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Prevailing wisdom dictates that without banks countries would be mired in poverty. Yet somehow much of Europe managed to grow rich long before the diffusion of banks. This book draws on centuries of loan data from France to reveal how credit abounded well before banks opened their doors. The book shows how a vast system of shadow credit enabled nearly a third of French families to borrow in 1740, and by 1840 funded as much mortgage debt as the American banking system of the 1950s. The book traces how this extensive private network outcompeted banks and thrived prior to World War I—not just in France but in Britain, Germany, and the United States—until killed off by government intervention after 1918. Overturning common assumptions about banks and economic growth, the book paints a revealing picture of an until-now hidden market of thousands of peer-to-peer loans made possible by a network of brokers who matched lenders with borrowers and certified the borrowers' creditworthiness. The book challenges widespread misperceptions about French economic history, such as the notion that banks proliferated slowly, and the idea that financial innovation was hobbled by French law. By documenting how intermediaries in the shadow credit market devised effective financial instruments, this compelling book provides new insights into how countries can develop and thrive today.

Milton Friedman once predicted that advances in scientific economics would resolve debates about whether raising the minimum wage is good policy. Decades later, Friedman's prediction has not come true. This book argues that it never will. Why? Because economic policy, when done correctly, is an art and a craft. It is not, and cannot be, a science. The book explains why classical liberal economists understood this essential difference, why modern economists abandoned it, and why now is the time for the profession to return to its classical liberal roots. Carefully distinguishing policy from science and theory, classical liberal economists emphasized values and context, treating economic policy analysis as a moral science where a dialogue of sensibilities and judgments allowed for the same scientific basis to arrive at a variety of policy recommendations. Using the University of Chicago—one of the last bastions of classical liberal economics—as a case study, the book examines how both the MIT and Chicago variants of modern economics eschewed classical liberalism in their attempt to make economic policy analysis a science. By examining the way in which the discipline managed to lose its bearings, the authors delve into such issues as the development of welfare economics in relation to economic science, alternative voices within the Chicago School, and exactly how Friedman got it wrong. Contending that the division between science and prescription needs to be restored, the book makes the case for a more nuanced and self-aware policy analysis by economists.