This chapter sets out the scholarship against which the two texts are read. It speaks to two debates, one about how a Roman edict on prices should be understood and one about whether the South Sea year was a fit of folly or a market with reasons, and it ends by naming the question both debates pass over: whom the texts of the time make answerable.
2.1The edict as an imperial pronouncement
The Edict on Maximum Prices of 301 survives in inscriptions, and Roland Kent's article of 1920 in the University of Pennsylvania Law Review presented it: it gave the history of the inscriptions in which the text survives, an English translation of the preamble and a discussion. In Kent's presentation the edict fixed maximum prices for goods and wages across the empire, with penalties for those who exceeded them, and its preamble blames speculation and greed for rising prices. Kent treats it as the principal ancient case of a general price control, issued at a time of currency debasement and inflation. Kent's article is read in this study as a source text, because its translation is the form in which the preamble is read here; what it says about the edict's setting is the translator's frame, given here as his.
Simon Corcoran's The Empire of the Tetrarchs approaches the edict from the side of government rather than of prices. Corcoran studies how the emperors of the Tetrarchy made and published law, through edicts and rescripts, and how the administration worked (Corcoran 1996). The Edict on Maximum Prices is one of the pronouncements he discusses: in his account it sought to fix maximum prices and wages and was issued along with the monetary reform of the period, and he discusses it beside the problem of inflation.
Both scholars set the edict next to the coinage, Kent by the debasement of the currency and Corcoran by the monetary reform issued with it. Corcoran's interest in how law was made and published turns attention, in this study's reading, to the preamble as a published text: an argument made in public for an act of power.
2.2Mania and its critics
Charles Mackay's Memoirs of Extraordinary Popular Delusions (1841) is a popular nineteenth-century collection of accounts of mass delusions, with chapters on John Law's Mississippi scheme, the South Sea Bubble and the Dutch tulip mania. Mackay describes the speculation in each, the rise and fall of prices and the response of the public and government. The work set the popular picture of financial manias as outbreaks of collective folly. Later scholars have questioned that picture, and the book is a narrative written for a general audience, not one based on careful research into the sources. It is therefore read here as a period text, evidence of how a writer of 1841 told the story and whom he blamed, and not as evidence of what happened in 1720.
This study reads the narrative of mania as having a modern and more systematic relative. Charles Kindleberger and Robert Aliber's Manias, Panics and Crashes surveys financial crises over several centuries and is built on Minsky's model of displacement, boom, euphoria, distress and revulsion (Kindleberger and Aliber 2005). They argue that crises recur in recognisable patterns of credit expansion, speculation and sudden loss of confidence, and are not simply random shocks; they hold that a lender of last resort is needed to stop a panic spreading, and that the timing and wording of its announcement matter. Minsky's own argument is that an economy with expensive capital assets and financial claims is inherently prone to instability, because periods of stability encourage more fragile financing, so that a small shock can set off a crisis (Minsky 1986).
These works differ from Mackay in a way that bears on blame. Mackay's delusion is a moral failing of people; Minsky's instability is a property of a financial system, produced by calm itself, and this study reads his account as needing no one to be wicked for a crisis to come. Kindleberger and Aliber sit between the two: their stages carry the language of feeling, euphoria and revulsion, but their argument is about recurring patterns of credit. John Kenneth Galbraith's narrative of 1929 shows a third placing: it is openly critical of the financial leaders of the day and of the public authorities, while also pointing to the weakness of the economy's structure (Galbraith 1955). A narrative of mania can place the fault in the crowd, in the leaders or in the structure, and the choice is rarely made explicit.
Peter Garber's Famous First Bubbles is the sharpest dissent. Re-examining the tulip mania of the 1630s, the Mississippi Bubble and the South Sea Bubble, Garber argues that market fundamentals can explain much of the price movement in these episodes, so that they should not be treated as simple cases of irrationality (Garber 2000). His analysis questions the standard accounts of them, and his book has been much discussed in the debate over whether bubbles can be told apart from fundamentals. His dissent is about cause, but it also removes the ground for blame: if prices moved for reasons, the folly of the crowd is no longer the explanation, and the moral story Mackay told loses its centre.
2.3The South Sea Company as public finance
Two works read 1720 neither as folly nor as fundamentals alone but as finance and politics. Richard Dale's The First Crash is a history of the Bubble that describes the company's scheme to take over government debt, the rise and collapse of its shares, the wider speculation of the time, and the political and financial aftermath (Dale 2004). Dale draws comparisons with later crises and discusses what the episode shows about speculation, regulation and the role of government, and he links the bubble to the development of financial markets and the response of Parliament. This study reads Dale's account as one in which the state is not a bystander: the scheme was a bargain over the state's own debts.
Larry Neal's The Rise of Financial Capitalism studies the growth of international capital markets in the eighteenth century, chiefly in London and Amsterdam, including the markets in government debt and company shares and the bubbles of 1720 in France, the Netherlands and England (Neal 1990). Neal argues that the bubbles occurred within a developing system of integrated markets and that the system survived them. For the present question Neal's contribution is one of scale. A story of the system's survival is a story with little room for culprits; it asks what the markets did, not who misled them.
2.4Necessity and the law of emergencies
The preamble of 301 justifies its measure by necessity, and Mackay reports the warnings of those who opposed the South Sea scheme in Parliament. Both bring in the question of how law treats emergency action. Oren Gross and Fionnuala Ní Aoláin set out models of response to emergency: the view that ordinary law applies fully, the view that emergencies lie outside the law, and the accommodation of emergency powers within the law (Gross and Ní Aoláin 2006). Their book is concerned chiefly with security, but it gives terms for asking where an emergency act places itself. Robert Higgs, studying the American federal government, argues that its size and power grew in jumps during national crises and did not fully return afterwards, a pattern often called the ratchet effect (Higgs 1987). Both works concern other times and places, Gross and Ní Aoláin chiefly terrorism and national security, Higgs the American federal government. They are used here only to frame a question the texts raise: whether an act justified by an emergency says anything about its own end.
2.5The debates side by side
| Work | Where the trouble lies | Whom it makes answerable |
|---|---|---|
| Kent 1920 (translator's frame) | Speculation and greed, as the preamble says; currency debasement and inflation, as the setting | The preamble's sellers; the setting points elsewhere |
| Corcoran 1996 | Inflation, beside the monetary reform | Not a question of blame: a question of how law was made and published |
| Mackay 1841 | Collective delusion | The crowd and those who led it |
| Kindleberger and Aliber 2005; Minsky 1986 | Recurring patterns of credit and confidence; instability bred by calm | Little room for individual fault |
| Garber 2000 | Fundamentals, largely | The ground for blaming folly is removed |
| Dale 2004; Neal 1990 | A scheme of public finance; an integrated market system | The scheme and Parliament's response; the system |
Both debates ask what caused prices to move. On the edict, the scholarly frame places beside it a cause, the coinage, that its preamble does not name; on 1720, the debate is over whether there was folly to blame at all. As this study reads them, neither debate asks, as its main question, what the texts say about who was answerable, or whether the measure was built from that answer. This study does not settle the cause in either episode; it asks the earlier question.