| Book Review | The American Historical Review, 109.3

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| Book Review | The American Historical Review, 109.3 | The History Cooperative

Book Review

Canada and the United States

Robert E. Wright. The Wealth of Nations Rediscovered: Integration and Expansion in American Financial Markets, 1780–1850. New York: Cambridge University Press. 2002. Pp. xi, 240. $55.00.
In this impressively researched and closely argued study, Robert E. Wright lays out the evidence for the centrality of an early national financial revolution. Before industrial, managerial, or transportation revolutions could provoke capitalist takeoff, Wright maintains, a network of financial institutions had to make them possible. Banks, brokers, corporations, and rudimentary stock exchanges laid the groundwork for a smoothly efficient economy by providing cheap and trustworthy ways to link borrowers and lenders. The result was a substantial pool of investment capital that sparked American progress.	1
The story Wright tells depicts the dramatic rise of financial activity impelled by the inner laws of the marketplace. Chief among those laws is the power of information. So-called information asymmetries—ignorance about lenders, borrowers, and their intentions—impede economic activity. Where information is more widely disseminated through credit assessments, financial reporting, and the open trading of securities, economic activity increases because investors have more reliable ways of assessing risk. Before the 1790s, information asymmetries stymied American development. There were few banks, an uncertain securities market, and a confusing, unwieldy array of debt instruments. Alexander Hamilton's reduction of state debts to three national bonds and the establishment of the Bank of the United States stimulated trade in corporate securities, bank stock, and even secondary instruments like ground rents. Lenders and brokers multiplied to meet demand. Such innovations fueled the liquidity that drove long-term growth.	. . .

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