Dark Matter Credit: The Development of Peer-to-Peer Lending and Banking in France by Philip T. Hoffman et al.

Abstract

Reviewed by: Dark Matter Credit: The Development of Peer-to-Peer Lending and Banking in France by Philip T. Hoffman et al. Catherine Desbarats Philip T. Hoffman, Gilles Postel-Vinay and Jean-Laurent Rosenthal, Dark Matter Credit: The Development of Peer-to-Peer Lending and Banking in France (Princeton: Princeton Univ. Press, 2019). Pp. 320; 38 b/w illus., 32 tables, 3 maps. $39.95 cloth. Two decades after their landmark work Priceless Markets, the transatlantic trio of economic historians Philip T. Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal has returned to the history of credit in France. The earlier work attempted to track the evolution of long-term borrowing in Paris between 1660 and 1870 and insisted on the important role of notaries as financial intermediaries. In a world still marked by provisions against usury, where visible interest rates could not be embedded into loan contracts, "price" could not help match lenders and borrowers, whether by luring those with resources to spare, or reigning in those tempted to borrow more than they could repay. Notaries could do some of this work, as they were privy to what individual borrowers and lenders could not know. Their knowledge grew as they inscribed the transactions of everyday life into official documents: marriage contracts, estate inventories, and sales, for example, along with various types of loans. All were carefully recorded, leaving treasure troves to be plumbed. Looking at over 400,000 contracts drawn up by just over a tenth of Paris's notaries, the authors detected significant growth in lending during the years separating the Law era (1717–1720) and the French Revolution. In the language of economists, it was a story of "asymmetric information" overcome in "priceless markets" with the help of notaries. As the latter became more numerous, financial development occurred, though it could be marred by inflationary shocks associated with political crises. Notaries and their central role as information brokers remain at the core of Dark Matter Credit. But this is a far more ambitious book. For a start, it looks well beyond Paris, to France as a whole. As anyone who has done research in the notarial archives knows, tracking down a viable national sample of these scattered records would be a herculean venture, even for a large team of researchers. Instead of attempting the impossible, however, the authors ingeniously exploit French fiscal records, which have the potential to yield systematic snapshots of notarial activity across France, amenable to aggregation. From 1693, a tax on notarial deeds (the Contrôle des actes) led summary registers to be kept in bureaux across the country. The authors deem them to be particularly complete as of 1740, which serves as their starting point. 1899 forms an endpoint, after which the country-wide records cease to be available for historical investigation. The registers allow them to quantify the medium and long-term borrowing instruments known as rentes (annuities) and obligations. Their figures thus exclude much of the widespread commercial and consumer debt that never made it into notarized contracts, including bills of [End Page 567] exchange (lettres de change). The latter appear in notarial records from the 1820s in the South of France, a story well told in the book's fifth chapter. To make the project manageable, the authors proceed by sampling years (1740, 1780, 1807, 1840, 1865, 1899) and regions. In the end, they analyzed some 239,269 loans spread across what they describe as ninety-nine "markets," from thirty-five Départements, ranging from overwhelmingly urban regions, such as Paris or Lyon, to more rural areas connected to smaller or medium-sized towns. The authors venture estimates for the whole of France, extrapolating from their samples by assuming that the observed rates of borrowing would hold in other places with similar urban/rural configurations. This big-picture quantitative estimate spanning France as a whole, and the data set underlying it, is one of the book's most important, hard-won, and original contributions. Throughout, the book is also scrupulously attentive to institutional and regulatory changes underlying the patterns they observe, including those relating to the notarial profession itself. The data set is used to support the claim that, overall...