Homo Economicus and Homo Politicus: Non-Economic Rationality in the Early 18th Century London Stock Market

Abstract

The case of the early 18th-century London stock market is used to evaluate economic and sociological theones of market trading. Data from 1712 on shares in two companies (the Bank of England and the East India Company), and on trading among three different groups (political parties, ethnic-religious groups, and guilds) are used to show how economic theories of rational trading do not account for market behavior, even though the 1712 London stock market was a highly centralized, organized and active capital market. Trading was embedded in domestic and mternational politics as party groups used the market to control joint-stock companies, and as ethnic-religious groups used the market to provide financial support for Britain's war with France In addition to economic goals, political goals were pursued in the market.