François R. Velde

Macroeconomic Features of the French Revolution

This paper describes aspects of the French Revolution from the perspective of theories about money and government budget constraints. We describe how unpleasant fiscal arithmetic gripped the Old Regime, how the Estates General responded to reorganize Frances fiscal affairs, and how fiscal exigencies impelled the Revolution into a procession of monetary experiments ending in hyper-inflation.

A Model of Bimetallism

Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it desirable? In our model, the amounts of each metal are split between coined metal, satisfying a cash‐in‐advance constraint, and uncoined metal, yielding utility. The ratio of the monies in the cash‐in‐advance constraint is endogenous. Bimetallism is feasible: we find a continuum of steady states indexed by the constant exchange rate of the monies. Bimetallism is not desirable: among steady states, welfare under monometallism is higher than under any bimetallic equilibrium. Long‐run trends in gold and silver production placed limits on the maintenance of bimetallism at any given ratio, but its sudden collapse in 1873 remains a puzzle.

The Debasement Puzzle: An Essay on Medieval Monetary History

We establish several facts about medieval monetary debasements: they were followed by unusually large minting volumes and by increased seigniorage; old and new coins circulated concurrently; and, at least some of the time, coins were valued by weight. These facts constitute a puzzle because debasements provide no additional inducements to bring coins to the mint. On theoretical and empirical grounds, we reject explanations based on by-tale circulation, nominal contracts, and sluggish price adjustment. We conclude that debasements pose a challenge to monetary economics.

The Crime of 1873: Back to the Scene

Milton Friedmans (1990) counterfactual analysis of what would have happened if the United States had not abandoned bimetallism in 1873 is revisited in a general equilibrium model of bimetallism. I find that bimetallism would have survived and the gold-silver ratio would have remained stable for another twenty years. If countries such as India that abandoned silver because of its depreciation are assumed not to, bimetallism survives to World War I. But the United States would have experienced a sharp bout of inflation in the early 20th century, although milder if India stays on silver.

On the Evolution of Specie: Circulation and Weight Loss in 18th and 19th Century Coinage

I measure the parameters of coin wear using data collected in the 19th century. A comparison across denominations and countries shows that coin wear (in relative terms) is linear in the logarithm of coin value. Data from coin hoards of the 18th and early 19th centuries yield similar estimates of mean coin wear, showing that hoards provide useful information. Finally, under assumptions of normality for initial coin weights and coin loss I use maximum likelihood estimation to recover the parameters of the wear process from a sample of coins whose age is unknown. The method performs well on the hoard data (for which the age is known and can serve as a check).

Following the Yellow Brick Road: How the United States Adopted the Gold Standard

The United States, with some difficulty, adopted the gold standard in the late nineteenth century, thus pegging the dollar to the pound sterling and other currencies. Some have argued it was mistake, others that it was inevitable. This article recounts the historical background and uses a model to shed light on the choices faced by policymakers of the time.

The Neapolitan Banks in the Context of Early Modern Public Banks

I examine the Neapolitan public banks, a group of non-profit institutions that emerged in the late sixteenth century, in the context of the early public banks that existed elsewhere in early modern Europe. In terms of size and stability they compare well with their peers, in spite of a difficult political and economic environment. They were also remarkably financially advanced for their time. Their success is likely due to their ownership structure, governance, and well managed relationship with the monarchical authorities.

The Talhouët Affair: Graft and Punishment in 1723 France

The “Talhouet Affair” was the most serious corruption scandal of early eighteenth century France. It arose in the context of a major restructuring of the public debt (the “Visa” of 1721–1723) and was handled by a special court which meted out exemplary punishment. Both the Affair and its context (the Visa of 1721) are known, but have not been studied in detail. I summarize the Visa operation and then recount the Affair, which sheds unexpected light on the primacy of State interests over the power of personal connections.