Summary
Investment: A History begins with the dawn of formal investment in the ancient societies of Mesopotamia, Greece, Rome, and China. The ancients confronted a vastly different economic landscape than today’s: investment was the exclusive privilege of the “power elite,” land was essentially the sole investment vehicle, slaves served as investment managers, and lending at interest was often restricted or even outlawed.
The book then details the slow but steady growth of investment and its forms through the Middle Ages, the rise of cities, and the Renaissance, with a special focus on Italy and England. This narrative is the prelude to the three developments that created modern investment: joint-stock companies, public markets, and the industrial revolution.
Thanks largely to the surplus created by industrial revolution, retirement became a widespread possibility for the first time in history. The book outlines this development’s amazing force in the growth of the financial sector and in the development of new investment opportunities. Around the same time pension funds and Social Security were enabling retirement, vehicles such as savings accounts, life insurance, and mutual funds came into being. A new class of investors also came into being, including endowments and foundations.
With new opportunities to invest came new opportunities for wrongdoing, and Reamer and Downing provide colorful anecdotes of fraud, market manipulation, and insider trading. They trace the contours of financial wrongdoings across the centuries, from the earliest days of American independence to the twenty-first century, and they point out how our society has responded to it—and what more we ought to do.
The twentieth century witnessed landmark developments in macroeconomic theory and financial theory. In two chapters, this book explains these new ideas and their real-world importance, presenting complicated scholarship in a straightforward and engaging narrative. First, Reamer and Downing examine arguments relating to the management of financial crises, arguing that the Great Recession of 2007–2009 was handled much better than the Great Depression of the 1930s. The authors also decipher seminal contributions to the financial theory of asset pricing, risk, and performance evaluation, showing how investment became a sophisticated discipline with a formal grounding in economic scholarship.
The last chapters of the book describe recent developments in the financial sector, including the practical implications of theoretical developments. Reamer and Downing notably describe the development of an unprecedented range of investment opportunities and a previously unheard-of scope of assets under management. This trend of innovation, independence, and entrepreneurship in the late twentieth century led to the creation of a “new elite.” Turning to the twenty-first century investment landscape, Reamer and Downing take a careful look at the promise and perils we face, and what may lie ahead.
