocs” (45 entries).

Category: Stock

Author: Mehmet Odekon

Language: English

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Introduction

This timely and authoritative set explores three centuries of good times and hard times in major economies throughout the world. More than 400 signed articles cover events from Tulipmania during the 1630s to the U.S. federal stimulus package of 2009, and introduce readers to underlying concepts, recurring themes, major institutions, and notable figures. Written in a clear, accessible style, “Booms and Busts” provides vital insight and perspective for students, teachers, librarians, and the general public – anyone interested in understanding the historical precedents, causes, and effects of the global economic crisis. Special features include a chronology of major booms and busts through history, a glossary of economic terms, a guide to further research, an appendix of primary documents, a topic finder, and a comprehensive index. It features 1,050 pages; three volumes; 8-1/2″ X 11″; topic finder; photos; chronology; glossary; primary documents; bibliography; and, index.

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To people whose jobs, lifestyles, families, and futures depend upon the ups and downs of capitalist markets—in other words, just about all of us—economic booms and busts may seem like elemental forces of nature. For every action, it would appear, there is an equal and opposite reaction. What goes up must come down. The cycle of good times and hard times, finally, is beyond human control.

Once upon a time, there was some truth to this view. Prior to the industrial age, when human endeavor was largely confined to agriculture, natural forces largely determined economic feast or famine. Indeed, one of the first intellectual efforts to understand the rhythms of market economies was known as the “sunspot theory.” According to its author, the nineteenth-century British economist William Stanley Jevons, the eleven-year cycle of sunspot activity, identified by astronomers of the day, influenced the earth’s climate, which affected crops, causing economies to expand and contract.

Subsequent to Jevons’s cosmological explanation of the boom-bust cycle, other economists pointed to causes more firmly rooted on Earth and, specifically, in the doings of the planet’s most enterprising species: humans.

Economic cycles, they said, were the result of credit (John Stuart Mill), of fixed capital investment (Clément Juglar), and of technological innovation (Nikolai Kondratieff). What all of these theories shared was the notion that there are predictable rules and principles, akin to the laws of nature, that explain economic cycles. These rules abide because human beings, in their role as homo economicus, or economic man, act rationally. According to this view, people act as efficient cogs in a great economic machine, their behavior following immutable laws and principles. This mechanistic view of human economic behavior—the British neoclassical paradigm, as it were— was very much in sync with the nineteenth-century Newtonian view of how nature itself works: logically and predictably.

Far from British shores, meanwhile, in the central European city of Vienna, Austria, an alternative paradigm emerged. For the thinkers of the Austrian school, economics is not driven by natural law but by human psychology; value is not determined mechanistically by adding up all the costs of making a product but by how much people want that product. Economic growth and contraction, according to this view, are not determined by natural law, but by the ambitions, insights, daring, and, yes, error of very human entrepreneurs. Despite these fundamentally different understandings of what determines the rhythms of an economy, the British neoclassical and Austrian psychological/entrepreneurial schools of thought did share at least one important assumption and conclusion about economic cycles. The assumption was that booms and busts, while obviously having beneficial or deleterious effects on people’s lives, are not central to how economies function but are, instead, self-correcting anomalies. Based on this assumption, these very different economic schools both concluded that there is very little governments can or should do to counteract boom-and-bust cycles, or even ease the want and suffering they cause.

The Keynesian revolution of the middle third of the twentieth century changed both the assumption and conclusion of the neoclassical and Austrian schools of thought and put the business cycle and efforts to manage it at the heart of economic theory and practice. Whatever causes booms and busts, argued the British economist John Maynard Keynes, economic forces can produce a situation in which the price equilibrium set by supply and demand—that is, the equilibrium that determines the utilization of economic resources, including both capital and labor—can become stuck well below full an economy’s full capacity to produce, leaving both factories and labor idle. Thus, the Great Depression formed a backdrop to Keynes’s greatest work, The General Theory of Employment, Interest and Money (1936). In it, Keynes argued that only government has the power to reinvigorate demand—through fiscal and monetary means—and thus lift an economy out of economic stagnation.

Keynes offered a series of tools governments can use to smooth out economic cycles and the hardships they cause—tools that were eagerly taken up throughout the industrialized capitalist West in the decades following World War II. And so successful were these tools—or so they appeared to be, amid the greatest economic boom in world history—that economists and policy makers spoke of capitalism having put the economic cycle itself behind it for good.

That illusion was shattered by the repeated economic contractions of the 1970s and early 1980s, accompanied, seemingly in violation of basic economic principles, by large doses of inflation. While Keynes’s heirs argued for wage and price controls to rein in inflation, policy makers largely ignored these ideas in favor of a purely monetarist approach—making sure that the money supply was kept in sync with economic growth. Once again, two decades of solid economic growth, with a minimum of economic contractions, led economic thinkers and tinkerers to believe they had found the economic Holy Grail—a way to avoid or, at least, minimize the boom-bust cycle.

Contributing to this thinking were key technological and financial innovations of the late twentieth and early twentyfirst centuries. The information revolution created by the personal computer and the Internet offered better and more easily accessible information to market participants, promising to minimize economic inefficiencies and market errors. And the securitization of debt—whereby the inherent risk of lending could be minimized through the marketplace—meant that more credit was available to drive economic growth.

Of course, as the financial crisis and recession of the late 2000s proved, neither technological innovation nor debt securitization could permanently keep the wolf from the door. Indeed, debt securitization proved to be the wolf itself, encouraging the kind of reckless financial leveraging that had caused so many booms to turn to busts in the dark ages, before economists and policy makers hubristically came to believe they could banish the economic cycle itself.

Conceived and created in the midst of the worst economic recession since the 1930s, this encyclopedia attempts to explain what the boom-and-bust cycle is all about—in theory, in history, and in real-life implications. Before describing the content and organization of this work, a brief explanation of its key concepts is in order. A boom is a period of rising economic expectation and activity triggered by any number of causes—population expansion, a new technology, the discovery of natural resources, the emergence of new industries, an increase in productivity, and the like. Booms go through a series of stages, beginning with a period in which investor confidence is matched by real economic growth. This is followed by a second phase, in which investor euphoria leads to outsized expectations, speculation, and increasing financial leveraging. At some point, when the savviest investors begin to recognize the frothiness of the expansion and start to pull out of the market, a decline in prices follows, which then triggers a mass sell-off and a rapid drop in prices. The bust that follows is marked by a precipitous decline in financial activity, production, and sales, leading to a broad contraction in business, rising unemployment, and a proliferation of bankruptcies—until the cycle is repeated.

Contents
The contents of this encyclopedia—more than 360 articles, 120 images, a chronology, a glossary, and ancillary materials—take it from there, offering the why’s, how’s, what’s, when’s, where’s, and w ho’s of economic booms and busts. Historically, the work begins with the first great episode in modern speculation—the Dutch tulip boom of the 1630s, and concludes with the Great Recession of the late 2000s, encompassing nearly 400 years of economic history. Geographically, it includes articles on all the major economies of the world, but with an emphasis on U.S. economic history. The book extensively covers the housing and securities boom of the mid-2000s and the financial crisis and global recession that followed. Readers will also find biographical entries on the important thinkers in the field (most of these are not American, a reflection of the history of the discipline) and the theories they advanced, with an emphasis on economists whose work has focused on business and trade cycles.

In addition, a number of biographies highlight recent and current economic policy makers and the decisions they have made. There are also profiles of economic and financial institutions, in both the private sector and government (most of these are American). In no small measure, this work also presents more abstract and technical aspects of economics and business cycle theory, with entries, written in laymen’s terms, on essential ideas, terms, and schools of thought.

Finally, a word on what this encyclopedia is not. Booms and Busts is not a general economics text. As its title implies, the work at hand focuses on one critical aspect of economic history and theory—the economic cycle. At the same time, because the theory and reality of economic cycles are so interconnected, a close reading of the encyclopedia’s contents will provide readers with a general understanding of the last 400 years of both. Readers are also likely to find articles of varying degrees of difficulty. Many entries, particularly those pertaining to economic history, can be easily understood by readers with a passing knowledge of the field. Other entries, particularly those on theoretical subjects, may be elucidated with the help of the Glossary.

In addition to word search—in either Quick or Advanced modes—tools for navigating the contents of this encyclopedia include an alphabetically arranged Browse list and a Topic Finder, along with hyperlinked crossreferences at the end of each article to other related entries. A comprehensive Chronology recounts the history of booms and busts from the 1630s to the present day. And a Master Bibliography of books, articles, and Web sites —in addition to Further Reading lists for each article—directs users to a wealth of recommended resources for expanded research.

Table of Contents- Booms and Busts PDF

Introduction
A-Z Entries
Africa, Sub-Saharan
Agriculture
AIG
Airline Industry
Akerman, Johan Henryk (1896–1982)
Argentina
Asian Financial Crisis (1997)
Asset-Price Bubble
Australia
Austrian School
Automated Trading Systems
Babson, Roger (1875–1967)
Balance of Payments
Baltic Tigers
Bank Cycles
Bank of America
Banking School/Currency School Debate
Banks, Central
Banks, Commercial
Banks, Investment
Bauer, Otto (1881–1938)
Bear Stearns
Behavioral Economics
Belgium
Bernanke, Ben (1953–)
Bethlehem Steel
Böhm-Bawerk, Eugen Ritter von (1851–1914)
Boom, Economic (1920s)
Boom, Economic (1960s)
Booms and Busts: Cause and Consequences
Booms and Busts: Pre–Twentieth Century
Booms and Busts: Twentieth and Twenty-First Centuries
Brazil
BRIC (Brazil, Russia, India, China)
Brunner, Karl (1916–1989)
Bullock, Charles (1869–1941)
Burchardt, Fritz (1902–1958)
Burns, Arthur (1904–1987)
Business Cycles, International
Canada
Capital Account
Capital Market
Capital One
Catastrophe Theory
Central America
Chile
China
Chrysler
Circuit City Stores
Citigroup
Classical Theories and Models
Collateral
Collateralized Debt Obligations
Collateralized Mortgage Obligations
Colombia
Commodity Markets
Community Reinvestment Act (1977)
Confidence, Consumer and Business
Congressional Budget Office
Construction, Housing and Commercial
Consumer and Investor Protection
Consumption
Corporate Corruption
Corporate Finance
Council of Economic Advisers, U.S.
Countrywide Financial
Creative Destruction
Credit Cycle
Credit Default Swaps
Credit Rating Agencies
Current Account
Debt
Debt Instruments
Deflation
Demographic Cycle
Denmark
Depository Institutions
Dot.com Bubble (1990s–2000)
Dow Jones Industrial Average
Duesenberry, James (1918–2009)
Eastern Europe
Echo Bubble
Eckstein, Otto (1927–1984)
Effective Demand
Efficient Market Theory
Emerging Markets
Employment and Unemployment
Endogenous Growth Models
Enron
European Central Bank
Exchange Rates
Fannie Mae and Freddie Mac
Federal Deposit Insurance Corporation
Federal Housing Administration
Federal Housing Enterprise Oversight, Office of
Federal Reserve System
Fellner, William John (1905–1983)
Financial Development/Deepening
Financial Markets
Financial Modeling of the Business Cycle
Finland
Fiscal Balance
Fiscal Policy
Fisher, Irving (1867–1947)
Fisher’s Debt-Deflation Theory
Fixed Business Investment
Fleetwood Enterprises
Florida Real-Estate Boom (1920s)
Foreclosure
Fragility, Financial
France
Friction, Financial
Friedman, Milton (1912–2006)
Frisch, Ragnar (1895–1973)
Galbraith, John Kenneth (1908–2006)
Geithner, Timothy (1961–)
General Motors
German Historical School
Germany
Glass-Steagall Act (1933)
Goldman Sachs
Goodwin, Richard Murphy (1913–1996)
Government Accountability Office
Great Depression (1929–1933)
Greece
Greenspan, Alan (1926–)
Gross Domestic Product
Growth Cycles
Growth, Economic
Haberler, Gottfried von (1900–1995)
Hansen, Alvin Harvey (1887–1975)
Harrod, Roy Forbes (1900–1978)
Hawtrey, Ralph George (1879–1975)
Hayek, Friedrich August von (1899–1992)
Hedge Funds
Hicks, John Richard (1904–1989)
Hoarding
House Financial Services Committee
Housing
Housing and Urban Development, Department of
Housing Booms and Busts
Iceland
Immigration and Migration
Income Distribution
India
Indicators of Financial Vulnerability
Indonesia
Industrial Policy
IndyMac Bancorp
Inflation
Information Technology
Innovation, Financial
Institutional Economics
Insull, Samuel (1859–1938)
Integration, Financial
Interest Rates
Intermediation, Financial
International Development Banks
International Economic Agreements
International Monetary Fund
International Monetary Fund Mortgage Market Index
International Policy Coordination
Inventory Investment
Investment, Financial
Ireland
“Irrational Exuberance”
Israel
Italy
Japan
Jevons, William Stanley (1835–1882)
JPMorgan Chase
Juglar, Clément (1819–1905)
Kaldor, Nicholas (1908–1986)
Kalecki, Michal (1899–1970)
Kautsky, Karl (1854–1938)
Keynes, John Maynard (1883–1946)
Keynesian Business Model
Kindleberger, Charles P. (1910–2003)
Kondratieff Cycles
Kondratieff, Nikolai Dmitriyevich (1892–1938)
Koopmans, Tjalling Charles (1910–1985)
Korea, South
Kuznets, Simon Smith (1901–1985)
Labor Market
Lachmann, Ludwig Maurits (1906–1990)
Lange, Oskar R. (1904–1965)
Latin America
Law, John (1671–1729)
Leads and Lags
Lehman Brothers
Lerner, Abba P. (1903–1982)
Leveraging and Deleveraging, Financial
Liberalization, Financial
Life Insurance
Linens’n Things
Liquidity Crunch
Liquidity Trap
Loan-to-Value Ratio
Long-Term Capital Management
Lowe, Adolph (1893–1995)
Loyd, Samuel Jones (1796–1883)
Luminent Mortgage Capital
Lundberg, Erik Filip (1907–1987)
Luxemburg, Rosa (1871–1919)
Madoff, Bernard (1938–)
Malthus, Thomas Robert (1766–1834)
Manufacturing
Market Trends
Marshall, Alfred (1842–1924)
Marx, Karl (1818–1883)
Marxist Cycle Model
Merrill Lynch
Metzler, Lloyd Appleton (1913–1980)
Mexico
Middle East and North Africa
Mill, John Stuart (1806–1873)
Mills, Frederick Cecil (1892–1964)
Minsky, Hyman (1919–1996)
Minsky’s Financial Instability Hypothesis
Mises, Ludwig von (1881–1973)
Mississippi Bubble (1717–1720)
Mitchell, Wesley Clair (1874–1948)
Monetary Policy
Monetary Stability
Monetary Theories and Models
Money Markets
Money, Neutrality of
Money Store, The
Moral Hazard
Morgan Stanley
Morgenstern, Oskar (1902–1977)
Mortgage-Backed Securities
Mortgage, Commercial/Industrial
Mortgage Equity
Mortgage Lending Standards
Mortgage Markets and Mortgage Rates
Mortgage, Reverse
Mortgage, Subprime
Myrdal, Gunnar (1898–1987)
Nasdaq
National Bureau of Economic Research
National Economic Council
Neoclassical Theories and Models
Neo-Keynesian Theories and Models
Netherlands, The
New Deal
New York Stock Exchange
New Zealand
Northern Rock
Norway
Oil Industry
Oil Shocks (1973–1974, 1979–1980)
Over-Savings and Over-Investment Theories of the Business Cycle
Overvaluation
Pacific Rim
Panic of 1901
Panic of 1907
Panics and Runs, Bank
Paulson, Henry (1946–)
Penn Central
Philippines
PNC Financial Services
Political Theories and Models
Ponzi Scheme (1919–1920)
Portugal
Poseidon Bubble (1969–1970)
Post Keynesian Theories and Models
Poverty
Price Stability
Production Cycles
Productivity
Profit
Public Works Policy
Real Business Cycle Models
Real-Estate Speculation
Recession and Financial Crisis (2007–2009)
Recession, Reagan (1981–1982)
Recession, Roosevelt (1937–1939)
Recession, Stagflation (1970s)
Refinancing
Regulation, Financial
Resource Allocation
Retail and Wholesale Trade
Retirement Instruments
Risk and Uncertainty
Robbins, Lionel Charles (1898–1984)
Robertson, Dennis Holme (1890–1963)
Robinson, Joan (1903–1983)
Romer, Christina (1958–)
Röpke, Wilhelm (1899–1966)
Rostow, Walt Whitman (1916–2003)
Rubin, Robert (1938–)
Russia and the Soviet Union
S&P 500
Samuelson, Paul (1915–2009)
Savings and Investment
Savings and Loan Crises (1980s–1990s)
Schumpeter, Joseph (1883–1950)
Schwartz, Anna (1915–)
Seasonal Cycles
Securities and Exchange Commission
Securitization
Shackle, George (1903–1992)
Shadow Banking System
Shock-Based Theories
Slow-Growth Recovery
Smith, Adam (1723–1790)
Souk al-Manakh (Kuwait) Stock Market Crash (1982)
South Africa
South Sea Bubble (1720)
Southeast Asia
Spain
Spiethoff, Arthur (1873–1957)
Spillover Effect
Sprague, Oliver (1873–1953)
Sraffa, Piero (1898–1983)
Stability and Stabilization, Economic
Steindl, Josef (1912–1993)
Stimulus Package, U.S. (2008)
Stimulus Package, U.S. (2009)
Stochastic Models
Stock and Bond Capitalization
Stock Market Crash (1929)
Stock Market Crash (1987)
Stock Markets, Global
Stockholm School
Subsidies
Summers, Lawrence (1954–)
Sunspot Theories
Sweden
Switzerland
Systemic Financial Crises
Tax Policy
Technological Innovation
Tequila Effect
Thorp, Willard Long (1899–1992)
Three-Curve Barometer
Thrift Supervision, Office of
Tinbergen, Jan (1903–1994)
Tobin, James (1918–2002)
“Too Big to Fail”
Transition Economies
Treasury Bills
Treasury, Department of the
Tribune Company
Tropicana Entertainment
Troubled Asset Relief Program (2008–)
Tugan-Baranovsky, Mikhail Ivanovich (1865–1919)
Tulipmania (1636–1637)
Turkey
UBS
Unemployment, Natural Rate of
United Kingdom
United States
Veblen, Thorstein (1857–1929)
Venture Capital
VeraSun Energy
Viner, Jacob (1892–1970)
Volcker, Paul (1927–)
Von Neumann, John (1903–1957)
Wachovia
Wages
Washington Mutual
Wealth
World Bank
WorldCom
Zarnowitz, Victor (1919–2009)
Chronology
Glossary
Master Bibliography
Books
Web Sites

Reviews

Good source for those interested in writing a paper on the history of business cycles…- A three-volume set focusing on a narrow niche of economic history — the economic cycle. Opens with three introductory essays on the history of economic booms and busts, then offers 361 entries written by 96 different contributors.

Entries are well-written and should be easily understood by undergraduate students. Ranging from one to ten pages, they cover profiles of banks and other financial institutions, biographies of noted bankers and economists, and offer detailed discussions of business cycle theory.

The set will be especially helpful for those seeking an understanding of the financial crisis and housing market meltdown of the last two decades of the 20th century in the United States. The narrative text is supplemented by a historical chronology, a glossary, an extensive bibliography of books sand websites and a detailed 59-page cumulative index.

“Booms and Busts” should prove to be a relatively inexpensive set that will see much use alongside the expensive new second edition set of “The New Palgrave Dictionary of Economics” (2008) and the now-dated, but widely held “Business Cycles and Depressions: An Encyclopedia” (1997).

R. Neil Scott, MBA/MSLS
Middle Tennessee State University

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Mehmet Odekon

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