The Historical Market

In the world of economics, what is your greatest tool? Cobb-Douglas, supply and demand, math? In a world with limited time and unlimited things to record. Record keepers would have to put down numbers in whatever way they saw as efficient, using chronological tables and spreadsheets. However, these uses are inefficient and overcomplicated record-keeping for only some of the most educated people. This continued until 1786, when a Scottish engineer named William Playfair created the line graph, or at least that's what he thought. “It is now sixteen years since I first thought of applying lines to subjects of Finance. At the time when this invention made its first appearance, it was much approved of in England. I confess I was long anxious to find out whether I was actually the first who applied the principles of geometry to matters of Finance, as it had long before been applied to chronology with great success”¹. Earlier forms of the line graph obviously existed, and there are plenty of creditors, but Playfair was the one to create the modern line graph for finances. All records of quantities, prices, and other quantitative variables can be condensed into one simple time-based line chart. Now, we can look at ranges, volatility, and averages more clearly. When we look at inventions, we often like to look at the turning edge of humanity, rockets or something that the public can see, its the reason why NASA, and tech start ups are so popular in our modern eyes, yet we often forget the more smaller but important inventions we use everyday, anyone ever asked the question of how Pencils were invented? The line graph may not be one of the famous inventions ever made, say it may not even be economics’ greatest tool, but it does show you how much we overlook things in our modern life, never questioning how things got to the way they are. Sure, you might look back at some things in retrospect, but never delve into these topics. In the following paragraphs, I will try to answer and explain some of the most mundane but quite interesting types of graphs. Now that I have made a case, are you going long or not?

Quoting the words of the famous Iron Man actor Robert Downey Junior, the stock market is full of “the most obnoxious group of money hungry, low IQ, high energy, Jack rabbit…wannna be big time, wanna be small time….”² ok you get the deal. If anyone ever wants to be paranoid about numbers and probability, just wait when your firm is holding 10 billion dollars in investments. In high volatility investments like the stock market, you are betting against Mutual funds, billionaires like Warran Buffet, ETFs, investment firms, con artists, hedge and pension funds, and the homeless man you passed by if he had enough money to invest, compared to private investing where you can at least play a big role in someone's life, you are nothing more than an ant that is going to be competing against AIs in the future. It seems now everyone is investing, from here to China, from the north pole to the south pole, increasing the ever-increasing volatility and risk of the stock market, but it wasn’t always like this.

Once upon a time. The Dutch East India Company needed money to expand its reach into India and other parts of Asia. Usually, you would get funding from your local monarchy, or big investors and governments, but no one wanted to give them a huge amount of their savings. So the Dutch East India Company created the first public stock market called the Amsterdam Stock Exchange in 1602 to receive funding from more sources. Now you can contribute a smaller amount of money or a share in the company. If you have a lot of shares, you can even dictate their policy³. Eventually this expanded to many parts of the globe to satisfy their needs of investment. Britain had their London Stock Exchange formally established in 1773⁴, and the Americans in 1790⁵ with the Philadelphia Stock Exchange, as trade became more globalized so did investing, restrictions on foreign capital came to be lifted and communications allowed people from all over the world to know what was happening through the telegram. With the widespread use of the internet, people can receive information on what to invest in and other tips like that. Even the way we buy stocks has changed, as in earlier times, you needed a stockbroker to buy stocks, and now you just open a stock trading app, and you can start trading without paying the broker. So the landscape is pretty competitive here for stock exchanges, but it doesn’t mean that it's out of reach for college students. What have we seen in the previous paragraphs, that some of the most mundane and insignificant things can hold something more interesting to us than we thought.

One of these topics is history, how have the companies of today eventually end up the way they are, how can some companies, although doing alright financially have such low stock prices, it might seem tricky at first but when we look at the stock prices of these companies we can see the exact moments investors knew more than what others did, and made their decisions in the trust of that company, At first we might suspect this to be more of a financial topic rather than an Economic topic. However, it does play a role in how populations interact with the stock market. Fiscal and monetary policies do play a role in a company's success. So sure, we might never be a part of the obnoxious group of the money-hungry, low IQ, high energy jack rabbits, but we can surely look from afar and learn something from the experience.

¹ Patricia Costigan-Eaves and Michael Macdonald-Ross, “Data-Based Graphics: William Playfair,” The Mathematical Gazette 74, no. 317 (1990): 325, https://www.jstor.org/stable/2245819.

² The Last Party, directed by Mark Benjamin and Marc Levin (Los Angeles: Cabin Fever Entertainment, 1993).

³ Lodewijk Petram and Lynne Richards, The World’s First Stock Exchange (New York, New York: Columbia University Press, 2015), 1.

⁴ C. F. Smith, “The Early History of the London Stock Exchange,” The American Economic Review 19, no. 2 (1929): 208, http://www.jstor.org/stable/1807309.

⁵ Historical Society of Pennsylvania, Philadelphia Stock Exchange Papers, 1746–2005 (bulk 1870–1990), processed by Meghan Vacca (Philadelphia: Historical Society of Pennsylvania, 2006), http://www.hsp.org.

Works Cited 

Costigan-Eaves, Patricia, and Michael Macdonald-Ross. “Data-Based Graphics: William Playfair.” The Mathematical Gazette 74, no. 317 (1990): 318–326.

https://www.jstor.org/stable/2245819.

Historical Society of Pennsylvania. Philadelphia Stock Exchange Papers, 1746–2005 (bulk 1870–1990). Processed by Meghan Vacca. Philadelphia: Historical Society of Pennsylvania, 2006. http://www.hsp.org

Petram, Lodewijk, and Lynne Richards. The World’s First Stock Exchange. New York: Columbia University Press, 2015.

Smith, C. F. “The Early History of the London Stock Exchange.” The American Economic Review 19, no. 2 (1929): 206–216. http://www.jstor.org/stable/1807309.

The Last Party. Directed by Mark Benjamin and Marc Levin. Los Angeles: Cabin Fever Entertainment, 1993.