Demanding ‘credible commitment’: public reactions to the failures of the early financial revolution1

North and Weingast's notion of ‘credible commitment’ arguably offers a reasonable understanding of the factors that allowed the development of a trusting relationship between the state and its potential creditors over the long term. Yet, they failed to recognize the difficulties that were encountered along the way. This article highlights some of those difficulties and shows that at times when credible commitment was in doubt, supporters of the financial revolution held the government to account through the published media and by direct action. This is important for two reasons. First, the contemporary debate regarding the financial revolution, as it is presented by some historians, may lead us to presume that there would have been little public outcry had the government reneged on its debt. Indeed, we might argue that hostility towards financiers had always made default popular with many segments of the population. Yet, clearly opinion was not quite so one‐sided and the reaction against potential default was considerable. Second, the fact that the public creditors were willing to act to protect themselves shows that credible commitment was not just created from above by the Glorious Revolution and the subsequent development of the institutions of government; it was demanded from below by the people who invested in the financial revolution.     

Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

We estimate a structural model of bank portfolio lending and find that the typical U.S. community bank reduced its business lending during the global financial crisis. The decline in business credit was driven by increased risk overhang effects (consistent with a reduction in the liquidity of assets held on bank balance sheets) and by reduced loan supply elasticities suggestive of credit rationing (consistent with an increase in lender risk aversion). Nevertheless, we identify a group of strategically focused relationship banks that made and maintained higher levels of business loans during the crisis.     

Accounting for Expenditure on Intangibles

In search of a unifying measurement feature on which to base a more systematic and potentially comprehensive analysis of intangibles, this paper first analyses the economic and accounting properties of intangibles, and second, empirically evaluates managerial practices for measuring and analysing expenditure on intangibles. We present evidence from a survey of 614 large Australian firms that suggests gaps in the extent with which firms plan, monitor, record, analyse, and report on intangibles. Third, we evaluate the implications of our analysis and survey for accounting practice. Our evidence suggests GAAP has a role to provide guidance that helps firms identify and classify their expenditure on intangibles in ways that elucidate the strategic implications of the different types of intangibles for future output. A secondary step for accountants, after identifying and classifying the expenditure on intangibles, is to apply a capitalization test to distinguish expenses from assets. The current asymmetric treatment of expenditure on purchased versus internally generated intangibles is not supportable on economic grounds. However, economists identify weak property rights as a major cause of uncertainty associated with the outcomes from expenditure on intangibles, suggesting verifiable property rights is a unifying measurement feature on which to base a capitalization test for intangible assets.     

贷款难求

尽管经济学家和政治家们反复告诉我们,中小企业在经济发展中发挥着十分重要的作用,然而,在最近20年里,相当多的中小企业却—直面临着管理现金流和满足最苛刻贷款条件的严峻挑战。     

A Mechanism for Inducing Cooperation in Noncooperative Environments: Theory and Applications

We construct a market‐based mechanism that induces players in a noncooperative game to make the same choices as characterize cooperation. We then argue that this mechanism is applicable to a wide range of economic questions and illustrate this claim using the problem of “The Tragedy of the Commons.”     

The effect of detergents on fabric handle

The effect of detergent products on fabric handle was investigated by means of consumer responses. The use of a semantic differential grid enabled responses to be compared to an ‘Ideal’ handle. Differences were obtained between the products and evidence was obtained which suggests that the judgements on the semantic differential grid provide a valid estimate of the way people make judgements about the overall handle of towels.