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Freaks of Fortune: The Emerging World of Capitalism and Risk in America
Until the early nineteenth century, "risk" was a specialized term: it was the commodity exchanged in a marine insurance contract. Freaks of Fortune tells the story of how the modern concept of risk emerged in the United States. Born on the high seas, risk migrated inland and became essential to the financial management of an inherently uncertain capitalist future.
Focusing on the hopes and anxieties of ordinary people, Jonathan Levy shows how risk developed through the extraordinary growth of new financial institutions-insurance corporations, savings banks, mortgage-backed securities markets, commodities futures markets, and securities markets-while posing inescapable moral questions. For at the heart of risk's rise was a new vision of freedom. To be a free individual, whether an emancipated slave, a plains farmer, or a Wall Street financier, was to take, assume, and manage one's own personal risk. Yet this often meant offloading that same risk onto a series of new financial institutions, which together have only recently acquired the name "financial services industry." Levy traces the fate of a new vision of personal freedom, as it unfolded in the new economic reality created by the American financial system.
Amid the nineteenth-century's waning faith in God's providence, Americans increasingly confronted unanticipated challenges to their independence and security in the boom and bust chance-world of capitalism. Freaks of Fortuneis one of the first books to excavate the historical origins of our own financialized times and risk-defined lives.
Focusing on the hopes and anxieties of ordinary people, Jonathan Levy shows how risk developed through the extraordinary growth of new financial institutions-insurance corporations, savings banks, mortgage-backed securities markets, commodities futures markets, and securities markets-while posing inescapable moral questions. For at the heart of risk's rise was a new vision of freedom. To be a free individual, whether an emancipated slave, a plains farmer, or a Wall Street financier, was to take, assume, and manage one's own personal risk. Yet this often meant offloading that same risk onto a series of new financial institutions, which together have only recently acquired the name "financial services industry." Levy traces the fate of a new vision of personal freedom, as it unfolded in the new economic reality created by the American financial system.
Amid the nineteenth-century's waning faith in God's providence, Americans increasingly confronted unanticipated challenges to their independence and security in the boom and bust chance-world of capitalism. Freaks of Fortuneis one of the first books to excavate the historical origins of our own financialized times and risk-defined lives.
432 pages, Paperback
First published October 29, 2012
42 people are currently reading
641 people want to read
About the author
Jonathan Levy
3 books42 followersJonathan Levy is Professor of History at Sciences Po. Before coming to Sciences Po, he was the James Westfall Thompson Professor of History and Social Thought at the University of Chicago and before that professor of history at Princeton University. Levy earned his AB from Yale University in 2000 and his AM (2003) and Ph.D. (2008) from the University of Chicago.
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Displaying 1 - 15 of 15 reviews
May 24, 2023
"By the end of the nineteenth century the freaks [of fortune] had exposed the limits of the moral idea—resurgent by the end of the twentieth—that by taking risks everyone got what they deserved in a capitalist economy. The freaks also taught another lesson. Capitalism cannot adequately stabilize itself through financial risk management. Risk management inherently breeds speculative risk-taking and manufactures new forms of insecurity and uncertainty." (310)
"The vexing moral and political questions at stake in the history of capitalism, risk, and freedom await satisfactory answers. Radical uncertainty rules. Only one prediction feels safe: Capitalism's future will be stormy." (316)
Freaks of Fortune focuses on the multifaceted nature of risk, its history, and the attempts to manage it in the history of American capitalism. Jonathan Levy traces the origin of risk management to marine insurance and its application in American jurisprudence in the 1840s which spawned the personal insurance industry, and conceptions of freedom and self-ownership which sprang from this. Briefly delving into risk management by way of physical capital—yeoman farming and slaveholding—Levy guides his reader through the life of abolitionist Elizur Wright and his quest for "actuarial science of freedom," to get rid of the slave-like nature of the early life insurance industry, an economic and ideological counter to "wage slavery." He traces the failed land reforms of Reconstruction and how this was funneled into Northern capital by way of the Freedman's Bank, and how the Freedman's Bank was destroyed by investments into speculation, another failure of capitalist risk management. He briefly traces the loss of land ownership and small-scale farming as a form of physical capital and economic security through the rise of the mortgage industry, and then chronicles the rise and fall of fraternal societies as attempts at "social bonding" combined with life risk management which attempted to counter insurances. He details the rise of futures trading, and the attempts of the Populist Revolt to reckon with it, and ends with the life of the trust-monopolist George W. Perkins, Sr. and his attempts to "consign the economic chance-world to the past" (264) through the industrial corporation, the elimination of competition, and the rise of monopoly.
Levy's work is brilliant, but there are a few criticisms to be made. He focuses on the Populist Revolt in relation to futures and other economic matters, but he does not devote nearly enough time to industrial labor or organizing. What is there is focused upon Samuel Gompers and the incorporation of health and life insurance into the AFL's program—what of labor radicalism as a form of social insurance? His chapter on Perkins and the trusts is illuminating and brilliant, but he foregoes the radicals who have already dealt with this issue at length—Lenin comes to mind in his critique of monopoly as the highest development of the capitalist corporation in his era of imperialism.
"The vexing moral and political questions at stake in the history of capitalism, risk, and freedom await satisfactory answers. Radical uncertainty rules. Only one prediction feels safe: Capitalism's future will be stormy." (316)
Freaks of Fortune focuses on the multifaceted nature of risk, its history, and the attempts to manage it in the history of American capitalism. Jonathan Levy traces the origin of risk management to marine insurance and its application in American jurisprudence in the 1840s which spawned the personal insurance industry, and conceptions of freedom and self-ownership which sprang from this. Briefly delving into risk management by way of physical capital—yeoman farming and slaveholding—Levy guides his reader through the life of abolitionist Elizur Wright and his quest for "actuarial science of freedom," to get rid of the slave-like nature of the early life insurance industry, an economic and ideological counter to "wage slavery." He traces the failed land reforms of Reconstruction and how this was funneled into Northern capital by way of the Freedman's Bank, and how the Freedman's Bank was destroyed by investments into speculation, another failure of capitalist risk management. He briefly traces the loss of land ownership and small-scale farming as a form of physical capital and economic security through the rise of the mortgage industry, and then chronicles the rise and fall of fraternal societies as attempts at "social bonding" combined with life risk management which attempted to counter insurances. He details the rise of futures trading, and the attempts of the Populist Revolt to reckon with it, and ends with the life of the trust-monopolist George W. Perkins, Sr. and his attempts to "consign the economic chance-world to the past" (264) through the industrial corporation, the elimination of competition, and the rise of monopoly.
Levy's work is brilliant, but there are a few criticisms to be made. He focuses on the Populist Revolt in relation to futures and other economic matters, but he does not devote nearly enough time to industrial labor or organizing. What is there is focused upon Samuel Gompers and the incorporation of health and life insurance into the AFL's program—what of labor radicalism as a form of social insurance? His chapter on Perkins and the trusts is illuminating and brilliant, but he foregoes the radicals who have already dealt with this issue at length—Lenin comes to mind in his critique of monopoly as the highest development of the capitalist corporation in his era of imperialism.
September 27, 2020
An amazing book. A new, atractive model on how to write the history of capitalism. Full five stars.
Read
January 3, 2021A "biography of risk" that traces the "double arc" of the consolidation of liberal individualism and corporate financial systems in the nineteenth century.
Boldly proceeding from the premise that "capitalism is a system that thrives off radical uncertainty," explains the paradox of how nineteenth century courts could increasingly use notions of agency and self-ownership to force individuals to bear the downsides of 19th century life while corporations could amass fabulous wealth. How could it be that risk would be distributed so unevenly? As Levy argues, through the lens of "countermovements" and "collective strategies" this isn't surprising at all. The uncertainty of capitalism has long been too much for an individual to weather. Whether through corporations, fraternal associations, or federal experiments like the Freedman's bank, people sought economic safety through collectives. As early as the thirteenth century merchants wouldn't risk going overseas without being able to purchase maritime insurance. In the eighteenth century, this was based on kinship ties, reputation, and trust. When an actuarial scientist - and abolitionist - tried to systematize understandings of lifetime risk to provide the protection of this form of insurance to ordinary people, he was forced to confront the limitations of agnostically adapting this collective strategy to real lives - mortality tables had to find compelling ways to predict the life spans of people and render the trajectories and social contributions of people as diverse as textile merchants and railroad workers commensurable.
Some of the capitalization stuff and ambiguous connections to slavery leave something to be desired (also knowing the smallest amount about how health insurance and modeling work today, I don't think the life insurance collective strategy is as eerie and imaginable as Levy seems to), but some of the discussions of causation and legal responsibility, I thought, were pretty damning. In one 1842 case a railroad worker lost his hand at work and was not entitled to compensation because his "high" wages were a reflection of the risks he was taking at work. As a self-owning individual, he had the right to sell his own risks (via earning a wage) and wage upside necessarily implied responsibility for any downsides. Levy reveals this was a uniquely ~19th century departure from (English) precedents of respondeat superior, where employers took a more paternalistic role. To me this illustrates that given the ambiguities of legally tracing causation, self-ownership as a means of rationalizing employment relations is bizarre and wrong when taken to the logical extreme. We moved to it and away and there's no need to go back lol
This review is more detailed than I intended, probably because I'm pretty surprised by and reacting to the negative reviews. The number of lines I remember from this book are really suspect (too punchy lol) but probably a testament to the clarity of writing. Weeks later, I'm still thinking about it fairly vividly. Admittedly not my favorite type of history or writing, but certainly effective
Boldly proceeding from the premise that "capitalism is a system that thrives off radical uncertainty," explains the paradox of how nineteenth century courts could increasingly use notions of agency and self-ownership to force individuals to bear the downsides of 19th century life while corporations could amass fabulous wealth. How could it be that risk would be distributed so unevenly? As Levy argues, through the lens of "countermovements" and "collective strategies" this isn't surprising at all. The uncertainty of capitalism has long been too much for an individual to weather. Whether through corporations, fraternal associations, or federal experiments like the Freedman's bank, people sought economic safety through collectives. As early as the thirteenth century merchants wouldn't risk going overseas without being able to purchase maritime insurance. In the eighteenth century, this was based on kinship ties, reputation, and trust. When an actuarial scientist - and abolitionist - tried to systematize understandings of lifetime risk to provide the protection of this form of insurance to ordinary people, he was forced to confront the limitations of agnostically adapting this collective strategy to real lives - mortality tables had to find compelling ways to predict the life spans of people and render the trajectories and social contributions of people as diverse as textile merchants and railroad workers commensurable.
Some of the capitalization stuff and ambiguous connections to slavery leave something to be desired (also knowing the smallest amount about how health insurance and modeling work today, I don't think the life insurance collective strategy is as eerie and imaginable as Levy seems to), but some of the discussions of causation and legal responsibility, I thought, were pretty damning. In one 1842 case a railroad worker lost his hand at work and was not entitled to compensation because his "high" wages were a reflection of the risks he was taking at work. As a self-owning individual, he had the right to sell his own risks (via earning a wage) and wage upside necessarily implied responsibility for any downsides. Levy reveals this was a uniquely ~19th century departure from (English) precedents of respondeat superior, where employers took a more paternalistic role. To me this illustrates that given the ambiguities of legally tracing causation, self-ownership as a means of rationalizing employment relations is bizarre and wrong when taken to the logical extreme. We moved to it and away and there's no need to go back lol
This review is more detailed than I intended, probably because I'm pretty surprised by and reacting to the negative reviews. The number of lines I remember from this book are really suspect (too punchy lol) but probably a testament to the clarity of writing. Weeks later, I'm still thinking about it fairly vividly. Admittedly not my favorite type of history or writing, but certainly effective
October 23, 2018
Jonathan Levy's excellent 2006 essay "Contemplating Delivery: Futures Trading and the Problem of Commodity Exchange" enthused me to read this book, his treatise on the history of risk.
Alas, my hopes were too high. Even though this book displays his wide reading & research, the nuggets he's uncovered come across as fragments of a long-gone world, not very illuminative by themselves. I'm hard-pressed to summarize this book because after its launch it never quite returns to earth, never connects the dots in a way that might form an illuminating contrast or perspective for viewing either the past or our contemporary situation. This book is a little bit like watching The Antiques Roadshow—the disparate bits of information one learns are interesting, but so what?
Also, the chapters are too long and the writing too slapdash. Levy writes from the perspective of an objective reporter, but too often I found myself wondering what point he was seeking to illuminate, what his narrative was seeking to evince.
I think this book would be much improved if he had edited it more tightly, reducing his chapters' wordcount and doubling the length of his epilogue.
Philip Rieff, in a 1952 review of John McNeill's History of the Cure of Souls, wrote that "McNeill has the final, moral virtue of the historian . . . he is not neutral."
Levy, in contrast, is nothing but neutral. In his next book I hope he shows a little less "objectivity" & restraint, and tells the reader what he really thinks.
Alas, my hopes were too high. Even though this book displays his wide reading & research, the nuggets he's uncovered come across as fragments of a long-gone world, not very illuminative by themselves. I'm hard-pressed to summarize this book because after its launch it never quite returns to earth, never connects the dots in a way that might form an illuminating contrast or perspective for viewing either the past or our contemporary situation. This book is a little bit like watching The Antiques Roadshow—the disparate bits of information one learns are interesting, but so what?
Also, the chapters are too long and the writing too slapdash. Levy writes from the perspective of an objective reporter, but too often I found myself wondering what point he was seeking to illuminate, what his narrative was seeking to evince.
I think this book would be much improved if he had edited it more tightly, reducing his chapters' wordcount and doubling the length of his epilogue.
Philip Rieff, in a 1952 review of John McNeill's History of the Cure of Souls, wrote that "McNeill has the final, moral virtue of the historian . . . he is not neutral."
Levy, in contrast, is nothing but neutral. In his next book I hope he shows a little less "objectivity" & restraint, and tells the reader what he really thinks.
June 11, 2014
OK, so I realize that a book about the changing understanding of how societies handle risk is not something that everyone will be interested in. But I found this fascinating. Our responses to protecting against losses began in maritime trades - but Levy's narrative soon connects the attempts to insure cargos with life insurance and other kinds of social insurance.
There are some bad characters in the development of the story. They come from two sources - first the outright crooks (people who made Ponzi look like a piker) and second some individuals who simply were trying to do something larger than insuring against risk - they had a larger goal in mind - to protect people but also to change society.
When life insurance first started our thoughts had to be adjusted a bit - in the early days there was concern that insuring one's life was somehow immoral. But as risk theory developed some also used it to get to pet theories.
Levy brings in Frank Knight and his differentiation between risk and uncertainty, Franklin Roosevelt (and some earlier reformers who pushed the ideas of social insurance), mutual benefit societies (which actually worked pretty well in areas like providing for injured workers) and one George Waldbridge Perkins who developed a series of insurance plans within trusts like US Steel. It is an interesting set of characters and issues. And as importantly, if you want to begin to think differently about how society should handle risk, this gives you a good background on how to think about the issues.
There are some bad characters in the development of the story. They come from two sources - first the outright crooks (people who made Ponzi look like a piker) and second some individuals who simply were trying to do something larger than insuring against risk - they had a larger goal in mind - to protect people but also to change society.
When life insurance first started our thoughts had to be adjusted a bit - in the early days there was concern that insuring one's life was somehow immoral. But as risk theory developed some also used it to get to pet theories.
Levy brings in Frank Knight and his differentiation between risk and uncertainty, Franklin Roosevelt (and some earlier reformers who pushed the ideas of social insurance), mutual benefit societies (which actually worked pretty well in areas like providing for injured workers) and one George Waldbridge Perkins who developed a series of insurance plans within trusts like US Steel. It is an interesting set of characters and issues. And as importantly, if you want to begin to think differently about how society should handle risk, this gives you a good background on how to think about the issues.
April 10, 2024
I think this book does something interesting wrt tying idea of risk to wage labour, even if the countermovement framing that runs through the book doesn't work for me exactly. I'm not sure its necessary even for levys arg... the narrative loop of mortgages/industrialisation in westward homesteading was compelling, though I really have nothing to assess this against being woefully ignorant (in general). certainly glad I read it. lighter on futures markets than I expected. I'm not sure I would've ever given much thought to insurance!
November 15, 2020
The first few chapters here were fascinating: about how the history of insurance, risk, and mortgages rise from the transatlantic slave trade and plantation economies. By the second half of the book I felt just too bogged down in terms about finance, stocks, trade, futures, etc. that I mostly skimmed until the end. But a really thorough look at the prominence of the sea, agriculture, and slave labour in the American history of capitalism and insurance.
November 29, 2012
Some wonderful stories and telling anecdotes here, but the book just relies a little too much on gossamer threads to tie together its numerous strands.
The first part on marine and life insurance is interesting enough, though a little belabored. His chapters on 1870s and 1880s mortgage securitization (yes it was happening then) and social fraternity insurance are certainly original and worthwhile. The real contribution to me, however, is his chapter on the rise and fall of the Freedman's Bank. Surprisingly this story has never been told in full before, but the author shows its drama and consequences. Chartered through the federal government in 1865 by a group of New York philanthropists, it was the only bank in the United States that was allowed to branch across state lines from the 1830s up until the 1980s, and thus deserves some attention from those concerned with bank expansion in its own right. It was also supposed to be run as a savings bank investing in safe government debt so former slaves could save for future land purchases and be taught the virtues of thrift. Unfortunately, Henry Cooke, brother of the bond-dealer Jay Cooke, co-opted the bank and got Congress to expand its charter so that it could invest in risky railroad bonds and his brother's own company. When the devastating 1873 panic began with the collapse of Jay Cooke, the Freedman's bank wasn't far behind. This attempt by the government to show the virtues of thrift thus taught the early freed people to be suspicious of the government and white people baring gifts. It was an all-around tragedy.
So read this for the insightful facts and stories. Just skip over some of the circuitous prose.
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December 14, 2015Freaks of Fortune: The Emerging World of Capitalism and Risk in America (2012) by Jonathan Levy, our colleague in the Department of History. It offers a history of risk by tracing the development of the “financial services industry” in America. More deeply, it contemplates how Americans have thought about risk, both its upside (the proper rewards for bearing it) and its downside (whether government should protect against it). It integrates history, economics, and law. —Thomas J. Miles
October 7, 2014
I rarely not read a book cover-to-cover. Many I times I felt like just closing this one, but I didn't. To me this was much more like a sociology text than a book about financial risk management. I probably should have stopped reading after the first 50-75 pages because I just did not find this treatise very enjoyable.
January 20, 2014
Boy does this read like a dissertation. A good one, to be sure, but there's so much research spread over comparatively few ideas, and each chapter feels like its own conference paper. Levy had a very nice idea for a book, but couldn't really deliver.
January 6, 2015
Freaks of Fortune tells the story of modern "risk" in American society, focusing on the development of the financial system in the United States. I have never been a fan of economic history, but this book made it bearable by focusing on the hopes, dreams, and anxieties of ordinary Americans.
October 29, 2014
Definitely a PhD thesis that got turned into a novel. Not especially thrilling, sometimes so much more detail than any non-historian would want, but also a unique (to me, at least) historical perspective on the growth of derivatives and risk management prior to the second world war.
February 18, 2015
This book directly ties the development of risk and insurance in America to historical events. It's a lot better than it sounds, I promise.
Displaying 1 - 15 of 15 reviews