The South Sea and Mississippi Bubbles of 1720

Jon-Arild Johannessen
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Jon-Arild Johannessen: Kristiania University College and Nord University

Chapter 4 in Innovations Lead to Economic Crises, 2017, pp 59-87 from Springer

Abstract: Abstract This chapter examines the assumption that there is a relationship between innovations and economic crises economic crises , with a special focus on the economic crisiseconomic crisis in BritainBritain in 1720. The Mississippi BubbleMississippi Bubble and the economic crisiscrisis in FranceFrance is described and analysed as well, because the British and French economic crises were interwoven. The following question is considered: Is there a relationship between innovations and economic crises? The purpose of the investigation is to discover which innovations triggered the social mechanismssocial mechanisms that led to the economic crisis of 1720. The findings presented reveal that the following innovations, working through social mechanismssocial mechanisms brought about the crisiscrisis : the establishment of the LondonLondon Stock Exchange London Stock Exchange in 1698 (institutional and political innovationsinnovation ); new public–private loan schemesnew public–private loan schemes (institutional and political innovationspolitical innovation ); the English Revolution in 1688 and the Peace of Utrechtthe Peace of Utrecht in 1713 (institutional and political innovationspolitical innovations ); the Mercantilist doctrinethe Mercantilist doctrine dominated European economic thinking (institutional, cultural innovation); and the emergenceemergence of options, lotteries, “futuresfutures ” and new paper moneynew paper money (economic and financial product innovations).

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-41793-6_4

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DOI: 10.1007/978-3-319-41793-6_4

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