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The Emergence of a Capital Market in Rural Massachusetts, 1730–1838

  • Winifred B. Rothenberg


This study is part of a continuing effort to document and date the emergence of a market economy in rural Massachusetts. It uses a probate data base to test for evidence of increased portfolio liquidity, decreased transactions costs, and the appearance of developmental institutional change. A regional capital market, so critical for the industrialization of New England, is found to have emerged in the early 1780s.



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1 Jones, Alice Hanson, Wealth of a Nation To Be (New York, 1980), p. 141.

2 Fogel, Robert W. and Engerman, Stanley L., Time On The Cross: The Economics of American Negro Slavery (Boston, 1974), vol. 1, p. 249.

3 Rothenberg, Winifred B., “The Market Massachusetts Farmes, 1750–1855,” this JOURNAL, 41 (06 1981), pp. 283314.

4 This apt phrase, taken out of its original context, appeared in Jacobs, Jane, “Why the TVA Failed,” New York Review of Books, 31 (05 10, 1984), p. 45.

5 That the southern economy was unable in the antebellum period to generate a comparable growth spurt may have been due to its failure to evolve a comparable capital market, a failure due, perhaps, to the anomaly of increasing risk aversion in the South over time, even into the 1870s. So suggest Jeremy Atack, Fred Bateman, and Thomas Weiss in their “Risk, the Rate of Return, and the Pattern of Investment in Nineteenth Century American Manufacturing,” Bureau of Economics and Business Research of the University of Illinois, Reprint No. 464 (Champaign-Urbana, n.d.).

6 For any serious student of probates, the discussion of the probate process in the Appendix will be inadequate, and they are referred to Jones, Alice Hanson, American Colonial Wealth: Documents and Methods (New York, 1977), vol. 1.

7 This is an issue definitively explored by Jones in American Colonial Wealth, pp. 1878–1901. For Jones's purposes it was imperative that her probate sample be made as nearly as possible a mirror image of the living universe: America on the eve of the Revolution.

8 Jones, Wealth of a Nation To Be, p. 164, Table 6.2. Jones ranked her sample by total physical wealth, which is real estate + PPW. Also Atack, Jeremy and Bateman, Fred, “The ‘Egalitarian Ideal’ and the Distribution of Wealth in the Northern Agricultural Community: A Backward Look,” Review of Economics and Statistics, 43 (02 1981), p. 125. Massachusetts was not included in their sample of the rural North, but their Ginis for Connecticut and Vermont are .66 and .67 respectively.

9 David Thomas Konig, in his study of seventeenth-century Essex County, was able to locate on a contemporary map of Lynn the homesteads of a few parties to probated loans and found that they lived within two miles of each other and could therefore be presumed to have had face-to-face contact; whereas parties to litigated loans were unlikely, given the distances that separated them, to encounter each other in the course of their daily interchanges. See his Law and Society in Puritan Massachusetts:Essex County, 1629–1692 (Chapel Hill. N.C., 1979), p. 82. I would add that a large majority of the plaintiffs and defendants in prosecutions for debt at the Middlesex County Court of Common Pleas lived in different towns.

10 Nelson, William E., Americanization of the Common Law: The Impact of Legal Change on Massachusetts Society, 1760–1830 (Cambridge, Mass., 1975), p. 42.

11 McCloskey, Donald N., “The Loss Function Has Been Mislaid: The Rhetoric of Significance Tests,” American Economics Association Papers and Proceedings, 75 (05 1985), p. 201.

12 Nelson, William E., for example, has explored the vast consequences for the common law alone of “the gradual breakdown of ethical unity in Massachusetts over a thirty-year period beginning in the 1780s,” in Americanization of the Common Law; the quotation is from p. 117.

13 Sturm, James L., “Investing in the United States, 1798–1893: Upper Wealth-Holders in a Market Economy,” (Ph.D. diss., University of Wisconsin, 1969), p. 72.

14 Charlestown was then part of Middlesex County. It was annexed to Boston (Suffolk County) in 1873.

15 Albert, William, The Turnpike Road System in England, 1663–1840 (Cambridge, 1972), p. 119.

16 Tawney, R. H., “Introduction,” to Wilson's, ThomasDiscourse Upon Usury (1572: Augustus M. Kelley Reprint, New York, 1965), p. 23.

17 “I would as much abhorre to lend money for gaine hereafter as I doe abhorre to steale by the high waye, or to murdr any man violentlye for his goods, which god forbyd that ever I shoulde thinke or minde to doe.” Thomas Wilson, Discourse Upon Usury, p. 379.

18 Apparently bonds, unlike notes, were protected from the operation of usury laws. “That the issue of negotiability first arose in connection with bonds seems to confirm the suspicion that until the nineteenth century bonds were widely used to prevent judicial interference with commercial transactions … (and) … almost surely could successfully immunize usurious contracts from legal attack.” Horwitz, Morton J., The Tranformation of American Law, 1780–1860 (Cambridge, Mass., 1977), p. 217. That may account for the preponderance of bonds among the credits of the wealthiest decedents.

19 “The capital market in a “developed” economy successfully monitors the efficiency with which the existing capital stock is deployed by pushing returns on physical and financial assets toward equality, thereby significantly increasing the average return. Economic development so defined is necessary and sufficient to generate high rates of saving and investment (accurately reflecting social and private time preference), the adoption of best-practice technologies, and learning-by-doing.” McKinnon, Ronald, Money and Capital in Economic Development (Washington, D.C., 1973), p. 9.

20 Horwitz, The Transformation of American Law, pp. 237–245.

21 Freyer, Tony A., “Negotiable Instruments and the Federal Courts in Antebellum American Business,” Business History Review, 50 (Winter 1976), p. 441 and Horwitz, Transformation of American Law, p. 215.

22 Horwitz, Transformation of American Law, pp. 212–213.

23 Freyer, Tony A., “Negotiable Instruments and the Federal Courts in Antebellum American Business,” Business History Review, 50 (Winter 1976), p. 338, fn.6.

24 Davis, Lance, “Capital Immobilities and Finance Capitalism: A Study of Economic Evolution in the United States, 1820–1920,” Explorations in Entrepreneurial History, 2 (1963/1964), p. 89.

25 Bruchey, Stuart W., Robert Oliver, Merchant of Baltimore, 1783–1819 (Baltimore, 1956), p. 112.

26 I say weakening, not disappearance. These inhibitions remain to this day. A major factor affecting household portfolio behavior of even the very wealthy as recently as 1978 “may be the costs of acquiring and processing the information required to make decisions about how best to allocate resources across different assets. We would expect such costs to vary among households and, in particular, with observable variables such as the level of educational attainment and occupation.” Mervyn A. King and Jonathan I. Leape, “Wealth and Portfolio Composition: Theory and Evidence,” NBER Working Paper No. 1468 (Sept 1984), p. 34. If this is true of a sample whose mean net worth was a quarter of a million dollars (in 1978). how much truer it must have been of my sample whose mean net worth, in 1800 dollars, was $3,600.

27 Because of the ubiquity of parent-naming and Bible-naming in Massachusetts, the pool of names was not large, and it would have been a mistake to have assumed that all appearances of the same name referred to the same individual. John Adamses, for example, abounded. To avoid this problem, various algorithms were employed, but in the end the distinction was made by time: It was assumed that the same name denoted the same individual only if the time interval between appearances of that name was less than 20 years. By holding to this perhaps too stringent rule, the 11,956 names reduced to 8,515 presumably different debtors and creditors, of whom 1.873 or 22 percent appear as partners of two or more sample decedents. and 627 as partners of three or more.

28 It appears that Concord occupied the center of gravity of the grid in the first period. Not only were there more instances of Concord residents transacting with each other than of any other pairing, but more decedents from all over the county were linked to Concord borrowers and lenders than to any other. While it is true that Concord is both centrally located in the county and was a shire town in the colonial period, the centrality of Concord in the county's credit networks may be an artifact of a local tradition of painstaking estate administration. If such were the case, Concord ties would dominate a subset like this one which, in naming the towns of both credit partners, is unusually painstaking. Incidentally, credit flows between Cambridge and Worcester County ran second to Concord/Concord networks. Thirty decedents owned outlying property in at least one town in Worcester County.

29 Thevariable ACRES in these regressions is carrying added freight as a proxy for that elusive thing, a noncommercial mentalité. A simple farmer/nonfarmer occupational dummy would have been preferable. but it is compromised by the ubiquity of by-employments: and investment in farm versus nonfarm physical capital raises simultaneity problems with TOTAL WEALTH of which they are components. I am grateful to Robert Margo and an anonymous referee for bringing the simultaneity problem to my attention.

The Emergence of a Capital Market in Rural Massachusetts, 1730–1838

  • Winifred B. Rothenberg


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