![conquered province. Corsica is also an obvious instance to the same
purpose.
There is an observation of Machiavel, with regard to the
conquests of Alexander the Great, which I think may be regarded as
one of those eternal political truths which no time nor accidents can
vary. It may seem strange, says that politician, that such sudden
conquests as those of Alexander should be settled so peaceably by
his successors, and that the Persians, during all the confusions and
civil wars of the Greeks, never made the smallest effort towards the
recovery of their former independent government. To satisfy us
concerning the cause of this remarkable event, we may consider that
a monarch may govern his subjects in two different ways. He may
either follow the maxims of the eastern princes, and stretch his
power so far as to leave no distinction of ranks among his subjects,
but what proceeds immediately from himself—no advantages of
birth; no hereditary honours and possessions; and, in a word, no
credit among the people except from his commission alone. Or a
monarch may exert his power after a milder manner, like our
European princes, and leave other sources of honour, beside his
smile and favour: birth, titles, possessions, valour, integrity,
knowledge, or great and fortunate achievements. In the former
species of government, after a conquest, it is impossible ever to
shake off the yoke, since no one possesses among the people so
much personal credit and authority as to begin such an enterprise;
whereas, in the latter, the least misfortune or discord of the victors
{p236} will encourage the vanquished to take arms, who have leaders
ready to prompt and conduct them in every undertaking.
[114] {p237}](https://image.slidesharecdn.com/19763-250612131807-061a1fd5/85/Venture-Capital-in-Europe-Quantitative-Finance-1st-Edition-Greg-N-Gregoriou-27-320.jpg)
![man should no more be anxious in this case than a husband, who
had married a wife from the stews, should be watchful to prevent
her infidelity. Public affairs in such a constitution must necessarily go
to confusion, by whatever hands they are conducted, and the zeal of
patriots is much less requisite in that case than the patience and
submission of philosophers. The virtue and good intentions of Cato
and Brutus are highly laudable, but to what purpose did their zeal
serve? To nothing but to hasten the fatal period of the Roman
government, and render its convulsions and dying agonies more
violent and painful.
I would not be understood to mean that public affairs deserve no
care and attention at all. Would men be moderate and consistent,
their claims might be admitted—at least might be examined. The
country-party might still assert that our constitution, though
excellent, will admit of mal-administration to a certain degree, and
therefore, if the minister be bad, it is proper to oppose him with a
suitable degree of zeal. And, on the other hand, the court-party may
be allowed, upon the supposition that the minister were good, to
defend, and with some zeal too, his administration. I would only
persuade men not to contend, as if they were fighting pro aris et
focis, and change a good constitution into a bad one by the violence
of their factions.
[115] {p242}
I have not here considered anything that is personal in the
present controversy. In the best civil constitution, {p243} where every
man is restrained by the most rigid laws, it is easy to discover either
the good or bad intentions of a minister, and to judge whether his
personal character deserves love or hatred. But such questions are
of little importance to the public, and lay those who employ their](https://image.slidesharecdn.com/19763-250612131807-061a1fd5/85/Venture-Capital-in-Europe-Quantitative-Finance-1st-Edition-Greg-N-Gregoriou-33-320.jpg)
![115 What our author’s opinion was of the famous minister here
pointed at may be learned from that essay, printed in the former
editions, under the title of “A Character of Sir Robert Walpole.” It was as
follows:—“There never was a man whose actions and character have
been more earnestly and openly canvassed than those of the present
minister, who, having governed a learned and free nation for so long a
time, amidst such mighty opposition, may make a large library of what
has been written for and against him, and is the subject of above half
the paper that has been blotted in the nation within these twenty years.
I wish, for the honour of our country, that any one character of him had
been drawn with such judgment and impartiality as to have credit with
posterity, and to show that our liberty has, once at least, been
employed to good purpose. I am only afraid of failing in the former
quality of judgment; but if it should be so, it is but one page more
thrown away, after a hundred thousand, upon the same subject, that
have perished and become useless. In the meantime, I shall flatter
myself with the pleasing imagination that the following character will be
adopted by future historians:—
“Sir Robert Walpole, Prime Minister of Great Britain, is a man of
ability, not a genius; good-natured, not virtuous; constant, not
magnanimous; moderate, not equitable.
[116] His virtues, in some
instances, are free from the alloy of those vices which usually
accompany such virtues. He is a generous friend, without being a bitter
enemy. His vices, in other instances, are not compensated by those
virtues which are nearly allied to them: his want of enterprise is not
attended with frugality. The private character of the man is better than
the public, his virtues more than his vices, his fortune greater than his
fame. With many good qualities he has incurred the public hatred; with
good capacity he has not escaped ridicule. He would have been
esteemed more worthy of his high station had he never possessed it;
and is better qualified for the second than for the first place in any
Government. His ministry has been more advantageous to his family
than to the public, better for this age than for posterity, and more
pernicious by bad precedents than by real grievances. During his time
trade has flourished, liberty declined, and learning gone to ruin. As I am
a man, I love him; as I am a scholar, I hate him; as I am a Briton, I
calmly wish his fall. And were I a member of either House I would give
my vote for removing him from St. James’s, but should be glad to see
him retire to Houghton Hall, to pass the remainder of his days in ease
and pleasure.”](https://image.slidesharecdn.com/19763-250612131807-061a1fd5/85/Venture-Capital-in-Europe-Quantitative-Finance-1st-Edition-Greg-N-Gregoriou-38-320.jpg)
![justice among themselves and recall those laws of equity which they
have violated with the rest of mankind.
“I hate a drinking companion,” says the Greek proverb, “who
never forgets.” The follies of the last debauch should be buried in
eternal oblivion, in order to give full scope to the follies of the next.
Among nations where an immoral gallantry, if covered with a thin
veil of mystery, is in some degree authorized by custom, there
immediately arise a set of rules calculated for the conveniency of
that attachment. The famous court or parliament of love in Provence
decided formerly all difficult cases of this nature.
In societies for play there are laws required for the conduct of
the game, and these laws are different in each game. The
foundation, I own, of such societies is frivolous, and the laws are in
a great measure, though not altogether, capricious and arbitrary. So
far is there a material difference between them and the rules of
justice, fidelity and loyalty. The general societies of men are
absolutely requisite for the subsistence of the species, and the public
conveniency, which regulates morals, is inviolably established in the
nature of man and of the world in which he lives. The {p252}
comparison, therefore, in these respects is very imperfect. We may
only learn from it the necessity of rules wherever men have any
intercourse with each other.
They cannot even pass each other on the road without rules.
Waggoners, coachmen, and postilions have principles by which they
give way, and these are chiefly founded on mutual ease and
convenience. Sometimes also they are arbitrary, at least dependent
on a kind of capricious analogy, like many of the reasonings of
lawyers.
[117]](https://image.slidesharecdn.com/19763-250612131807-061a1fd5/85/Venture-Capital-in-Europe-Quantitative-Finance-1st-Edition-Greg-N-Gregoriou-50-320.jpg)
Venture Capital in Europe Quantitative Finance 1st Edition Greg N. Gregoriou
- 1. Venture Capital in Europe Quantitative Finance 1st Edition Greg N. Gregoriou download pdf https://ebookultra.com/download/venture-capital-in-europe-quantitative- finance-1st-edition-greg-n-gregoriou/ Visit ebookultra.com today to download the complete set of ebook or textbook!
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- 5. Venture Capital in Europe Quantitative Finance 1st Edition Greg N. Gregoriou Digital Instant Download Author(s): Greg N. Gregoriou, Maher Kooli, Roman Kraeussl ISBN(s): 9780750682596, 0750682590 Edition: 1 File Details: PDF, 3.23 MB Year: 2006 Language: english
- 7. Venture Capital in Europe
- 8. Quantitative Finance Series Aims and Objectives • Books based on the work of financial market practitioners and academics • Presenting cutting-edge research to the professional/practitioner market • Combining intellectual rigour and practical application • Covering the interaction between mathematical theory and financial practice • To improve portfolio performance, risk management and trading book performance • Covering quantitative techniques Market Brokers/Traders; Actuaries; Consultants; Asset Managers; Fund Managers; Regulators; Central Bankers; Treasury Officials; Technical Analysts; and Academics for Masters in Finance and MBA market. Series Titles Return Distributions in Finance Derivative Instruments: theory, valuation, analysis Managing Downside Risk in Financial Markets: theory, practice & implementation Economics for Financial Markets Performance Measurement in Finance: firms, funds and managers Real R&D Options Forecasting Volatility in the Financial Markets, Second edition Advanced Trading Rules, Second edition Advances in Portfolio Construction and Implementation Computational Finance Linear Factor Models in Finance Initial Public Offerings: an international perspective Venture Capital in Europe Series Editor Dr Stephen Satchell Dr Satchell is the Reader in Financial Econometrics at Trinity College, Cambridge; Vis- iting Professor at Birkbeck College, City University Business School and University of Technology, Sydney. He also works in a consultative capacity to many firms, and edits the journal Derivatives: use, trading and regulations and the Journal of Asset Management.
- 9. Venture Capital in Europe Edited by Greg N. Gregoriou Maher Kooli Roman Kraeussl AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Butterworth-Heinemann is an imprint of Elsevier
- 10. Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA First edition 2007 Copyright © 2007 Elsevier Inc. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier website at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalogue record for this book is available from the Library of Congress ISBN–13: 978-0-7506-8259-6 ISBN–10: 0-7506-8259-0 For information on all Butterworth-Heinemann publications visit our website at http://books.elsevier.com Printed and bound in Great Britain 07 08 09 10 11 10 9 8 7 6 5 4 3 2 1 Working together to grow libraries in developing countries www.elsevier.com | www.bookaid.org | www.sabre.org
- 11. Contents Foreword by Josh Lerner xiii Preface and Acknowledgments xv About the Editors xvii List of Contributors xix Part One European Venture Capital Markets: Recent Developments and Perspectives 1 1 Venture capital in Europe: Closing the gap to the U.S. 3 Andreas Oehler, Kuntara Pukthuanthong, Marco Rummer, and Thomas Walker 1.1 Introduction 3 1.2 The European and U.S. venture capital markets – a comparison 4 1.3 Economic effects and government intervention 10 1.4 Conclusion 14 References 15 2 Public venture capital across Europe: A 15-year perspective 19 Christof Beuselinck and Sophie Manigart 2.1 Introduction 19 2.2 Public versus private VC 20 2.3 Hypotheses 21 2.4 Data 22 2.5 The evolution of public VC in Europe 23 2.6 Multivariate analyses 27 2.7 Conclusion 29 References 30 3 Why venture capital markets are well developed in some countries but comparatively small in others: Evidence from Europe 33 Kuntara Pukthuanthong, Dolruedee Thiengtham, and Thomas Walker 3.1 Introduction 33 3.2 Literature review 34 3.3 Data 36
- 12. vi Contents 3.4 Methodology and results 43 3.5 Conclusion 47 References 48 4 A survey of the venture capital industry in Central and Eastern Europe 51 Rachel A. Campbell and Roman Kraeussl 4.1 Introduction 51 4.2 The route of transition and the current economic environment 52 4.3 Recent developments of VC funding in CEE 54 4.4 An action plan towards a well-functioning VC market 62 4.5 Conclusion 64 References 65 Appendix 67 5 Venture capital in European transition economies: A scoring system 71 Robert W. McGee 5.1 Introduction 71 5.2 Some factors to consider 72 5.3 Results 78 5.4 Conclusion 81 References 82 6 Recommendations for the development of a European venture capital regulatory corpus: Lessons from the U.S. 85 Edward J. Lusk, Gregor Schmidt, and Michael Halperin 6.1 Introduction 85 6.2 Wealth creation: the final launch price and its market implications 86 6.3 A study of strategic price setting from the U.S. 88 6.4 Results 89 6.5 Summary of the U.S. study 93 6.6 Recommendations and conclusion 93 References 96 Part Two Evaluation, Exit Strategies, and Theoretical Aspects 99 7 Productivity growth in Spanish venture-backed firms 101 Luisa Alemany and José Martí 7.1 Introduction 101 7.2 Literature review and hypotheses 102 7.3 Data and methodology 105 7.4 Results 109 7.5 Conclusion 112 References 113
- 13. Contents vii 8 Is the Spanish public sector effective in backing venture capital? 115 Marina Balboa, José Martí, and Nina Zieling 8.1 Introduction 115 8.2 The role of venture capital 116 8.3 Data and descriptive analysis 118 8.4 Methodology 122 8.5 Results 123 8.6 Conclusion 124 References 126 9 A review of the venture capital industry in Italy 129 Fabio Bertoni, Massimo G. Colombo, Annalisa Croce, and Evila Piva 9.1 Introduction 129 9.2 Venture capital in Italy: the supply side 131 9.3 Venture capital in Italy: the demand side 135 9.4 The effect of venture capital on NTBF performance 138 9.5 Public policy in support of the venture capital industry 139 9.6 Conclusion 140 References 141 10 Exit strategy and the intensity of exit-directed activities among venture capital-backed entrepreneurs in Sweden 143 Anders Isaksson 10.1 Introduction 143 10.2 Research framework 145 10.3 Data collection 149 10.4 Results and discussion 151 10.5 Conclusion 154 References 155 11 Private equity fund managers do not overvalue their company investments 157 Tom Weidig, Andreas Kemmerer, Tadeusz Lutoborski, and Mark Wahrenburg 11.1 Introduction 157 11.2 Valuation guidelines 158 11.3 Literature review 158 11.4 Data sample 160 11.5 Empirical findings 161 11.6 Conclusion 166 References 167 Appendix 168
- 14. viii Contents 12 A search model of venture capital, entrepreneurship, and unemployment 171 Robin Boadway, Oana Secrieru, and Marianne Vigneault 12.1 Introduction 171 12.2 The model 172 12.3 The social optimum 177 12.4 Optimal policy 179 12.5 Conclusion 181 References 182 Appendix 184 Part Three Financing and Contracting 185 13 Capital structure in new technology-based firms: Venture capital-backed versus non-venture capital-backed firms in the Irish software sector 187 Teresa Hogan and Elaine Hutson 13.1 Introduction 187 13.2 Theoretical background and testable implications 188 13.3 Survey and sample characteristics 190 13.4 Capital structure 192 13.5 Founders’ perceptions of information asymmetries 194 13.6 Conclusion 196 References 197 14 German business ventures – entrepreneurs, success factors, and financing 199 Ann-Kristin Achleitner, Christoph Kaserer, Niklas Wagner, Angela Poech, and Martin Brixner 14.1 Introduction 199 14.2 Research set-up 200 14.3 Results 202 14.4 Conclusion 214 References 215 15 Financing practices in the German venture capital industry: An empirical study 217 Andreas Bascha and Uwe Walz 15.1 Introduction 217 15.2 Theoretical background 218 15.3 The data 221 15.4 Descriptive analysis 221 15.5 Does theory match with practice? 224 15.6 Conclusion 228 References 229
- 15. Contents ix 16 Covenants in venture capital contracts: Theory and empirical evidence from the German capital market 233 Ron C. Antonczyk, Wolfgang Breuer, and Klaus Mark 16.1 Introduction 233 16.2 Venture capital, agency problems, and hold-up 234 16.3 Incentive instruments in venture capital financing relationships 236 16.4 Empirical data 237 16.5 Contract design and characteristics of portfolio firms 241 16.6 Conclusion 245 References 246 17 Supply and demand of venture capital for biotech firms: The case of the Belgian regions of Wallonia and Brussels 249 Véronique Bastin, Georges Hübner, Pierre-Armand Michel, and Mélanie Servais 17.1 Introduction 249 17.2 Context 251 17.3 Venture capital in Belgium 251 17.4 Methodology 252 17.5 Literature: relevant dimensions 255 17.6 Empirical material 258 17.7 Analysis of perceptions 266 17.8 Conclusion 270 References 272 Part Four Performance 275 18 Simple and cross-efficiency of European venture capital firms using data envelopment analysis 277 Greg N. Gregoriou, Maher Kooli, Philipp Krohmer, and Rainer Lauterbach 18.1 Introduction 277 18.2 Background 278 18.3 Methodology 280 18.4 Data 284 18.5 Empirical results 288 18.6 Conclusion 293 References 293 19 Agency theory and management buy-out: The role of venture capitalists 297 Hans Bruining and Arthur Herst 19.1 Introduction 297 19.2 Agency theory 298 19.3 Management buy-out 302
- 16. x Contents 19.4 Agency theory and management buy-out 305 19.5 Conclusion 307 References 308 20 Does the value of venture capital vary over the investee life cycle? Evidence from Irish investees 311 Nancy Huyghebaert and Sheila O’Donohoe 20.1 Introduction 311 20.2 Literature review and development of hypotheses 314 20.3 Sample selection 316 20.4 Venture capitalist involvement in investee firms 318 20.5 Valuation of venture capitalists by investees 323 20.6 Relation between venture capitalist involvement and their perceived contribution to performance 324 20.7 Conclusion 328 References 329 21 German banks as venture capitalists 331 Tereza Tykvová 21.1 Introduction 331 21.2 Venture capital in Germany 332 21.3 Duration of the venture capital financing and the venture capitalists’ retention rate 333 21.4 Hypotheses 334 21.5 Data 335 21.6 Multivariate analyses 337 21.7 Conclusion 339 References 340 Appendix 341 22 Long-run venture-backed IPO performance analysis of Italian family-owned firms: What role do closed-end funds play? 343 Stefano Caselli and Stefano Gatti 22.1 Introduction 343 22.2 Literature and hypotheses 346 22.3 Data sample and methodology 351 22.4 Empirical results 354 22.5 Explanations of IPO underperformance 356 22.6 Conclusion 359 References 360 23 Securitization and venture capital fundraising 365 Paul U. Ali 23.1 Introduction 365 23.2 European private equity securitizations 366
- 17. Contents xi 23.3 Generic Collateralized Private Equity Obligations structure 366 23.4 Investors in CPOs 367 23.5 Funds of private equity funds 368 23.6 Conclusion 369 References 369 24 Total loss risk in European versus U.S.-based venture capital investments 371 Dieter G. Kaiser, Rainer Lauterbach, and Denis Schweizer 24.1 Introduction 371 24.2 Determinants of total losses of pre-market equity capital stakes 372 24.3 Data description 375 24.4 Description of the model 377 24.5 Results 378 24.6 Conclusion 385 References 386 Index 389
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- 19. Foreword During the 1980s and 1990s, there was a tremendous boom in the American venture capital industry. The pool of U.S. venture funds – partnerships specializing in early stage equity or equity-linked investments in young or growing firms – has grown from just over US$1 billion in 1980 to about US$160 billion at the end of 2005. Despite the pattern of boom-and-bust that has characterized the sector – the rapid increases in fundraising in the late 1960s, mid-1980s, and late 1990s were followed by precipitous declines in the 1970s, early 1990s, and early 2000s – the American venture industry today is far more developed and mature than it was in earlier decades. In recent years, this growth has extended outside the U.S.: Israel, India, and China are just three examples of nations that have experienced a dramatic surge in venture investment. In part, the capital has been provided by home-grown groups, but affiliates or branch offices of U.S.-based groups are playing an increasingly important role. Much of this growth seems to have by-passed Europe. European venture capital funds have long been overshadowed by the funds specializing in buy-outs and other later-stage transactions: not only have the level of such activities been far lower than elsewhere but so have the returns. While there was a brief surge of European venture capital activity in the late 1990s, it proved short-lived and many of the new entrants collapsed early in this decade. Many of the policy initiatives of that era, such as the creation of the pan-European EASDAQ market for young growth companies, have been written off as failures. The small size and very modest success of the European venture capital industry is trou- bling because considerable evidence has emerged that venture capitalists play an important role in encouraging innovation. The types of firms that these organizations finance – whether young start-ups hungry for capital or middle-aged firms that need capital to grow – pose numerous problems and uncertainties that discourage other investors. To be sure, the financing of entrepreneurial firms is a risky business. Uncertainty and informational gaps often characterize these firms, particularly in high-technology industries. These information problems make it difficult to assess these firms, and per- mit opportunistic behavior by entrepreneurs after the financing is received. To address these information problems, venture investors employ a variety of mechanisms, which seem to be critical in boosting innovation. A considerable body of evidence suggests that the early participation of venture firms – including their guidance, monitoring, shap- ing of management teams and boards, networking, and credibility – helps innovators successfully nurture start-ups and sustain their success long after their company goes public. Thus, the state of the European venture capital market is an important public policy issue. This collection of essays will help scholars, investors, and academics better
- 20. xiv Foreword understand the challenges faced by the European venture industry and – hopefully – suggest steps that can address some of these problems. Josh Lerner Jacob H. Schiff Professor of Investment Banking Harvard Business School
- 21. Preface After looking for information on European venture capital we noticed that there was not enough literature in this area and strongly believed an edited book on the subject was warranted. The articles exclusive to this book represent the latest cutting-edge research that examines venture capital in Europe. Acknowledgments We would like to thank Karen Maloney, publishing editor at Elsevier, for her support throughout the entire process; and Dennis McGonagle, assistant editor at Elsevier. We would also like to thank the copyeditor, Sue Thomas, as well as the handful of anonymous referees of the selection of papers for inclusion in this book.
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- 23. About the Editors Greg N. Gregoriou is Associate Professor of Finance and coordinator of faculty research in the School of Business and Economics at the State University of New York (Plattsburgh). He obtained his Ph.D. (Finance) from the University of Quebec at Montreal, which is part of the joint Doctoral Program in Administration that merges the resources of Montreal’s four major universities (McGill, Concordia, and HEC). He is hedge fund editor and editorial board member for the peer-reviewed scientific journal Derivatives Use, Trading and Regulation published by Palgrave-MacMillan in London. He has authored over 50 articles on hedge funds and managed futures in various U.S. and U.K. peer-reviewed publications, including the Journal of Portfolio Management, Journal of Futures Markets, European Journal of Operational Research, Annals of Operations Research, European Journal of Finance, Journal of Asset Management, and Journal of Derivatives Accounting, etc. This is his fourth edited book with Elsevier and his latest book is entitled Initial Public Offerings: An International Perspective. Maher Kooli is Assistant Professor of Finance at the School of Business and Management, University of Quebec in Montreal (UQAM). He holds a Ph.D. in Finance from Laval University (Quebec) and was a postdoctoral researcher in finance at the Center of Interuni- versity Research and Analysis on Organisations. Maher also worked as a Senior Research Advisor for la Caisse de Depot et Placement de Quebec (CDP Capital). He has published articles in a wide variety of books and journals including the Journal of Multinational and Financial Management, the Financial Management, The Journal of Private Equity, the Canadian Investment Review, Derivatives Use and Trading Regulations, FINECO, and Gestion. He has co-authored a book entitled Principes de Gestion financiere, Gaëtan Morin edition. His current research interests include alternative investments, initial public offerings, and mergers and acquisitions. Roman Kraeussl obtained a first-class honours Masters in Economics with a specialization in Financial Econometrics at the University of Bielefeld, Germany, in 1998. He completed his Ph.D. in Financial Economics on the Role of Credit Rating Agencies in International Financial Markets at Johann Wolfgang Goethe-University, Frankfurt/Main, Germany, in 2002. As the Head of Quantitative Research at Cognitrend GmbH, he was closely involved with the financial industry. Currently he is Assistant Professor of Finance at the Free University of Amsterdam and research fellow with the Centre for Financial Studies, Frankfurt/Main. He is a specialist on venture capital and private equity and has written numerous papers on these topics. Roman is also a Research Fellow at the Center for Financial Studies in Frankfurt/Main.
- 24. This page intentionally left blank
- 25. List of Contributors Luisa Alemany holds a B.Sc. in Economics and Business Administration from the Com- plutense University of Madrid, an M.B.A. from Stanford (U.S.A.) and a Ph.D. in Corporate Finance from Complutense University of Madrid. She has gained professional experience in consulting with McKinsey & Co, in finance with Goldman Sachs, and in venture capital with The Carlyle Group. She is currently part of the Finance faculty at ESADE Business School (Barcelona, Spain). Her main research interests are venture capital, valuation of start-ups and companies in general, entrepreneurship, and corporate finance. Paul U. Ali is an Associate Professor in the Faculty of Law, University of Melbourne and a Visiting Associate Professor in the Faculty of Law, National University of Singapore. Paul was previously a finance lawyer in Sydney. Paul has published several books and journal articles on finance and investment law, including, most recently, Opportunities in Credit Derivatives and Synthetic Securitisation (London, 2005) and articles in Derivatives Use, Trading and Regulation, Journal of Alternative Investments, Journal of Banking Regulation, and Journal of International Banking Law and Regulation. Ron C. Antonczyk is assistant at the chair of Finance at RWTH Aachen University, Germany’s leading Technical University. In 2003 he received his diploma in Business Studies at Humboldt University, Berlin. He has written a textbook on the basics of corporate finance. His research interests include corporate finance and particularly venture capital. Marina Balboa is Associate Professor of Economics at the University of Alicante, Spain. She has a Ph.D. in Business Administration (Finance) from the University of Alicante. She has published in several international as well as Spanish journals. Her research areas are venture capital, private equity, and corporate finance. Andreas Bascha joined the German Central Bank in 2002, after he received his Diploma and Ph.D. in Economics from the University of Mannheim and University of Tübingen, in 1996 and 2001, respectively. From 1996 to 2001 he was research and teaching assistant at the University of Bochum and the University of Tübingen. He received a prize from Ernst & Young Stiftung E.V., Stuttgart for his Ph.D. dissertation. His area of specialization is contract theory, and his recent research interests include venture capital, financial intermediation, and banking supervision, especially Basel II. He is currently working in a senior position at the Department of Banking Supervision and Bank Examinations at the German Central Bank, Regional Office in Mainz, Germany.
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- 27. conquered province. Corsica is also an obvious instance to the same purpose. There is an observation of Machiavel, with regard to the conquests of Alexander the Great, which I think may be regarded as one of those eternal political truths which no time nor accidents can vary. It may seem strange, says that politician, that such sudden conquests as those of Alexander should be settled so peaceably by his successors, and that the Persians, during all the confusions and civil wars of the Greeks, never made the smallest effort towards the recovery of their former independent government. To satisfy us concerning the cause of this remarkable event, we may consider that a monarch may govern his subjects in two different ways. He may either follow the maxims of the eastern princes, and stretch his power so far as to leave no distinction of ranks among his subjects, but what proceeds immediately from himself—no advantages of birth; no hereditary honours and possessions; and, in a word, no credit among the people except from his commission alone. Or a monarch may exert his power after a milder manner, like our European princes, and leave other sources of honour, beside his smile and favour: birth, titles, possessions, valour, integrity, knowledge, or great and fortunate achievements. In the former species of government, after a conquest, it is impossible ever to shake off the yoke, since no one possesses among the people so much personal credit and authority as to begin such an enterprise; whereas, in the latter, the least misfortune or discord of the victors {p236} will encourage the vanquished to take arms, who have leaders ready to prompt and conduct them in every undertaking. [114] {p237}
- 28. Such is the reasoning of Machiavel, which seems to me very solid and conclusive, though I wish he had not mixed falsehood with truth in asserting that monarchies governed according to the Eastern policy, though more easily kept when once subdued, yet are the most difficult to subdue, since they cannot contain any powerful subject whose discontent and faction may facilitate the enterprises of an enemy. For besides that such a tyrannical government enervates the courage of men and renders them indifferent towards the fortunes of their sovereign; besides this, I say, we find by experience that even the temporary and delegated authority of the generals and magistrates being always, in such governments, as absolute within its sphere as that of the prince himself, is able, with barbarians accustomed to a blind submission, to produce the most dangerous and fatal revolutions. So that, in every respect, a gentle government is preferable, and gives the greatest security to the sovereign as well as to the subject. Legislators, therefore, ought not to trust the future government of a state entirely to chance, but ought to provide a system of laws to regulate the administration of public affairs to the latest posterity. Effects will always correspond to causes, and wise regulations in any commonwealth are the most valuable legacy which can be left to future ages. In the smallest court or office the stated forms and methods by which business must be conducted are found to be a considerable check on the natural depravity of mankind. Why should not the case be the same in public affairs? Can we ascribe the stability and wisdom of the Venetian Government through so many ages to anything but the form of government? And is it not easy to point out those defects in the original constitution which produced
- 29. the tumultuous governments of Athens and Rome, and ended at last in the ruin of these two famous republics? And so little dependence has this affair on the humours and education of particular men that one part of the same republic may be wisely conducted and another weakly, by the very same men, merely on account of the {p238} difference of the forms and institutions by which these parts are regulated. Historians inform us that this was actually the case with Genoa; for while the state was always full of sedition, and tumult, and disorder, the bank of St. George, which had become a considerable part of the people, was conducted for several ages with the utmost integrity and wisdom. The ages of greatest public spirit are not always most eminent for private virtue. Good laws may beget order and moderation in the government where the manners and customs have instilled little humanity or justice into the tempers of men. The most illustrious period of the Roman history, considered in a political view, is that between the beginning of the first and the end of the last Punic War; the due balance between the nobility and people being then fixed by the contests of the tribunes, and not being yet lost by the extent of conquests. Yet at this very time the horrid practice of poisoning was so common that, during part of the season, a prætor punished capitally for this crime above three thousand persons in a part of Italy, and found informations of this nature still multiplying upon him. There is a similar, or rather a worse instance in the more early times of the commonwealth; so depraved in private life were that people, whom in their histories we so much admire. I doubt not but they were really more virtuous during the time of the two Triumvirates, when they were tearing their common country to
- 30. pieces, and spreading slaughter and desolation over the face of the earth merely for the choice of tyrants. Here, then, is a sufficient inducement to maintain, with the utmost zeal, in every free state, those forms and institutions by which liberty is secured, the public good consulted, and the avarice or ambition of particular men restrained and punished. Nothing does more honour to human nature than to see it susceptible of so noble a passion, as nothing can be a greater indication of meanness of heart in any man than to see him devoid of it. A man who loves only himself, without regard to friendship and merit, is a detestable {p239} monster; and a man who is only susceptible of friendship, without public spirit or a regard to the community, is deficient in the most material part of virtue. But this is a subject which needs not be longer insisted on at present. There are enough of zealots on both sides who kindle up the passions of their partisans, and under the pretence of public good pursue the interests and ends of their particular faction. For my part I shall always be more fond of promoting moderation than zeal, though perhaps the surest way of producing moderation in every party is to increase our zeal for the public. Let us therefore try, if it be possible, from the foregoing doctrine to draw a lesson of moderation with regard to the parties into which our country is at present divided; at the same time, that we allow not this moderation to abate the industry and passion with which every individual is bound to pursue the good of his country. Those who either attack or defend a minister in such a government as ours, where the utmost liberty is allowed, always carry matters to an extreme, and exaggerate his merit or demerit
- 31. with regard to the public. His enemies are sure to charge him with the greatest enormities, both in domestic and foreign management, and there is no meanness or crime of which, in their account, he is not capable. Unnecessary wars, scandalous treaties, profusion of public treasure, oppressive taxes, every kind of mal-administration is ascribed to him. To aggravate the charge, his pernicious conduct, it is said, will extend its baleful influence even to posterity, by undermining the best constitution in the world, and disordering that wise system of laws, institutions, and customs by which our ancestors for so many centuries have been so happily governed. He is not only a wicked minister in himself, but has removed every security provided against wicked ministers for the future. On the other hand, the partisans of the minister make his panegyric run as high as the accusation against him, and celebrate his wise, steady, and moderate conduct in every part of his administration. The honour and interest of the {p240} nation supported abroad, public credit maintained at home, persecution restrained, faction subdued: the merit of all these blessings is ascribed solely to the minister. At the same time he crowns all his other merits by a religious care of the best constitution in the world, which he has preserved in all its parts, and has transmitted entire to be the happiness and security of the latest posterity. When this accusation and panegyric are received by the partisans of each party, no wonder they beget a most extraordinary ferment on both sides, and fill the nation with the most violent animosities. But I would fain persuade these party-zealots that there is a flat contradiction both in the accusation and panegyric, and that it were impossible for either of them to run so high were it not for this
- 32. contradiction. If our constitution be really that noble fabric, the pride of Britain, the envy of our neighbours, raised by the labour of so many centuries, repaired at the expense of so many millions, and cemented by such a profusion of blood—I say, if our constitution does in any degree deserve these eulogies, it would never have suffered a wicked and weak minister to govern triumphantly for a course of twenty years, when opposed by the greatest geniuses of the nation, who exercised the utmost liberty of tongue and pen, in Parliament and in their frequent appeals to the people. But if the minister be wicked and weak to the degree so strenuously insisted on, the constitution must be faulty in its original principles, and he cannot consistently be charged with undermining the best constitution in the world. A constitution is only so far good as it provides a remedy against mal-administration, and if the British constitution, when in its greatest vigour, and repaired by two such remarkable events as the Revolution and Accession, by which our ancient royal family was sacrificed to it—if our constitution, I say, with so great advantages does not, in fact, provide any such remedy, we are rather beholden to any minister who undermines it and affords us an opportunity of erecting in its place a better constitution. I would make use of the same topics to moderate the zeal {p241} of those who defend the minister. Is our constitution so excellent? Then a change of ministry can be no such dreadful event, since it is essential to such a constitution, in every ministry, both to preserve itself from violation and to prevent all enormities in the administration. Is our constitution very bad? Then so extraordinary a jealousy and apprehension on account of changes is ill-placed, and a
- 33. man should no more be anxious in this case than a husband, who had married a wife from the stews, should be watchful to prevent her infidelity. Public affairs in such a constitution must necessarily go to confusion, by whatever hands they are conducted, and the zeal of patriots is much less requisite in that case than the patience and submission of philosophers. The virtue and good intentions of Cato and Brutus are highly laudable, but to what purpose did their zeal serve? To nothing but to hasten the fatal period of the Roman government, and render its convulsions and dying agonies more violent and painful. I would not be understood to mean that public affairs deserve no care and attention at all. Would men be moderate and consistent, their claims might be admitted—at least might be examined. The country-party might still assert that our constitution, though excellent, will admit of mal-administration to a certain degree, and therefore, if the minister be bad, it is proper to oppose him with a suitable degree of zeal. And, on the other hand, the court-party may be allowed, upon the supposition that the minister were good, to defend, and with some zeal too, his administration. I would only persuade men not to contend, as if they were fighting pro aris et focis, and change a good constitution into a bad one by the violence of their factions. [115] {p242} I have not here considered anything that is personal in the present controversy. In the best civil constitution, {p243} where every man is restrained by the most rigid laws, it is easy to discover either the good or bad intentions of a minister, and to judge whether his personal character deserves love or hatred. But such questions are of little importance to the public, and lay those who employ their
- 34. pens upon them under a just suspicion either of malevolence or flattery.
- 35. NOTES, POLITICS REDUCED TO A SCIENCE. 113 “For forms of government let fools contest; Whate’er is best administer’d is best.” Essay on Man, Book iii.
- 36. 114 I have taken it for granted, according to the supposition of Machiavel, that the ancient Persians had no nobility, though there is reason to suspect that the Florentine secretary, who seems to have been better acquainted with the Roman than the Greek authors, was mistaken in this particular. The more ancient Persians, whose manners are described by Xenophon, were a free people, and had nobility. Their ὁμοτιμοι were preserved even after the extending of their conquests and the consequent change of their government. Arrian mentions them in Darius’s time (De exped. Alex., lib. 2). Historians also speak often of the persons in command as men of family. Tygranes, who was general of the Medes under Xerxes, was of the race of Achmænes (Herod., lib. 7, cap. 62). Artachæas, who directed the cutting of the canal about Mount Athos, was of the same family (id., cap. 117). Megabyzus was one of the seven eminent Persians who conspired against the Magi. His son Zopyrus was in the highest command under Darius, and delivered Babylon to him. His grandson Megabyzus commanded the army defeated at Marathon. His great grandson Zopyrus was also eminent, and was banished Persia (Herod., lib. 3; Thuc., lib. 1). Rosaces, who commanded an army in Egypt under Artaxerxes, was also descended from one of the seven conspirators (Diod. Sic., lib. 16). Agesilaus (in Xenophon, Hist. Græc. lib. 4), being desirous of making a marriage betwixt King Cotys, his ally, and the daughter of Spithridates, a Persian of rank who had deserted to him, first asks Cotys what rank Spithridates is of. One of the most considerable in Persia, says Cotys. Ariæus, when offered the sovereignty by Clearchus and the ten thousand Greeks, refused it as of too low a rank, and said that so many eminent Persians would never endure his rule (id., De exped. lib. 2). Some of the families, descended from the seven Persians above mentioned, remained during all Alexander’s successors; and Mithridates, in Antiochus’s time, is said by Polybius to be descended from one of them (lib. 5, cap. 43). Artabazus was esteemed, as Arrian says, εν τοις πρωτοις Περσων (lib. 3). And when Alexander married in one day eighty of his captains to Persian women, his intention plainly was to ally the Macedonians with the most eminent Persian families (id., lib. 7). Diodorus Siculus says they were of the most noble birth in Persia (lib. 17). The government of Persia was despotic, and conducted in many respects after the Eastern manner, but was not carried so far as to extirpate all nobility, and confound all ranks and orders. It left men who were still great, by themselves and their family, independent of their office and commission. And the reason why the Macedonians kept so easily dominion over them was owing to other causes easy to be found in the
- 37. historians, though it must be owned that Machiavel’s reasoning was in itself just, however doubtful its application to the present case.
- 38. 115 What our author’s opinion was of the famous minister here pointed at may be learned from that essay, printed in the former editions, under the title of “A Character of Sir Robert Walpole.” It was as follows:—“There never was a man whose actions and character have been more earnestly and openly canvassed than those of the present minister, who, having governed a learned and free nation for so long a time, amidst such mighty opposition, may make a large library of what has been written for and against him, and is the subject of above half the paper that has been blotted in the nation within these twenty years. I wish, for the honour of our country, that any one character of him had been drawn with such judgment and impartiality as to have credit with posterity, and to show that our liberty has, once at least, been employed to good purpose. I am only afraid of failing in the former quality of judgment; but if it should be so, it is but one page more thrown away, after a hundred thousand, upon the same subject, that have perished and become useless. In the meantime, I shall flatter myself with the pleasing imagination that the following character will be adopted by future historians:— “Sir Robert Walpole, Prime Minister of Great Britain, is a man of ability, not a genius; good-natured, not virtuous; constant, not magnanimous; moderate, not equitable. [116] His virtues, in some instances, are free from the alloy of those vices which usually accompany such virtues. He is a generous friend, without being a bitter enemy. His vices, in other instances, are not compensated by those virtues which are nearly allied to them: his want of enterprise is not attended with frugality. The private character of the man is better than the public, his virtues more than his vices, his fortune greater than his fame. With many good qualities he has incurred the public hatred; with good capacity he has not escaped ridicule. He would have been esteemed more worthy of his high station had he never possessed it; and is better qualified for the second than for the first place in any Government. His ministry has been more advantageous to his family than to the public, better for this age than for posterity, and more pernicious by bad precedents than by real grievances. During his time trade has flourished, liberty declined, and learning gone to ruin. As I am a man, I love him; as I am a scholar, I hate him; as I am a Briton, I calmly wish his fall. And were I a member of either House I would give my vote for removing him from St. James’s, but should be glad to see him retire to Houghton Hall, to pass the remainder of his days in ease and pleasure.”
- 39. The author is pleased to find that after animosities are laid, and calumny has ceased, the whole nation almost have returned to the same moderate sentiments with regard to this great man, if they are not rather become more favourable to him, by a very natural transition from one extreme to another. The author would not oppose those humane sentiments towards the dead, though he cannot forbear observing that the not paying more of our public debts was, as hinted in this character, a great, and the only great error in that long administration. 116 Moderate in the exercise of power, not equitable in engrossing it.
- 40. OF THE FIRST PRINCIPLES OF GOVERNMENT. Nothing is more surprising to those who consider human affairs with a philosophical eye, than to see the easiness with which the many are governed by the few; and to observe the implicit submission with which men resign their own sentiments and passions to those of their rulers. When we inquire by what means this wonder is brought about, we shall find that, as force is always on the side of the governed, the governors have nothing to support them but opinion. It is therefore on opinion only that government is founded, and this maxim extends to the most despotic and most military governments, as well as to the most free and most popular. The Soldan of Egypt, or the Emperor of Rome, might drive his harmless subjects like brute beasts against their sentiments and inclination; but he must, at least, have led his mamalukes, or prætorian bands, like men, by their opinion. Opinion is of two kinds—viz., opinion of interest and opinion of right. By opinion of interest, I chiefly understand the sense of the public advantage which is reaped from government, together with the persuasion that the particular government which is established is equally advantageous with any other that could easily be settled. When this opinion prevails among the generality of a state, {p244} or
- 41. among those who have the force in their hands, it gives great security to any government. Right is of two kinds—right to power and right to property. What prevalence opinion of the first kind has over mankind may easily be understood by observing the attachment which all nations have to their ancient government, and even to those names which have had the sanction of antiquity. Antiquity always begets the opinion of right, and whatever disadvantageous sentiments we may entertain of mankind, they are always found to be prodigal both of blood and treasure in the maintenance of public justice. This passion we may denominate enthusiasm, or we may give it what appellation we please; but a politician who should overlook its influence on human affairs would prove himself but of a very limited understanding. There is, indeed, no particular in which at first sight there may appear a greater contradiction in the frame of the human mind than the present. When men act in a faction they are apt, without any shame or remorse, to neglect all the ties of honour and morality in order to serve their party; and yet when a faction is formed upon a point of right or principle, there is no occasion where men discover a greater obstinacy and a more determined sense of justice and equity. The same social disposition of mankind is the cause of both these contradictory appearances. It is sufficiently understood that the opinion of right to property is of the greatest moment in all matters of government. A noted author has made property the foundation of all government; and most of our political writers seem inclined to follow him in that particular. This is carrying the matter too far; but still it must be owned that the opinion of right to property has a great influence in this subject.
- 42. Upon these three opinions, therefore, of public interest, of right to power, and of right to property, are all governments founded, and all authority of the few over the many. There are indeed other principles which add force to these, and determine, limit, or alter their operation; such as {p245} self-interest, fear, and affection. But still we may assert that these other principles can have no influence alone, but suppose the antecedent influence of those opinions above mentioned. They are therefore to be esteemed the secondary, not the original principles of government. For, first, as to self-interest, by which I mean the expectation of particular rewards, distinct from the general protection which we receive from government, it is evident that the magistrate’s authority must be antecedently established, or at least be hoped for, in order to produce this expectation. The prospect of reward may augment the authority with regard to some particular persons, but can never give birth to it with regard to the public. Men naturally look for the greatest favours from their friends and acquaintance, and therefore the hopes of any considerable number of the state would never centre in any particular set of men if these men had no other title to magistracy, and had no separate influence over the opinions of mankind. The same observation may be extended to the other two principles of fear and affection. No man would have any reason to fear the fury of a tyrant if he had no authority over any but from fear; since as a single man his bodily force can reach but a small way, and all further power he possesses must be founded either on our opinion or on the presumed opinion of others. And though affection to wisdom and virtue in a sovereign extends very far and has great influence, yet he must be antecedently supposed invested
- 43. with a public character, otherwise the public esteem will serve him in no stead, nor will his virtue have any influence beyond a narrow sphere. A government may endure for several ages, though the balance of power and the balance of property do not agree. This chiefly happens where any rank or order of the state has acquired a large share of the property, but from the original constitution of the government has no share of the power. Under what pretext would any individual of that order assume authority in public affairs? As men are commonly much attached to their ancient government, it is {p246} not to be expected that the public would ever favour such usurpations. But where the original constitution allows any share of power, though small, to an order of men who possess a large share of the property, it is easy for them gradually to stretch their authority and bring the balance of power to coincide with that of property. This has been the case with the House of Commons in England. Most writers who have treated of the British Government have supposed that as the House of Commons represents all the commons of Great Britain, so its weight in the scale is proportioned to the property and power of all whom it represents. But this principle must not be received as absolutely true. For though the people are apt to attach themselves more to the House of Commons than to any other member of the constitution—that House being chosen by them as their representatives and as the public guardians of their liberty—yet are there instances where the House, even when in opposition to the Crown, has not been followed by the people; as we may particularly observe of the Tory House of Commons in the reign of King William. Were the members of the House obliged to
- 44. receive instructions from their constituents, like the Dutch deputies, this would entirely alter the case; and if such immense power and riches as those of the whole commons of Britain were brought into the scale, it is not easy to conceive that the Crown could either influence the multitude of people or withstand that overbalance of property. It is true the Crown has great influence over the collective body of Britain in the elections of members; but were this influence, which at present is only exerted once in seven years, to be employed in bringing over the people to every vote, it would soon be wasted, and no skill, popularity or revenue, could support it. I must, therefore, be of opinion that an alteration in this particular would introduce a total alteration in our government, and would soon reduce it to a pure republic; and perhaps to a republic of no inconvenient form. For though the people collected in a body like the Roman tribes be quite unfit for government, yet when {p247} dispersed in small bodies they are more susceptible both of reason and order; the force of popular currents and tides is in a great measure broken; and the public interest may be pursued with some method and constancy. But it is needless to reason any further concerning a form of government which is never likely to have place in Britain, and which seems not to be the aim of any party amongst us. Let us cherish and improve our ancient government as much as possible, without encouraging a passion for such dangerous novelties.
- 45. OF POLITICAL SOCIETY. Had every man sufficient sagacity to perceive at all times the strong interest which binds him to the observance of justice and equity, and strength of mind sufficient to persevere in a steady adherence to a general and a distant interest, in opposition to the allurements of present pleasure and advantage—there had never, in that case, been any such thing as government or political society, but each man following his natural liberty had lived in entire peace and harmony with all others. What need of positive laws where natural justice is, of itself, a sufficient restraint? Why create magistrates where there never arises any disorder or iniquity? Why abridge our native freedom when, in every instance, the utmost exertion of it is found innocent and beneficial? It is evident that if government were totally useless it never could have place, and that the sole foundation of the duty of allegiance is the advantage which it procures to society by preserving peace and order among mankind. When a number of political societies are erected, and maintain a great intercourse together, a new set of rules are immediately discovered to be useful in that particular {p248} situation, and accordingly take place under the title of “Laws of Nations.” Of this kind are the sacredness of the persons of ambassadors, abstaining from poisoned arms, quarter in war, with others of that kind, which are plainly calculated for the advantage of states and kingdoms in their intercourse with each other.
- 46. The rules of justice, such as prevail among individuals, are not entirely suspended among political societies. All princes pretend a regard to the rights of others; and some, no doubt, without hypocrisy. Alliances and treaties are every day made between independent states, which would only be so much waste of parchment if they were not found, by experience, to have some influence and authority. But here is the difference between kingdoms and individuals. Human nature cannot by any means subsist without the association of individuals; and that association never could have place were no regard paid to the laws of equity and justice. Disorder, confusion, the war of all against all, are the necessary consequences of such a licentious conduct. But nations can subsist without intercourse. They may even subsist, in some degree, under a general war. The observance of justice, though useful among them, is not guarded by so strong a necessity as among individuals; and the moral obligation holds proportion with the usefulness. All politicians will allow, and most philosophers, that reasons of state may, in particular emergencies, dispense with the rules of justice, and invalidate any treaty or alliance where the strict observance of it would be prejudicial in a considerable degree to either of the contracting parties. But nothing less than the extremest necessity, it is confessed, can justify individuals in a breach of promise, Or an invasion of the properties of others. In a confederated commonwealth, such as the Achæan Republic of old, or the Swiss Cantons and United Provinces in modern times; as the league has here a peculiar utility, the conditions of union have a peculiar sacredness and authority, and a violation of them would
- 47. be equally criminal, Or even more criminal than any private injury or injustice. {p249} The long and helpless infancy of man requires the combination of parents for the subsistence of their young, and that combination requires the virtue of chastity or fidelity to the marriage-bed. Without such a utility, it will readily be owned that such a virtue would never have been thought of. An infidelity of this nature is much more pernicious in women than in men; hence the laws of chastity are much stricter over the one sex than over the other. These rules have all a reference to generation, and yet women past child-bearing are no more supposed to be exempted from them than those in the flower of their youth and beauty. General rules are often extended beyond the principle whence they first arise, and this holds in all matters of taste and sentiment. It is a vulgar story at Paris that during the rage of the Mississippi a hump-backed fellow went every day into the Rue de Quincempoix, where the stock- jobbers met in great crowds, and was well paid for allowing them to make use of his hump as a desk in order to sign their contracts upon it. Would the fortune which he raised by this invention make him a handsome fellow, though it be confessed that personal beauty arises very much from ideas of utility? The imagination is influenced by association of ideas, which, though they arise at first from the judgment, are not easily altered by every particular exception that occurs to us. To which we may add, in the present case of chastity, that the example of the old would be pernicious to the young, and that women, continually thinking that a certain time would bring
- 48. them the liberty of indulgence, would naturally advance that period and think more lightly of this whole duty so requisite to society. Those who live in the same family have such frequent opportunities of licence of this kind that nothing could preserve purity of manners were marriage allowed among the nearest relations, or were any intercourse of love between them ratified by law and custom. Incest, therefore, being pernicious in a superior degree, has also a superior turpitude and moral deformity annexed to it. {p250} What is the reason why, by the Athenian laws, one might marry a half-sister by the father but not by the mother? Plainly this:—The manners of the Athenians were so reserved that a man was never permitted to approach the women’s apartment, even in the same family, unless where he visited his own mother. His step-mother and her children were as much shut up from him as the women of any other family, and there was as little danger of any criminal correspondence between them. Uncles and nieces, for a like reason, might marry at Athens, but neither these nor half-brothers and sisters could contract that alliance at Rome, where the intercourse was more open between the sexes. Public utility is the cause of all these variations. To repeat to a man’s prejudice anything that escaped him in private conversation, or to make any such use of his private letters, is highly blamed. The free and social intercourse of minds must be extremely checked where no such rules of fidelity are established. Even in repeating stories, whence we can see no ill consequences to result, the giving one’s authors is regarded as a piece of indiscretion, if not of immorality. These stories, in passing from hand
- 49. to hand and receiving all the usual variations, frequently come about to the persons concerned and produce animosities and quarrels among people whose intentions are the most innocent and inoffensive. To pry into secrets, to open or even read the letters of others, to play the spy upon their words and looks and actions—what habits more inconvenient in society? what habits, of consequence, more blameable? This principle is also the foundation of most of the laws of good manners, a kind of lesser morality calculated for the ease of company and conversation. Too much or too little ceremony are both blamed, and everything which promotes ease without an indecent familiarity is useful and laudable. Constancy in friendships, attachments, and intimacies is {p251} commonly very commendable, and is requisite to support trust and good correspondence in society. But in places of general though casual concourse, where the pursuit of health and pleasure brings people promiscuously together, public conveniency has dispensed with this maxim, and custom there promotes an unreserved conversation for the time by indulging the privilege of dropping afterwards every indifferent acquaintance without breach of civility or good manners. Even in societies which are established on principles the most immoral and the most destructive to the interests of the general society there are required certain rules which a species of false honour as well as private interest engages the members to observe. Robbers and pirates, it has often been remarked, could not maintain their pernicious confederacy did they not establish a new distributive
- 50. justice among themselves and recall those laws of equity which they have violated with the rest of mankind. “I hate a drinking companion,” says the Greek proverb, “who never forgets.” The follies of the last debauch should be buried in eternal oblivion, in order to give full scope to the follies of the next. Among nations where an immoral gallantry, if covered with a thin veil of mystery, is in some degree authorized by custom, there immediately arise a set of rules calculated for the conveniency of that attachment. The famous court or parliament of love in Provence decided formerly all difficult cases of this nature. In societies for play there are laws required for the conduct of the game, and these laws are different in each game. The foundation, I own, of such societies is frivolous, and the laws are in a great measure, though not altogether, capricious and arbitrary. So far is there a material difference between them and the rules of justice, fidelity and loyalty. The general societies of men are absolutely requisite for the subsistence of the species, and the public conveniency, which regulates morals, is inviolably established in the nature of man and of the world in which he lives. The {p252} comparison, therefore, in these respects is very imperfect. We may only learn from it the necessity of rules wherever men have any intercourse with each other. They cannot even pass each other on the road without rules. Waggoners, coachmen, and postilions have principles by which they give way, and these are chiefly founded on mutual ease and convenience. Sometimes also they are arbitrary, at least dependent on a kind of capricious analogy, like many of the reasonings of lawyers. [117]
- 51. To carry the matter further, we may observe that it is impossible for men so much as to murder each other without statutes and maxims and an idea of justice and honour. War has its laws as well as peace, and even that sportive kind of war carried on among wrestlers, boxers, cudgel-players, gladiators, is regulated by fixed principles. Common interest and utility beget infallibly a standard of right and wrong among the parties concerned.
- 52. NOTE, OF POLITICAL SOCIETY. 117 That the lighter machine yields to the heavier, and in machines of the same kind, that the empty yields to the loaded—this rule is founded on convenience. That those who are going to the capital take place of those who are coming from it—this seems to be founded on some idea of the dignity of the great city, and of the preference of the future to the past. From like reasons, among foot-walkers, the right-hand entitles a man to the wall and prevents jostling, which peaceable people find very disagreeable and inconvenient.
- 53. ALPHABETICAL ARRANGEMENT OF AUTHORITIES CITED BY HUME. ÆMILIUS, PAULUS, Roman general, B.C. 230–157. Defeated Perseus of Macedonia. AGATHOCLES, tyrant of Syracuse, born circa B.C. 361, died 289. ALCIBIADES, Athenian general and statesman, born B.C. 450, died B.C. 404. A disciple of Socrates, and noted for dissoluteness. ALEXANDER the Great, born B.C. 356, died 323. ANACHARSIS, Scythian philosopher, B.C. 600. Much esteemed by Solon. ANTHONY, MARK, Triumvir, born circa B.C. 85, died B.C. 30. Best known through his association with Cleopatra. ANTIGONUS, one of the greatest generals of Alexander the Great. Slain in 301 at Ipsus. ANTIPATER, minister of Philip of Macedon and Alexander the Great, died B.C. 319. APPIANUS (Appian), belonged to the time of Trajan, and wrote the history of Rome in Greek. ARATUS, general of the Achæan League, born B.C. 271, died 213. ARBUTHNOT, JOHN, physician, born 1675, died 1735. Associate of Pope and Swift, and wrote on ancient measures, weights, and coins.
- 54. ARISTOTLE, philosopher, the Stagirite, born B.C. 384, died 332. Tutor of Alexander the Great. ARRIANUS, Greek historian, resided at Rome in the second century, a disciple of Epictetus, died circa B.C. 160. ATHENÆUS, grammarian, born in Egypt in the third century. ATTALUS, King of Pergamus, died B.C. 197. AUGUSTUS, first Roman Emperor, born B.C. 63, grandnephew of Julius Cæsar, died B.C. 14. CÆSAR, CAIUS JULIUS, B.C. 100–44, Roman warrior and administrator, known to every schoolboy from his Commentaries. {p254} CAMILLUS, MARCUS FURIUS, died B.C. 365, Roman warrior, six times military tribune and five times dictator. CARACALLA, brother of Geta, whom he murdered B.C. 212. CATALINA, LUCIUS SERGIUS (Catiline), died B.C. 62, noted for his depraved habits and his conspiracy that drew from Cicero his famous orations. CATO, MARCUS PORCIUS, surnamed from Utica, his birthplace, Uticensis, died B.C. 46. CATO, the elder, born B.C. 234, died 149, noted for his courage and temperance. CICERO, MARCUS TULLIUS, Roman orator, born B.C. 106, died 43. CLAUDIUS, Roman Emperor, born B.C. 9, died B.C. 54. Visited Britain B.C. 43. CLEOMENES, King of Sparta, died B.C. 220. CLODIUS, enemy of Cicero, died B.C. 52. Used to go about Rome with an intimidating band of gladiators. COLUMELLA, native of Spain, resided at Rome in the reign of Claudius, B.C. 41–54.
- 55. COMMODUS, Roman Emperor, son of Marcus Aurelius, born B.C. 161, died 192. CTESIPHON. In his defence Demosthenes delivered his famous oration “On the Crown” in B.C. 330. DEMETRIUS PHALEREUS, Greek orator and statesman, born B.C. 345, died circa 283. DEMOSTHENES, Greek orator, B.C. 385–322, whose speeches against the encroachments of Philip of Macedon have given the general term “philippics” to powerful invective. DION CASSIUS, circa 200–250, wrote history of Rome in Greek. DIONYSIUS HALICARNASSÆUS, Greek rhetorician and historian, born B.C. 29, died B.C. 7. Chief work, Roman Archæology. DIONYSIUS, the elder, tyrant of Syracuse, B.C. 430–367; besides being a warrior, was a patron of literary men and artists. Built Lautumiæ, the famous prison, called also the “Ear of Dionysius.” DIODORUS SICULUS, wrote a universal history, flourished circa B.C. 50. DRUSUS, Roman consul, born B.C. 38. EPAMINONDAS, Theban statesman and general, died B.C. 362. FLORUS, Roman historian, lived in the reigns of Trajan and Hadrian. FOLARD, JEAN CHARLES, military tactician, born at Avignon 1669, died 1752, published an edition of Polybius. {p255} GARCILASSO DE LA VEGA, called the Inca because descended from the royal family of Peru (1530–1620), wrote History of Peru and History of Florida. GEE, JOSHUA, eighteenth-century London merchant, wrote Trade and Navigation of Great Britain (1730). GERMANICUS, son of Nero, died B.C. 19, aged 34. GETA, second son of Emperor Severus, born B.C. 189, died 212.
- 56. GUICCIARDINI, FRANCISCO, Italian historian (1482–1540). HANNIBAL, great Carthaginian general, born B.C. 247, died 183. HELIOGABALUS, Roman emperor, born circa B.C. 205, died 222. HERODIAN, flourished in the third century, wrote in Greek a history of the period from the death of Marcus Aurelius to 238. HESIOD, one of the earliest Greek poets, supposed to have flourished in the eighth century B.C. “Works and Days” is his best known poem. HIERO II., King of Syracuse, died B.C. 215, aged 92. Archimedes lived in his reign. HIRTIUS, Roman consul, contemporary with Cæsar and Cicero; is said to be the author of the eighth book of Cæsar’s Commentaries. HYPERIDES, Athenian orator, died B.C. 322, disciple of Plato. ISOCRATES, Greek orator, born B.C. 436, died 338. JUSTIN, a Latin historian, lived in second or third century, epitomized Historiæ Philippicæ of Trogus Pompeius, a native of Gaul. LIVIUS, TITUS (Livy), historian of Rome (B.C. 59–17). Of his 142 books, only 35 have been preserved. LONGINUS, DIONYSIUS, Greek philosopher, died B.C. 273. His extensive knowledge earned him the title of “The living library.” LUCIAN, Greek writer, lived in the time of Marcus Aurelius. LYCURGUS, Spartan lawgiver, whose severe regulations made the Spartans a race of warriors, is said to have flourished in the ninth century B.C. LYSIAS, Greek orator, born B.C. 458, died 373, wrote 230 orations, of which only 35 remain.
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