Give Me Liberty Or Give Me Death

by Richard A. Easterlin (University of Southern California)

This blog is  part G of the Economic History Society’s blog series: ‘The Long View on Epidemics, Disease and Public Health: Research from Economic History’. The full article from this blog is “How Beneficent Is the Market? A Look at the Modern History of Mortality.” European Review of Economic History 3, no. 3 (1999): 257-94.


A child is vaccinated, Brazil, 1970.

Patrick Henry’s memorable plea for independence unintentionally also captured the long history of conflict between the free market and public health, evidenced in the current struggle of the United States with the coronavirus.  Efforts to contain the virus have centered on  measures to forestall transmission of the disease such as stay-at-home orders, social distancing, and avoiding large gatherings, each of which infringes on individual liberty.  These measures have given birth to a resistance movement objecting to violations of one’s freedom.

My 1999 article posed the question “How Beneficent is the Market?” The answer, based on “A Look at the Modern History of Mortality” was straightforward: because of the ubiquity of market failure, public intervention was essential to achieve control of major infectious disease. This intervention  centered on the creation of a public health system. “The functions of this system have included, in varying degrees, health education, regulation, compulsion, and the financing or direct provision of services.”

Regulation and compulsion, and the consequent infringement of individual liberties, have always been  critical building blocks of the public health system. Even before formal establishment of public health agencies, regulation and compulsion were features of measures aimed at controlling the spread of infectious disease in mid-19th century Britain. The “sanitation revolution” led to the regulation of water supply and sewage disposal, and, in time to regulation of slum-  building conditions.  As my article notes, there was fierce opposition to these measures:

“The backbone of the opposition was made up of those whose vested interests were threatened: landlords, builders, water companies, proprietors of refuse heaps and dung hills, burial concerns, slaughterhouses, and the like … The opposition appealed to the preservation of civil liberties and sought to debunk the new knowledge cited by the public health advocates …”

The greatest achievement of public health was the eradication of smallpox, the one disease in the world that has been eliminated from the face of the earth. Smallpox was the scourge of humankind until William Jenner’s discovery of a vaccine in 1798.   Throughout the 19th and 20th centuries, requirements for smallpox vaccination were fiercely opposed by anti-vaccinationists.  In 1959 the World Health Organization embarked on a program to eradicate the disease. Over the ensuing two decades its efforts to persuade governments worldwide to require vaccination of infants were eventually successful, and in 1980 WHO officially declared the disease eradicated. Eventually public health triumphed over liberty. But It took almost two centuries to realize Jenner’s hope that vaccination would annihilate smallpox.

In the face of the coronavirus pandemic the U. S. market-based health care system  has demonstrated once again the inability of the market to  deal with infectious disease, and the need for forceful public intervention. The  current health care system requires that:

 “every player, from insurers to hospitals to the pharmaceutical industry to doctors, be financially self-sustaining, to have a profitable business model. It excels in expensive specialty care. But there’s no return on investment in being positioned for the possibility of a pandemic” (Rosenthal 2020).

Commercial and hospital labs have been slow to respond to the need for developing a test for the virus.  Once tests became available, conducting them was handicapped by insufficient supplies of testing capacity — kits, chemical reagents, swabs, masks and other personal protective equipment. In hospitals, ventilators  were also in short supply. These deficiencies reflected the lack of profitability in responding to these needs, and of a government reluctant to compensate for market failure.

At the current time, the halting efforts of federal public health authorities  and state and local public officials to impose quarantine and “shelter at home” measures have been seriously handicapped by public protests over infringement of civil liberties, reminiscent of the dissidents of the 19th  and 20th centuries and their current day heirs. States are opening for business well in advance of guidelines of the Center for Disease Control.  The lesson of history regarding such actions is clear: The cost of liberty is sickness and death.  But do we learn from history? Sadly, one is put in mind of Warren Buffet’s aphorism: “What we learn from history is that people don’t learn from history.”



Rosenthal, Elizabeth, “A Health System Set up to Fail”,  New York Times, May 8, 2020, p.A29.


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Cash Converter: The Liquidity of the Victorian Capital Market

by John Turner (Queen’s University Centre for Economic History)

Liquidity is the ease with which an asset such as a share or a bond can be converted into cash. It is important for financial systems because it enables investors to liquidate and diversify their assets at a low cost. Without liquid markets, portfolio diversification becomes very costly for the investor. As a result, firms and governments must pay a premium to induce investors to buy their bonds and shares. Liquid capital markets also spur firms and entrepreneurs to invest in long-run projects, which increases productivity and economic growth.

From an historical perspective, share liquidity in the UK played a major role in the widespread adoption of the company form in the second half of the nineteenth century. Famously, as I discuss in a recent book chapter published in the Research Handbook on the History of Corporate and Company Law, political and legal opposition to share liquidity held up the development of the company form in the UK.

However, given the economic and historical importance of liquidity, very little has been written on the liquidity of UK capital markets before 1913. Ron Alquist (2010) and Matthieu Chavaz and Marc Flandreau (2017) examine the liquidity risk and premia of various sovereign bonds which were traded on the London Stock Exchange during the late Victorian and early Edwardian eras. Along with Graeme Acheson (2008), I document the thinness of the market for bank shares in the nineteenth century, using the share trading records of a small number of banks.

In a major study, Gareth Campbell (Queen’s University Belfast), Qing Ye (Xi’an Jiaotong-Liverpool University) and I have recently attempted to understand more about the liquidity of the Victorian capital market. To this end, we have just published a paper in the Economic History Review which looks at the liquidity of the London share and bond markets from 1825 to 1870. The London capital market experienced considerable growth in this era. The liberalisation of incorporation law and Parliament’s liberalism in granting company status to railways and other public-good providers, resulted in the growth of the number of business enterprises having their shares and bonds traded on stock exchanges. In addition, from the 1850s onwards, there was an increase in the number of foreign countries and companies raising bond finance on the London market.

How do we measure the liquidity of the market for bonds and stocks in the 1825-70 era? Using end-of-month stock price data from a stockbroker list called the Course of the Exchange and end-of-month bond prices from newspaper sources, we calculate for each security, the number of months in the year where it had a zero return and divide that by the number of months it was listed in the year. Because zero returns are indicative of illiquidity (i.e., that a security has not been traded), one minus our illiquidity ratio gives us a liquidity measure for each security in our sample. We calculate the overall market liquidity for shares and bonds by taking averages. Figure 1 displays market liquidity for bonds and stocks for the period 1825-70.

Figure 01. Stock and bond liquidity on London Stock Exchange, 1825-1870. Source: Campbell, Turner and Ye (2018, p.829)

Figure 1 reveals that bond market liquidity was relatively high throughout this period but shows no strong trend over time. By way of contrast, there was a strong secular increase in stock liquidity from 1830 to 1870. This increase may have stimulated greater participation in the stock market by ordinary citizens. It may also have affected the growth and deepening of the overall stock market and resulted in higher economic growth.

We examine the cross-sectional differences in liquidity between stocks in order to understand the main determinants of stock liquidity in this era. Our main finding in this regard is that firm size and the number of issued shares were major correlates of liquidity, which suggests that larger firms and firms with a greater number of shares were more frequently traded. Our study also reveals that unusual features which were believed to impede liquidity, such as extended liability, uncalled capital or high share denominations, had little effect on stock liquidity.

We also examine whether asset illiquidity was priced by investors, resulting in higher costs of capital for firms and governments. We find little evidence that the illiquidity of stock or bonds was priced, suggesting that investors at the time did not put much emphasis on liquidity in their valuations. Indeed, this is consistent with J. B. Jefferys (1938), who argued that what mattered to investors during this era was not share liquidity, but the dividend or coupon they received.

In conclusion, the vast majority of stocks and bonds in this early capital market were illiquid. It is remarkable, however, that despite this illiquidity, the UK capital market grew substantially between 1825 and 1870. There was also an increase in investor participation, with investing becoming progressively democratised in this era.


To contact the author:
Twitter: @profjohnturner



Acheson, G.G., and Turner, J.D. “The Secondary Market for Bank Shares in Nineteenth-Century Britain.” Financial History Review 15, no. 2 (October 2008): 123–51. doi:10.1017/S0968565008000139.

Alquist, R. “How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange.” Journal of International Economics 82, no. 2 (November 1, 2010): 219–29. doi:10.1016/j.jinteco.2010.07.007.

Campbell, G., Turner, J.D., and Ye, Q. “The Liquidity of the London Capital Markets, 1825–70†.” The Economic History Review 71, no. 3 (August 1, 2018): 823–52. doi:10.1111/ehr.12530.

Chavaz, M., and Flandreau, M. “‘High & Dry’: The Liquidity and Credit of Colonial and Foreign Government Debt and the London Stock Exchange (1880–1910).” The Journal of Economic History 77, no. 3 (September 2017): 653–91. doi:10.1017/S0022050717000730.

Jefferys, J.B. Trends in Business Organisation in Great Britain Since 1856: With Special Reference to the Financial Structure of Companies, the Mechanism of Investment and the Relations Between the Shareholder and the Company. University of London, 1938.