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Jonathan Levy

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Freaks of Fortune: The Emerging World of Capitalism and Risk in America Kindle Edition

by Jonathan Levy (Author) Format: Kindle Edition

4.1 29 ratings

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Until the early nineteenth century, “risk” was a specialized term: it was the commodity exchanged in a marine insurance contract. Freaks of Fortune tells the story of how the modern concept of risk emerged in the United States. Born on the high seas, risk migrated inland and became essential to the financial management of an inherently uncertain capitalist future.

Focusing on the hopes and anxieties of ordinary people, Jonathan Levy shows how risk developed through the extraordinary growth of new financial institutions—insurance corporations, savings banks, mortgage-backed securities markets, commodities futures markets, and securities markets—while posing inescapable moral questions. For at the heart of risk’s rise was a new vision of freedom. To be a free individual, whether an emancipated slave, a plains farmer, or a Wall Street financier, was to take, assume, and manage one’s own personal risk. Yet this often meant offloading that same risk onto a series of new financial institutions, which together have only recently acquired the name “financial services industry.” Levy traces the fate of a new vision of personal freedom, as it unfolded in the new economic reality created by the American financial system.

Amid the nineteenth-century’s waning faith in God’s providence, Americans increasingly confronted unanticipated challenges to their independence and security in the boom and bust chance-world of capitalism. Freaks of Fortune is one of the first books to excavate the historical origins of our own financialized times and risk-defined lives.

Editorial Reviews

Review

A most informative and imaginative study of the many roles played by risk and the attempts to offset it in American economic development. Levy's insights will substantially enrich our understanding of the American past. (Stanley L. Engerman, author of Slavery, Emancipation, and Freedom: Comparative Perspectives)

There is a brilliance of mind and story on every page of Levy's intriguing and innovative study of American capitalism. Risk taking and risk management illuminate the economic history of the United States in the nineteenth century and prompt invaluable reflection on our own risky financial times. (Walter Licht, author of Industrializing America: The Nineteenth Century)

A free-wheeling yet finely targeted history of capitalism and the modern financial industry, this study by Princeton historian Levy revolves around one specific concept--risk--while considering changing notions of liberty, justice, and human agency. Originally a mariners' term for the possibility of a ship's cargo being lost at sea, "risk" became a defining feature of American commercial life as the free market expanded and industrialization radically increased the pace of economic change...Levy's humane vision and his extensive knowledge of American law, economics, and politics turn what could have been a dry treatise into a fascinating portrait of a society in flux. The author sheds light on such topics as corporate profit-sharing and the ethical ramifications of futures trading, underscoring the extraordinary power of the "economic chance-world" to create and destroy. Happenstance has always played an enormous role in human life, and the book explores society's reaction to the realization that individuals are increasingly defined by the possibility that their station in life will dramatically rise or fall. (Publishers Weekly 2012-08-20)

Levy provides a fascinating glimpse into the history of financial risk. Looking at the years between the start of the 19th century and the beginning of the Great Depression, he outlines a shift in philosophy regarding risk and responsibility as workers became dependent on new financial systems. Insurance, savings accounts, and even mortgage-backed securities proliferated in an attempt to shift risk off the individual and onto a larger institution. (Elizabeth Nelson Library Journal 2012-10-15)

Freaks of Fortune is a bold new synthesis of nineteenth-century U.S. history. It illuminates the transformation of fundamental ideas about property, personhood, liberty, and security as an agrarian market society became a modern industrial state. In showing how an omniscient God yielded authority to the emerging statistical science of probability, Levy casts unprecedented light on the culture of American capitalism, past and present. This is a powerful and important book. (Jackson Lears, author of Rebirth of a Nation: The Making of Modern America, 1877–1920)

[Levy] not only tells a historical tale but also usefully illuminates the background to two first-magnitude issues confronting the American economy and American economic policy today: to what extent should the government, as opposed to private insurers, absorb the financial risks that we choose not to bear individually? ...And within the private sector, including not just private insurance companies but also for-profit firms in other industries, how do the rewards that firms' owners and senior managers receive relate to the risks that they are personally bearing? ...Anyone concerned with these important questions can usefully--and enjoyably--learn from Levy's fine-grained yet sweeping account...Corporate America has evolved a labor market that treats top executives differently from other people not just in the amount paid to them but in their exposure to downside risk. For three decades now, our society has been making the consequences of unemployment ever harsher for ordinary citizens. The theory, apparently, is that facing the disastrous consequences of losing one's job creates an incentive to work hard and well. At the same time, the theory applied to our top executives is that their incentive to good performance is not just the enormous upside potential of success but also the generous cushion provided in case of failure. Reading Jonathan Levy's book leaves no doubt which theory is more consistent with traditional American values.
(Benjamin M. Friedman New Republic 2013-08-05)

Brilliant. (Stephen Mihm The Nation 2013-04-23)

Levy sets himself the task of writing a history of economic and social risk in America in the 19th and early 20th centuries and, along the way, of showing that big government didn't just come from nowhere. It is an indispensable absorber, he suggests, of the shocks of the free market...Freaks of Fortune is a formidable work of scholarship--hats off to the author for the depth and breadth of his research. (James Grant Wall Street Journal 2012-11-02)

Engrossing account of the rise of the financial sector of the U.S. economy and the development of new tools for managing risk...Levy adds greatly to an understanding of risk in the American economy. (D. A. Coffin Choice 2013-04-01)

Review

Brilliant.
-- Stephen Mihm The Nation
Levy sets himself the task of writing a history of economic and social risk in America in the 19th and early 20th centuries and, along the way, of showing that big government didn’t just come from nowhere. It is an indispensable absorber, he suggests, of the shocks of the free market… Freaks of Fortune is a formidable work of scholarship―hats off to the author for the depth and breadth of his research.
-- James Grant Wall Street Journal
[Levy] not only tells a historical tale but also usefully illuminates the background to two first-magnitude issues confronting the American economy and American economic policy today: to what extent should the government, as opposed to private insurers, absorb the financial risks that we choose not to bear individually?… And within the private sector, including not just private insurance companies but also for-profit firms in other industries, how do the rewards that firms’ owners and senior managers receive relate to the risks that they are personally bearing?… Anyone concerned with these important questions can usefully―and enjoyably―learn from Levy’s fine-grained yet sweeping account… Corporate America has evolved a labor market that treats top executives differently from other people not just in the amount paid to them but in their exposure to downside risk. For three decades now, our society has been making the consequences of unemployment ever harsher for ordinary citizens. The theory, apparently, is that facing the disastrous consequences of losing one’s job creates an incentive to work hard and well. At the same time, the theory applied to our top executives is that their incentive to good performance is not just the enormous upside potential of success but also the generous cushion provided in case of failure. Reading Jonathan Levy’s book leaves no doubt which theory is more consistent with traditional American values.
-- Benjamin M. Friedman New Republic
Engrossing account of the rise of the financial sector of the U.S. economy and the development of new tools for managing risk… Levy adds greatly to an understanding of risk in the American economy.
-- D. A. Coffin Choice
Levy provides a fascinating glimpse into the history of financial risk. Looking at the years between the start of the 19th century and the beginning of the Great Depression, he outlines a shift in philosophy regarding risk and responsibility as workers became dependent on new financial systems. Insurance, savings accounts, and even mortgage-backed securities proliferated in an attempt to shift risk off the individual and onto a larger institution.
-- Elizabeth Nelson Library Journal
A free-wheeling yet finely targeted history of capitalism and the modern financial industry, this study by Princeton historian Levy revolves around one specific concept―risk―while considering changing notions of liberty, justice, and human agency. Originally a mariners’ term for the possibility of a ship’s cargo being lost at sea, ‘risk’ became a defining feature of American commercial life as the free market expanded and industrialization radically increased the pace of economic change… Levy’s humane vision and his extensive knowledge of American law, economics, and politics turn what could have been a dry treatise into a fascinating portrait of a society in flux. The author sheds light on such topics as corporate profit-sharing and the ethical ramifications of futures trading, underscoring the extraordinary power of the ‘economic chance-world’ to create and destroy. Happenstance has always played an enormous role in human life, and the book explores society’s reaction to the realization that individuals are increasingly defined by the possibility that their station in life will dramatically rise or fall.
-- Publishers Weekly
A most informative and imaginative study of the many roles played by risk and the attempts to offset it in American economic development. Levy’s insights will substantially enrich our understanding of the American past.
-- Stanley L. Engerman, author of Slavery, Emancipation, and Freedom: Comparative Perspectives
There is a brilliance of mind and story on every page of Levy’s intriguing and innovative study of American capitalism. Risk taking and risk management illuminate the economic history of the United States in the nineteenth century and prompt invaluable reflection on our own risky financial times.
-- Walter Licht, author of Industrializing America: The Nineteenth Century
Freaks of Fortune is a bold new synthesis of nineteenth-century U.S. history. It illuminates the transformation of fundamental ideas about property, personhood, liberty, and security as an agrarian market society became a modern industrial state. In showing how an omniscient God yielded authority to the emerging statistical science of probability, Levy casts unprecedented light on the culture of American capitalism, past and present. This is a powerful and important book.
-- Jackson Lears, author of Rebirth of a Nation: The Making of Modern America, 1877–1920

Product details

ASIN ‏ : ‎ B00AFS6LXW
Publisher ‏ : ‎ Harvard University Press (October 29, 2012)
Publication date ‏ : ‎ October 29, 2012
Language ‏ : ‎ English
File size ‏ : ‎ 1868 KB
Text-to-Speech ‏ : ‎ Enabled
Screen Reader ‏ : ‎ Supported
Enhanced typesetting ‏ : ‎ Enabled
X-Ray ‏ : ‎ Not Enabled
Word Wise ‏ : ‎ Enabled
Sticky notes ‏ : ‎ On Kindle Scribe
Print length ‏ : ‎ 425 pages

Best Sellers Rank: #614,213 in Kindle Store (See Top 100 in Kindle Store)
- #380 in Economic Conditions (Kindle Store)
- #419 in Economic History (Kindle Store)
- #605 in Political Economy

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4.1 29 ratings

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Jonathan Levy

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Jonathan Levy is professor in the Department of History and the John U. Nef Committee on Social Thought at the University of Chicago

https://voices.uchicago.edu/jlevy/

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Philo

Eye-opening, insightful, scholarly, every page a pleasure

Reviewed in the United States on May 9, 2013

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This book has opened my eyes to depths and meanings of risk, risk transfer, insurance, and a great array of related topics, I never grasped at anything like this level before. (I'm a law teacher of some 3 decades' experience, without a formal finance background.) In this sweeping canvas, we also witness a seafaring adventuring people transforming into the land-based capitalists of the great emerging American cities. This is a great example of those books on the 17th, 18th and 19th centuries that give such deep insight into the formation of our modern ideas and ways. The explanations here are well-researched and well-crafted, sailing far above so much dreck clogging the bookshelves these days. This is a skilled and erudite author. Vignettes of the lives of the participants, from capitalists to laborers, alongside examples of transactions, court cases, and a big picture of the flow and development of business, are masterfully blended and paced. If the title seems to your liking, I feel assured the whole book will be.
I finish at least a book per week, and this is my favorite discovery of the last year, alongside two others in law and finance history: "Novus Ordo Seclorum" by Forrest McDonald (I got in audio form) on ideological and legal origins of the U.S. Constitution, and "The Origins of Value: The Financial Innovations that Created Modern Capital Markets" by various authors. All these books have that high-quality value of building deep history-based insights into things we might otherwise see only shallowly. If only every book I start into could be this good!

19 people found this helpful

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Jonathan Brown

I found this to be a fascinating discussion of the ...

Reviewed in the United States on January 6, 2015

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I found this to be a fascinating discussion of the concept of risk and insurance in the US. It is a historical treatment that gave me a lot of insight into the thinking of how insurance works today and how those concepts developed.

One person found this helpful

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Reader

A wordy read.

Reviewed in the United States on August 17, 2017

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The material is interesting but Mr. Levy needs an editor. For example "...countermovement against the generative insecurity and radical uncertainty of capitalism...". He appears unable to relinquish adjectives, making for an unnecessarily wordy read.

2 people found this helpful

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HD

fascinating

Reviewed in the United States on December 3, 2013

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i keep trying to get other people to get other people to read this book. as soon as they see the title, they get intimidated. no, no! its not like that. this is a completely engrossing read.

2 people found this helpful

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Robert Ross

Remarkably insightful

Reviewed in the United States on July 7, 2013

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I found this book to be something of an eye opener. It gave me a new perspective on the inevitability of our economic ups and downs and the issues in such a market driven society as ours.

4 people found this helpful

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James R. Maclean

Surprised by Countermovement

Reviewed in the United States on January 2, 2013

The practice of managing risks of the unknown was a major preoccupation of 19th century Americans. One major form of risk was the loss of physical wealth (e.g., a ship's cargo); the other was the loss of monetary wealth, through a change in prices. According to author Jonathan Levy, both forms of risk were tied to the concept of personal liberty--of self-ownership: free people owned themselves, and therefore, owned the risks associated with their situation within the industrial system.

This book is organized into eight chapters with a thematic (and mostly chronological) structure. The first two address the philosophical and pragmatic issues of maritime insurance, with chapter two especially focused on the antebellum dilemma of insuring cargos of slaves (slavery plays a major role in this book because of the revolutionary impact of emancipation). As the coastal trade in human captives runs its baneful course, finance and the slave power confront each other over the risks insurers are obligated to bear: is a bid for liberty the sort of disaster a policy is supposed to cover? Insurers and their lawyers battled over this in Southern courts where the expression of abolitionist ideas was virtually a capital offense.

With the liquidation of slavery, the freedmen and the planter alike needed to accumulate reserves against the risk of early death or incapacitation. Life insurance (§3) had, until the 1850s, been unusual and primitive in the US; now it boomed. In the past, all types of farm proprietor had accumulated capital mostly in the form of land and improvements (and in the South, slaves). After 1865, the saving bank (§4), farm mortgage (§5), and life insurance policy became major forms of personal capital accumulation. In fact, savings bank management and life insurance companies, with rapidly growing portfolios of deposits/reserve funds, turned first to the railroads and then to farm mortgages as an outlet.

Levy frequently frames the quest for risk management as a "countermovement" (after Polanyi ); Polanyi coined the phrase to refer to the tendency of people to resist the uncertainty inherent in a rapidly evolving market economy. As more and more social institutions were replaced by putative markets (markets for labor, land, and capital, among others) and as good from far away become competitors to those produced locally, people increasingly insisted on legislation to reduce uncertainty about the future. Polanyi was interested in measures such as statutory restrictions on markets, such as agrarian protectionism. Levy is interested in the "countermovement" of the market itself to the uncertainties it produced: the emergent technology of risk management (1).

But as the market introduced new ways of alienating and commodifying risk, it created more risk. Partly this was a simple effect of moving the risk of commercial ventures onto new markets farther away from the original: insurance companies rather than merchants, for example, took a large part of the financial risk of shipping; farm mortgages, the hot new repository for savings deposits and insurance premia, were quickly pooled, securitized, and traded (until that particular form of risk arbitrage blew out in 1893). However, the pooling and securitization of risk itself was--from the very beginning of US history--multiplied outward to create lucrative investment opportunities. Instead of the risk of a price movement being split up (and presumably easier to bear), the risk was replicated, pantograph-like, for all the people who wanted to gamble on the upside risk of a price movement. So, for example, in 1888, when American farmers harvested 415 million bushels of wheat, experts estimated 25,000 trillion bushels of wheat were traded in futures contracts (2). This multiplier effect had a ripple effect through the global economy.

In addition to the derivatives market (§7), which is well known to followers of the 2008 Global Financial Crisis, there was also the countermovement of "fraternalism" (§6). Movements such as a Ancient Order of United Workmen (AOUM) or Knights of Columbus emerged to provide support for members' dependents in the event of death or disability. In the fullness of time (i.e., 1905), litigation had reduced these to mutual insurance associations, but the fraternal orders did outperform the insurance companies during the financial catastrophe of the 1890s (3).

Levy concludes with (§8), a cautionary introduction to the quixotic George W. Perkins, partner of J. P. Morgan . An architect of industrial consolidation ( NYLIC , US Steel , International Harvester ), Perkins sought to first unify industry--eliminating competition within heavy industry--and then guarantee social welfare to employees. Perkins did not hesitate to describe this dream of his as "socialism," albeit socialism of a singularly undemocratic kind. The paternalistic scheme he aimed for was lampooned relentlessly, and while he was well-connected, association with him would prove highly radioactive (4). But Perkins' downfall was his conflict with other plutocrats, who insisted on the fiction of the uncertain market--a market that would never brook the luxury of gracious benevolence towards its workforce.
_______________________________________________
(1) "Emergent": a type of order that arises in groups of things (like cells in an organism) that cannot be predicted by examining the constituent parts in isolation. An example is a hurricane: parts of a hurricane, or little bits of hurricane-like behavior, cannot be found in the constituent bits of the atmosphere. For an introduction to the concept, see Peter T. Macklem, "Emergent phenomena and the secrets of life," _Journal of Applied Physiology_ June 2008 vol. 104 no. 6 1844-1846. One of the passages in Polanyi's _The Great Transformation_ addressing the [statutory] countermovement begins on p.152 (2001 edition). An extremely helpful introduction to the concept of emergence in economics may be found in the 2011 edition of Debunking Economics , beginning on p.207.

(2) Levy, p.238. In 1888, a bushel of wheat had a mean price of $0.93/bushel (see USDA Economic Research Service, Wheat Data).

(3) The fraternal organizations formally repudiated any actuarial estimate of risk valuation until 1888, on the grounds that risk pricing was morally sordid. The fraternal movements are the one form of countermovement mentioned by Levy that really correspond to Polanyi's original sense.

(4) George W. Perkins managed Theodore Roosevelt's attempted political comeback of 1912; Wilson's campaign targeted Perkins, rather than Roosevelt. Wilson's form of populism took the form of anti-conspiracy (which would presumably mean free markets and free men). Perkin's (and Roosevelt's) populism took the form of industrial peace and paternalism. Perkins was "exposed" repeatedly for conspiring to restrain competition, as in the New York State legislature's 1905 hearings on consolidation in the insurance industry. Perkins never broke the law, but he was very good at supplying his enemies with ammunition.

39 people found this helpful

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D Newcomer

Incomprehensible, endless strings of speculation

Reviewed in the United States on August 13, 2019

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The intellectual framework fails to connect with a solid base of fact. The book lacks a grasp of risk

One person found this helpful

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Samuel J. Sharp

Impressive But For A Limited Audience

Reviewed in the United States on April 26, 2013

"Freaks of Fortune" is an exhaustively researched account of how America's financial system evolved in the nineteenth and early twentieth centuries to absorb increasing amounts of risk from the perils of the "economic chance-world." Levy traces the development of risk management principles from marine insurance to life insurance, farm mortgages, and eventually the dominance of commercial trusts in the early 1900s.

Even though Levy deserves praise for his research and scholarly contribution, the book itself does not make for great reading. The 300 pages are divided into eight long, largely standalone chapters that average 37.5 pages each. Chapter 4 is a entirely a history of the Freedman's bank; Chapter 8 is a biography of financier George Perkins. The book lacks a strong overarching theme to pull each chapter's subjects together. Levy lays the groundwork for a discussion of how the meaning of identity changed as individuals shifted more of life's day-to-day risk to third parties, but this theme was not robustly treated throughout the book.

This book is most appropriate for economic history scholars like Levy and for readers with particularly strong interests in the history of insurance. I am afraid most readers will find this book clearly impressive but ultimately too long and too disjointed.

44 people found this helpful

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Timothy Johnson

Tough but rewarding

Reviewed in the United Kingdom on October 18, 2013

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Not an easy read but worth the effort, especially on the interaction between finance, insurance and production and consequential impacts on US society.

Issues that niggled was the fact that US (actuarially managed) life insurance originated in the Presbyterian's Ministers Fund of Philadelphia in 1761, whereas the text sometimes presents a dissonance between Christianity and life insurance.

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