Watson Events

Bruce Carruthers -- The Economy of Promises: The Invention of Credit Rating in 19th-c. U.S.

"The Economy of Promises: The Invention of Credit Rating in 19th-c. U.S.," with Bruce Carruthers, Professor, Department of Sociology, Northwestern University. 

Credit ratings, and the failure of rating agencies, played key roles in the financial crisis of 2008. This paper examines the invention and spread of credit rating, an important type of market-based information used by lenders to assess the creditworthiness of borrowers. Using archival and published data from the 1870s, I assess the value of ratings in predicting the failure of small firms and explore how much ratings as “objective” or “quantitative” measures were compromised by their status as forms of intellectual property and as legally-liable claims to truth. These foreshadow the recent problems faced by rating agencies.

Location: Joukowsky Forum, Watson Institute, 111 Thayer Street.