Money Changes everything prinCeton university press prinCeton & oxford M o n e y C h a n g e s e v e r y t h i n g h o w f i n a n C e M a d e C i v i l i z a t i o n p o s s i b l e w i l l i a M n . g o e t z M a n n Copyright © 2016 by William N. Goetzmann Requests for permission to reproduce material from this work should be sent to Permissions, Princeton University Press Published by Princeton University Press 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press 6 Oxford Street, Woodstock, Oxfordshire OX20 1TR press.princeton.edu Jacket design by Chris Ferrante All Rights Reserved Library of Congress Cataloging- in- Publication Data Goetzmann, William N., author. Money changes everything : how finance made civilization possible / William N. Goetzmann. pages cm Includes bibliographical references and index. ISBN 978- 0- 691- 14378- 1 (hardcover : alk. paper) - - ISBN 0- 691- 14378- 1 (hardcover : alk. paper) 1. Finance- - History. 2. Economic history. 3. Civilization- - History. I. Title. HG171.G638 2016 332.09- - dc23 2015025879 British Library Cataloging- in- Publication Data is available This book has been composed in Garamond Premier Pro and Montserrat Printed on acid- free paper. ∞ Printed in the United States of America 1 3 5 7 9 10 8 6 4 2 Contents Acknowledgments vii Introduction 1 part i froM CuneiforM to ClassiCal Civilization 15 1 Finance and Writing 19 2 Finance and Urbanism 31 3 Financial Architecture 46 4 Mesopotamian Twilight 65 5 Athenian Finance 73 6 Monetary Revolution 92 7 Roman Finance 103 part ii the finanCial legaCy of China 137 8 China’s First Financial World 143 9 Unity and Bureaucracy 167 10 Financial Divergence 194 part iii the european CruCible 203 11 The Temple and Finance 207 12 Venice 221 13 Fibonacci and Finance 238 14 Immortal Bonds 249 15 The Discovery of Chance 258 16 Efficient Markets 276 17 Europe, Inc. 289 18 Corporations and Exploration 305 19 A Projecting Age 320 20 A Bubble in France 347 vi Contents 21 According to Hoyle 363 22 Securitization and Debt 382 part iv the eMergenCe of global Markets 401 23 Marx and Markets 405 24 China’s Financiers 423 25 The Russian Bear 443 26 Keynes to the Rescue 454 27 The New Financial World 467 28 Re- Engineering the Future 493 29 Post-W ar Theory 504 Conclusion 519 Notes 523 Bibliography 541 Illustration Credits 555 Index 557 aCknowledgMents Many thanks to everyone who read and commented on drafts of this book—they include friends, colleagues, and coauthors: my editor Seth Ditchik; my colleagues K. Geert Rouwenhorst, Rik Frehen, David Le Bris, Martin Shubik, Zhiwu Chen, Douglas Rae, Valerie Hansen, Henry Hansmann; and three anonymous reviewers. Most of all I acknowledge the support of my late father William H. Goetzmann, whose encour- agement and support throughout the project kept me going. He stressed the importance of communicating to broader audiences. I thank Leigh Ann Clark for her help with the practical challenges of key parts of this project. Many thanks to Johanna Palacio for project management and her excellent work on the images for the book. I owe a great debt to Yuan Chen for her thoughtful editing of the sections of the book per- taining to China. Over the years, Ulla Kasten has helped me with access to the Yale Babylonian Collection. I also thank the many scholars who gave me advice and pointed me in the right direction: Ben Foster, Marc Van De Mieroop, Elisabeth Köll, Robert Shiller, Timothy Young, Catherine Labio, Jonathan Spence, Steven Pincus, and Naomi Lamoreaux. I thank William Fitzhugh and Harvey Weiss for including me in their pathbreaking archaeological ex- peditions early in my career. And I thank my friend William S. Reese for introducing me to many of the extraordinary documents in financial history that have become part of the narrative of this book. I particularly acknowledge the support of the Yale School of Manage- ment over the years. Yale funding, along with the funding of an anon- ymous donor to the International Center for Finance, allowed me to visit the important sites in financial history, to collect and study early financial documents, to explore archives throughout the world, to build databases of early capital markets, to bring together the leading scholars in the field for rewarding discussions and the cross- pollination of ideas, viii aCknowledgMents and finally to develop cases and a course in financial history. Although not part of the book per se, the cases developed by Jaan Elias, Andrea Nagy- Smith, and Jean Rosenthal deeply enriched my understanding of the past. Most of all, I thank Yale University for creating an intellectu- ally generous environment—and one that consistently celebrates inter- disciplinary research. New Haven, 2015 Money Changes everything