5,000 years of economy and finance

In the beginning there was not the coin but the list. In the temples and palaces of Mesopotamia scribes recorded who had delivered how much barley or silver and who owed what. Silver served as the yardstick; it was rarely moved.

With debts came rules: interest, and from the start a ceiling on it. When the burden grew too heavy, kings cancelled debts and freed debt slaves. Today insolvency law does that job.

1. c. 3300 BCThe first accounts In Uruk the oldest written tablets appear, most of them administrative records: who delivered what, who owes what.Money and markets · Source: Englund, Accounting in Proto-Cuneiform (2011)
2. c. 2400 BCInterest on barley Texts from Lagash record loans of barley with interest.Money and markets · Source: Muroi, The Oldest Example of Compound Interest in Sumer (2015)
3. c. 1900 BCLong-distance trade in silver Merchants from Assur trade via Kanesh in Anatolia and pay in silver by weight; about 23,000 tablets survive. Investors pool capital for one merchant for ten to twelve years.Econ­omy · Source: Dercksen, The Golden Interval of Old Assyrian Trade (2022)
4. c. 1750 BCInterest with a ceiling The Code of Hammurabi regulates loans, interest and debt bondage: at most 20 per cent on silver, 33⅓ on barley, as the laws of Eshnunna did before.Money and markets · Source: Code of Hammurabi, transl. L. W. King (Avalon Project, Yale)
5. c. 1646 BCDebt relief Babylonian kings cancel debts when they take office; the edict of Ammi-saduqa is the best preserved.Money and markets · Source: Gaertner, The motives for the mesarum edict of King Ammiṣaduqa (2008)
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The coin made weight and purity visible, under the stamp of a power. The state paid its soldiers in coins and demanded taxes in the same coins. Whoever minted could also mint worse: the silver in Roman coins fell over centuries.

Antiquity knew credit, interest, shared risk and even state help in a crisis. What it lacked were shares one could sell on and liability limited to the stake. So business stayed with single deals.

1. c. 630 BCThe first coins In Lydia and Ionia coins are struck from electrum, an alloy of gold and silver.Money and markets · Source: Konuk and Kerschner, Electrum Coins and their Archaeological Context (2020)
2. 594 BCSolon's debt cut Solon cancels debts secured on persons and land in Athens and bans debt slavery.Money and markets · Source: Aristotle, The Constitution of Athens, ch. 6
3. 4th c. BCThe sea loan If the ship sinks, the merchant repays nothing; the high interest makes the loan a kind of insurance.Money and markets · Source: Demosthenes, Against Lacritus (speech 35)
4. AD 33Credit crisis in Rome When an old law is suddenly enforced, lenders call in loans at once and land prices fall. Emperor Tiberius provides 100 million sesterces through banks, free of interest for three years.Crises · Source: Tacitus, Annals 6.16–17
5. AD 64Less silver in the coin Nero makes the denarius lighter; around 270 its successor holds only about 2.5 per cent silver.Money and markets · Source: Butcher and Ponting, The Denarius in the First Century
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The Church banned interest, trade needed credit. Merchants found ways around: the bill of exchange, with the interest hidden in the exchange rate, and the purchase of annuities. Cities such as Venice, Florence and Genoa borrowed from their citizens, and the shares in these debts were traded.

Double-entry bookkeeping separated the business from the person. Only then could accounts be rendered, and outside investors could rely on the figures. Insurance broke away from the loan and became a business of its own. From 1492 the continents exchanged plants, animals and diseases, with consequences for food and population.

1. 12th c.Bills of exchange and fairs At the fairs of Champagne merchants settle their claims against each other. With the bill of exchange they pay in another city and currency; the interest hides in the rate, despite the ban.Money and markets · Source: Edwards and Ogilvie, Lessons from the Champagne fairs (2012)
2. 1172Bonds in Venice Venice raises a forced loan with interest from its citizens; in 1262 the loans become one debt at 5 per cent whose shares are traded.Money and markets · Source: Mueller, Foreign Investment in Venetian Government Bonds (KNAW)
3. 1347Insurance on its own One of the oldest surviving marine insurance contracts, from Genoa: the insurance stands on its own, no longer part of a loan.Money and markets · Source: Gioffrè, Note sull'assicurazione e sugli assicuratori genovesi
4. 1397The Medici bank The Medici run their branches as separate partnerships with their own books; their main business is the bill of exchange.Money and markets · Source: de Roover, The Rise and Decline of the Medici Bank (1963)
5. 1492The Columbian exchange With Columbus the exchange of plants, animals and diseases between the continents begins; potatoes and tomatoes come to Europe. Later the potato explains about a quarter of the population growth of the Old World from 1700 to 1900.Econ­omy · Source: Nunn and Qian, The Potato's Contribution to Population and Urbanization (2011)
6. 1494Bookkeeping in print Luca Pacioli describes double-entry bookkeeping in a printed book in Venice. He did not invent it, but he made it teachable.Meth­ods · Source: Morgan Library, Pacioli's Summa (1494)
7. 1531A building for the exchange Antwerp builds the first building made for an exchange, for bills and goods.Money and markets · Source: Ottomer, Handelsbeurs Antwerpen (2020)
8. 1545Interest allowed England allows interest of up to 10 per cent by law.Money and markets · Source: Munro, Usury, Calvinism, and Credit in Protestant England (2011)
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In 1602 what had been separate came together: anyone could subscribe to the Dutch East India Company, liability was limited, and the shares traded on the exchange every day. Soon there were short sales, forwards and options as well, and the first bans.

At the same time mathematicians learned to calculate with chance. Lists of deaths became tables, tables became prices for annuities and life insurance. By the end of the century there was the first fund for small investors and the first bond protected against inflation.

1. 1602Shares for everyone Anyone can subscribe to the Dutch East India Company, and its shares are traded continuously on an exchange.Money and markets · Source: Gaastra, The Amsterdam Capital Market and the Dutch East India Company (KNAW)
2. 1637Tulip mania Prices of tulip bulbs soar and collapse in February 1637. By a strict measure hardly a bubble: trade was small, and the famous story comes largely from moralising writings.Crises · Source: Price, review of Goldgar, Tulipmania (Reviews in History, 2008)
3. 1654Calculating with chance In letters, Blaise Pascal and Pierre de Fermat work out how to split the stake of an interrupted game fairly: the beginning of probability theory.Meth­ods · Source: Fermat and Pascal, letters of 1654 (English translation)
4. 1693A life table Edmond Halley builds a life table from the church records of Breslau and derives prices for life annuities.Meth­ods · Source: Halley, An Estimate of the Degrees of the Mortality of Mankind (1693)
5. 1694Bank of England 1,268 subscribers lend the state £1.2 million at 8 per cent and become the bank's shareholders. Only the Swedish Riksbank (1668) is older.Money and markets · Source: Bank of England Museum, Why was the Bank of England founded?
6. 1720South Sea bubble Shares in London and, with the Mississippi Company, in Paris soar and crash; Isaac Newton loses a good part of his fortune.Crises · Source: Odlyzko, Isaac Newton and the perils of the financial South Sea (2020)
7. 1738Utility, not amount Daniel Bernoulli: an extra coin pleases the poor more than the rich, so utility counts, not the amount of money.Ideas · Source: Bernoulli, Exposition of a New Theory on the Measurement of Risk (English 1954)
8. 1762Life insurance by age The Equitable in London, a mutual society, charges premiums by age, calculated from life tables.Money and markets · Source: Institute and Faculty of Actuaries, the Equitable's archive
9. 1774The first investment fund After the crisis of 1772/73 Abraham van Ketwich launches “Eendragt Maakt Magt” in Amsterdam: diversification for investors with little money.Money and markets · Source: Rouwenhorst, The Origins of Mutual Funds (2004)
10. 1776The Wealth of Nations Adam Smith explains prosperity by the division of labour and markets.Ideas · Source: Smith, The Wealth of Nations (Project Gutenberg)
11. 1780Protection against inflation Massachusetts pays its soldiers with notes tied to the prices of corn, beef, wool and leather: the oldest known inflation-linked bonds.Money and markets · Source: Shiller, The Invention of Inflation-Indexed Bonds in Early America (2003)
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Railways, electricity, industry: large projects needed a lot of capital, and the exchanges grew with them. Each wave brought an excess. Many investors lost, but the rails remained. Central banks learned to step in during a panic as lender of last resort.

Least squares came from astronomy, regression from the study of heredity. In 1900 Louis Bachelier described prices as a random walk, hardly noticed. After the crash of 1929 people began to test whether market letters beat the market.

1. c. 1800Lasting growth Before, the economy hardly grew for long; from about 1800 it grows lastingly, by about 1.5 to almost 2 per cent a year.Econ­omy · Source: Prize in Economic Sciences 2025, popular science background
2. 1805Least squares Adrien-Marie Legendre publishes the method of least squares, Carl Friedrich Gauss grounds it in 1809: the tool behind every regression.Meth­ods · Source: Legendre (1805)
3. 1845Railway mania Britain approves thousands of miles of new lines; many shareholders lose, the railway network remains.Crises · Source: Odlyzko, The British Railway Mania of the 1840s (2010)
4. 1869The Suez Canal The canal opens and shortens the sea route between Europe and Asia; the Panama Canal follows in 1914.Econ­omy · Sources: Britannica, Suez Canal: history; Panama Canal Authority, 100 years
5. 1873Lender of last resort Walter Bagehot: in a panic the central bank should lend freely, against good security and at a high rate.Ideas · Source: Bagehot, Lombard Street (Project Gutenberg)
6. 1880sElectrification Electricity changes factories and households; many early utilities and manufacturers go under or are regulated. The users profit most.Econ­omy · Source: Jovanovic and Rousseau, General Purpose Technologies (2005)
7. 1896The Dow Jones Charles Dow publishes the average of twelve industrial shares.Money and markets · Source: S&P Dow Jones Indices, The Dow Turns 120 (2016)
8. 1900Prices as a random walk Louis Bachelier describes prices as a random walk and prices options with it.Ideas · Source: Bachelier, Théorie de la spéculation (1900)
9. 1911Creative destruction Joseph Schumpeter: entrepreneurs push through the new with credit and drive out the old. He coins the phrase creative destruction in 1942.Ideas · Source: Schumpeter, Theorie der wirtschaftlichen Entwicklung (1912, reprint)
10. 1913The Federal Reserve On 23 December President Wilson signs the Federal Reserve Act: the United States gets a central bank with twelve regional reserve banks.Money and markets · Source: Federal Reserve History, Federal Reserve Act Signed
11. 1929Crash and Great Depression The crash on Wall Street is followed by the deepest slump of the 20th century; RCA, the stock of the future of the twenties, loses about 98 per cent by 1932.Crises · Sources: Federal Reserve History, Stock Market Crash of 1929; Global Financial Data, RCA and the Roaring Twenties
12. 1934Security analysis Benjamin Graham and David Dodd: buy only with a margin between price and intrinsic value.Ideas · Source: Graham and Dodd, Security Analysis (the 1934 edition)
13. 1936The General Theory John Maynard Keynes: how many people have work depends on total demand, not on wages. It becomes the case for countering a slump with public spending.Ideas · Source: Keynes, The General Theory (Palgrave Macmillan 2018)
14. 1944Bretton Woods Fixed exchange rates to the dollar, the dollar convertible into gold, plus the IMF and the World Bank; given up in 1971 and 1973.Money and markets · Source: IMF, Cooperation and Reconstruction (1944–71)
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After the war experience became theory. Harry Markowitz showed how spreading money lowers risk, William Sharpe how the market pays for risk, Eugene Fama why hardly anyone beats it for long. Computers and databases made it possible to test this on all shares.

Ideas became products: index funds that simply buy the market, options with a calculated price, hedge funds. The container made world trade cheap. At the same time Daniel Kahneman and Amos Tversky showed that people decide differently from what the models assume.

1. 1949The first hedge fund Alfred Winslow Jones buys shares on credit, hedges part of them with short sales and keeps 20 per cent of the profits; it counts as the first hedge fund.Money and markets · Source: Loomis, The Jones Nobody Keeps Up With (Fortune, 1966)
2. 1949Monte Carlo Nicholas Metropolis and Stanisław Ulam describe the Monte Carlo method: calculating with many random runs.Meth­ods · Source: Metropolis, The Beginning of the Monte Carlo Method (Los Alamos Science, 1987)
3. 1952Portfolio theory Harry Markowitz shows how spreading money lowers risk: the beginning of modern finance.Ideas · Source: Markowitz, Portfolio Selection (1952)
4. 1956The container Malcom McLean's Ideal X carries 58 containers from Newark to Houston; the box makes world trade cheap.Econ­omy · Source: Levinson, The Box (Princeton University Press)
5. 1956Growth from progress Robert Solow: in the long run growth per head depends on technical progress.Ideas · Source: Solow, A Contribution to the Theory of Economic Growth (1956)
6. 1964CAPM William Sharpe explains returns by the risk of the market, the beta.Ideas · Source: Sharpe, Capital Asset Prices (1964)
7. 1970Efficient markets Eugene Fama: prices contain what is known, so beating the market for long is hard.Ideas · Source: Fama, Efficient Capital Markets (1970)
8. 1971Index funds Wells Fargo invests a pension fund's money in all shares of the New York Stock Exchange; from 1973 funds track the S&P 500, in 1976 Vanguard opens one to private investors.Money and markets · Source: InvestmentNews, The secret history of index mutual funds
9. 1973A price for options Fischer Black, Myron Scholes and Robert Merton find a formula for the value of options; in the same spring the options exchange CBOE opens in Chicago.Ideas · Source: Black and Scholes, The Pricing of Options and Corporate Liabilities (1973)
10. 1979The Volcker shock Fed chairman Paul Volcker tightens money to break inflation; the policy rate rises to 20 per cent by late 1980, and inflation falls from 11.6 per cent in March 1980 to 3.7 per cent in 1983.Money and markets · Source: Federal Reserve History, Volcker's Announcement of Anti-Inflation Measures
11. 1979Fear of losses Daniel Kahneman and Amos Tversky: losses hurt about twice as much as gains please.Ideas · Source: Kahneman and Tversky, Prospect Theory (1979)
12. 1979Spreadsheet and terminal VisiCalc, the first spreadsheet program for personal computers, appears; the Bloomberg terminal follows in 1982.Meth­ods · Sources: Computer History Museum, Bob Frankston; Fast Company, How the Bloomberg Terminal Made History (2015)
13. 1984Decision trees Classification and regression trees (CART) appear; in 1986 networks with several layers learn by backpropagation.Meth­ods · Sources: Breiman, Friedman, Olshen and Stone, Classification and Regression Trees (1984); Rumelhart, Hinton and Williams (1986)
14. 1987Black Monday The Dow Jones falls by 22.6% in a single day.Crises · Source: Federal Reserve History, Stock Market Crash of 1987
15. 1989Japan The Nikkei peaks at the end of 1989; then the share and property bubble bursts.Crises · Source: nippon.com, Nikkei Index Sets First Record High Since 1989 (2024)
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Data and computing power brought the search for patterns: first three factors, then hundreds. Many did not survive stricter tests. New products passed risks on, until 2008 showed how closely everything was connected.

Learning methods such as decision trees and neural networks predict returns somewhat better than regression, if at a low level. Today hundreds of billions flow into data centres for AI. Whether that becomes a return or another bubble will only be known afterwards.

1. 1993Three factors Eugene Fama and Kenneth French: besides the market, size and valuation explain returns.Ideas · Source: Fama and French, Common Risk Factors (1993)
2. 1994Insurance against default J.P. Morgan passes the default risk of a credit line to Exxon to the European Bank for Reconstruction and Development for a fee; by the common account the first credit default swap.Money and markets · Source: Tett, Fool's Gold (2009)
3. 1998LTCM The hedge fund Long-Term Capital Management, with Merton and Scholes among its partners, collapses; fourteen institutions rescue it.Crises · Source: Federal Reserve History, Near Failure of Long-Term Capital Management
4. 1999The euro On 1 January eleven countries introduce the euro, at first as money in accounts; the European Central Bank makes monetary policy. Notes and coins follow in 2002.Money and markets · Source: Banco de España, The introduction of the euro
5. 2000Technology bubble The Nasdaq falls from 5,048 points in March 2000 to 1,114 in October 2002.Crises · Source: AP via Fox Business, Milestones for the Nasdaq composite index
6. 2001Enron Enron files for insolvency; debts sat in special-purpose companies outside the balance sheet. WorldCom and the Sarbanes-Oxley Act follow in 2002.Crises · Source: Healy and Palepu, The Fall of Enron (2003)
7. 2001Random forest Leo Breiman presents the random forest: many trees that vote together.Meth­ods · Source: Breiman, Random Forests (2001)
8. 2008Financial crisis On 15 September 2008 Lehman Brothers files for creditor protection; central banks lend on a huge scale against collateral.Crises · Source: Lehman Brothers, press release of 15 September 2008 (SEC)
9. 2009Bitcoin On 3 January the first block of Bitcoin is created, money without a state and without a bank; Satoshi Nakamoto, a pseudonym, had published the idea in October 2008.Money and markets · Sources: Nakamoto, Bitcoin P2P e-cash paper (31 October 2008); Finance Magnates, Bitcoin Celebrates 7th Birthday (2016)
10. 2012Greece Greece exchanges bonds of private creditors worth about €200 billion; they lose 59 to 65 per cent of the value, the largest debt cut by a government until then.Crises · Source: Zettelmeyer, Trebesch and Gulati, The Greek Debt Restructuring (2013)
11. 2012Deep learning A deep neural network, AlexNet, clearly lowers the error in the ImageNet image recognition contest: the breakthrough of deep learning.Meth­ods · Source: Krizhevsky, Sutskever and Hinton (2012)
12. 2017The transformer The architecture behind today's language models is published.Meth­ods · Source: Vaswani and others (2017)
13. 2022ChatGPT On 30 November ChatGPT becomes publicly available.Meth­ods · Source: OpenAI, Introducing ChatGPT (30 November 2022)
14. 2023Data centres for AI The large cloud companies invest 135 to 220 billion dollars each a year in data centres, partly financed outside their balance sheets.Econ­omy · Sources: Amazon, results for Q3 2026; Meta, results for Q3 2026; Meta, joint venture for Hyperion (2025)
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1. The new needs time. Between an idea and its use often lay decades. Those who know this are less surprised by slow change and by sudden excess.
2. Bubbles follow a pattern. Cheap money and rising debt, a new technology or a political spark, and suddenly everyone can and wants to buy. The pattern says that danger exists, not when it breaks.
3. Losses become infrastructure. The railway shareholders of the 1840s and the fibre investors around 2000 lost a lot; the rails and cables remained and carried the next growth.

How the learning methods of today work is shown on Understanding AI; how I plan finances with these lessons, on Life and financial planning.

The stations follow the specialist literature on economic and financial history; each names a public source, and where a dating is disputed, the text says so. A selection, told in my own words.