Capital exports, 1870-1914: a reply.

The article presents a response to comments made by economist V.N. Balasubramanyam on the authors criticism of economist S. Pollard's survey of the literature on the effects of Victorian Great Britain's capital exports. According to the author, Pollard approached the problem through the traditional route in assuming that Victorian capital markets did not work very well,and suggested an alternative approach which assumed that Victorian capital markets worked as well as any such market could be expected to work. He argues that such an assumption provided a way to synthesize the micro and macro aspects of the problem, to understand the policy options open to the historical actors, and to direct research toward the influence of prices on behavior. The model could be generalized to a continuum of assets by extending the mathematics, but this would have obscured the argument. In a curious conclusion to a hostile comment, Balasubramanyam echoed the author's concern for the ability of the British economy to utilize new technology.