Calculated Values: Finance, Politics, and the Quantitative Age.
William Deringer. Harvard University Press, 2018
1720 was a bad year for financial innovation. Both the British South Sea Company (SSC) and the French Mississippi Company (MC) collapsed in scandal that year. The hybrid public-private enterprises had been authorized as high-concept solutions to troublesome national debts in Britain and France. Each relied on complicated financial schemes. Each relied on its relationship with the state to entice private investors. And each failed because it sold far more dividend-bearing shares of stock than it could service, leading to a collapse in stock prices, angry investors, governmental investigations, public criticism, and disgrace.
William Deringer, an MIT historian of science and technology, uses the SSC to illustrate the role numerical calculations played in public discourse in Britain in the early modern period. His main thesis is that such calculations were thought of quite differently during the early modern period than they are today. In his telling, before the Glorious Revolution in 1688, numerical calculations were derogated by many elites as ungentlemanly, the tools of merchants, mechanics, and tradesmen, and certainly not suitable for matters of state. But after the Glorious Revolution Parliament assumed much more responsibility for state finances – which required financial, and hence numerical calculation. In essence, Deringer is arguing that the Glorious Revolution can also be seen, in part, as a financial revolution. Along with these expanded institutional responsibilities, persistent alliances formed, the Tory and Whig parties. Also, once press regulation was removed the number of newspapers and pamphlets grew rapidly. All of these factors led to noisy, sometimes vicious, public debates about a number of public issues. Deringer argues that numerical calculation gained credibility and influence during the course of these partisan struggles between the parties not because numerical calculations led to better, truer, more objective understanding but because such calculations were useful in these partisan polemics. “Questions about evidence, methodology, and indeed epistemology became a regular part of political practice. This ruthless, adversarial context became fertile ground for quantitative arguments.” [26]
Deringer illustrates his thesis by focusing on several contentious public issues during the period between 1688 and the end of Walpole’s ministry. How much money should Parliament provide to the Monarch? What is the national debt, is it a problem, and if so, how should it be resolved? How much should be paid today to Scotland to offset the future cost of taxes they are expected to pay for English debt incurred before Union? If the British government were to provide relief to shareholders who lost money in the collapse of SSC stock, how would the original shareholders fare? What is the “intrinsic value” of something, how should it be calculated, who determines it? How important is the trade balance – the difference between the amount of goods sold to foreigners and the amount of goods purchased from foreigners – and how should it be calculated? Each of these issues, and many more, was vigorously contested.
Whichever party was out of power in Parliament criticized the decisions and proposals of the party in power. “Numerical calculators” would mount an attack on a program or proposal, usually in a widely-distributed pamphlet. A calculator working for the principal being attacked would respond. And so it would go, back and forth, until the next issue emerged or the combatants had exhausted their arguments. Usually there was no resolution. Out of these often fierce partisan controversies though, there emerged improvements in techniques and presentation. Even if issues were not resolved with calculations, sometimes the points of disagreement became clearer. Some problems recurred: how to handle compound interest, how to compare accounting numbers with analytic numbers, how to adjust for incomplete and erratic data.
Deringer’s last illustration is Walpole’s administration. After the collapse of SSC stock, Deringer argues, public appreciation of financial calculation began to increase sharply. Those who had argued that the price of SSC stock was unsupportable were proven right by events. Walpole seized on that public trust to use numerical calculations as a tool of state, as a way to choose among alternative policies, rather than (only) as a polemical tool. He ends the book by tracing the acceptance (and criticism) of numerical calculation into the present with an emphasis on David Hume’s criticisms and Richard Price’s enthusiasms later in the 18C.
In Deringer’s terms, the adoption of financial calculation as a trustworthy way to understand public matters represents a shift in civic epistemology. His book, then, can be understood as the history of this shift. But the book plays in many different historiographical fields: intellectual and cultural, science and technology, commerce, finance, banking, public finance, political science, rhetoric and discourse, and social.
Deringer offers a kind of summary: ““This image of the conflict between the quantitative and the political simply did not obtain in the eighteenth century, though. Political calculators in that period were not exploiting some preexisting authority that numbers held in the minds of the British public. Rather, it was the use of numerical calculations to pursue political ends that generated their power and prestige within British civic epistemology. To put it bluntly: Britons did not come to fight with numbers in the eighteenth century because numbers were already believed to be trustworthy and authoritative; numbers came to be seen as trustworthy and authoritative because Britons fought with them.”
The number and variety of pamphlets that Deringer uses in his narrative is impressive. His explication of the complicated financial schemes and the point-counterpoint polemics surrounding them makes them more intelligible to modern readers. His ability to see the similarity between the conceptual analytical strategies of early modern calculators and modern computer spreadsheets is commendable. But his single-minded focus on political argumentation as the midwife of modern-day numeracy is less praiseworthy. Surely 17C civic epistemology was the result of multiple influences: the 16/17C scientific and intellectual societies of England and the Continent, mathematical education, the demands of mercantile trade, the influence of the Dutch Republic, mercantilism, … But that would be a different book. This one is a good one.
