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Review of The Ascent of Money: A Financial History of the World by

The Ascent of Money: A Financial History of the World

by Niall Ferguson

Long have I regarded the economy as a fickle, fictitious construct of humanity. If we disappeared, it would disappear (although its effects on the environment would remain). However, that's a very naive view to take, and not a particularly helpful one. So I set out to learn more about the economy the way we're told to learn about things in school: begin at the beginning. The Ascent of Money is an attempt to recount the wise of finance, beginning in Mesopotamia and ending in modern-day United States and Britain.

As I began reading, I reacted with scorn to Niall Ferguson's intense introduction, thinking that this would be another one of those books where the author takes his pet thesis and tries to show that it is the real reason behind everything that's happened in history. Fortunately, Ferguson toned down the rhetoric after the introduction and instead focused on imparting and interpreting the facts.

The book follows a roughly chronological path, but only because Ferguson tackles components of the economy in increasingly complex order. Each chapter is about some specific aspect of finances, such as the bond market, the stock market, mortgages, etc. Hence, Ferguson treads over the same historical periods several times, but each time with fresh eyes. I enjoyed this categorization scheme, and I think it worked better than a strict chronological organization would have. Above all, it helped stress the interdependence of these various components; they did not arise in a vacuum and they are still closely-linked today.

My favourite part of The Ascent of Money concerns the financial history of the Renaissance. Ferguson mentions the rise of the Medicis, explaining how their decentralized approach to banking protected them from the weakness of any one man in power. This is a marked contrast to the excesses of 18th century France, of course, which sparked the French Revolution. At this point, Ferguson once again veers too close to the thesis precipice. However, he's right in saying that one of the major factors of the Revolution was economic, and I enjoyed hearing the full story. It is amazing how much people could accomplish so quickly and efficiently in the days before modern telecommunication.

As the book continues to the present-day financial scene, more esoteric terms begin to clutter Ferguson's vocabulary. Ferguson does his best to provide explanations, especially in footnotes, but it still makes for slow and difficult reading. I know it's unusual for me to express a dislike of numbers, since I'm studying math, but it's true: I find them shifty, which is the source of my unease about economics. The jargon Ferguson so carelessly bandies about only increases that sense of unease, to the point where my eyes were glazing over (although I was also tired). Again, though, as a mathematician-in-training I understand that jargon is only jargon to the uninitiated. (And on that note, in chapter 6—page 321 in my edition—Ferguson includes the book's sole mathematical formula, used to calculate the price of an option. Afterward, he adds, "Feeling a bit baffled? Can't follow the algebra? To be honest, I am a bit baffled too." Meanwhile, I'm going, "Yay, finally something I can understand!") I'll take Ferguson at his word that all these terms mean what he says they mean and that they work like he says they do. Nor do I expect him to give me a crash course in economics—there's reasons people earn degrees in this field; I won't learn it from a single book. Unfortunately, I did find the last two chapters, particularly the last chapter, so dense with terminology I could hardly follow that they were very difficult for me to read . . . I will confess I began skimming.

One explanation I did follow was the rise of the insurance industry. Not as fascinating as Renaissance economics, but it's a close second! Ferguson clearly explains the origins of modern insurance companies and the way in which modern insurance operates—not just from the point of view of the policy-holder, which is easy enough to understand, but from the point of view of insurance companies. We're living in an era where insurance companies have substantial influence on the economy and on public policy (I'm looking at you, U.S. health care reform debate). Understanding how and why insurance companies operate as they do is key to understanding what's happening in the modern political landscape. The same goes for mortgages and the real estate game, which Ferguson covers in the subsequent chapter, albeit with that aforementioned increase in jargon.

Having read The Ascent of Money, I feel like I've learned more, and—perhaps more importantly—I feel more confident in what I know. Whereas before I knew only that the recent turmoil was caused, in part, by subprime mortgages and derivatives, now I think I could explain what those things are to other people. Or, you know, I could just tell them to read this book.


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