Limited attention and selective memory are important forms of cognitive bias. We investigate how present events trigger selective recall, thereby changing economic behavior. The 2010-14 sovereign debt crisis in Greece created massive political conflict between the German and Greek governments....

Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain's borrowing boom was beneficial. The massive issuance...

This paper constructs simple models in which industrialization is driven by human capital accumulation. Industrialization can explain the robust correlation between equipment investment and growth in developing countries. We show that government intervention is justified within our stylized...

What sustained borrowing without third-party enforcement, in the early days of sovereign lending? Philip II of Spain accumulated towering debts while stopping all payments to his lenders four times. How could the sovereign borrow much and default often? We argue that bankers' ability to cut off...

Finance is important for development, yet the onset of modern economic growth in Britain lagged the British financial revolution by over a century. We present evidence from a new West-End London private bank to explain this delay. Hoare's Bank loaned primarily to a highly select and well-born...