This presentation is part of: E30-1 (1886) Prices, Business Fluctuations, and Cycles

The Political Economy of Free Banking in Illinois

Salim Rashid, Ph, D, Economics, University of Illinoisa, 323 DKH, Urbana, IL 61801 and Abdus Samad, Ph, D, Utah Valley State College, 800 west university, Orem, UT 84058.

This paper adopts a statistical approach to politics and economics by studying the passage of the Illinois Free Banking Act of 1851. Using data from the antebellum decade 1850-1860, this paper analyzes qualitatively and quantitatively, via a Probit model, the voting behavior of Illinois House members. Particular attention is given to out of sample testing and to the assumption that the study of voting behaviour can reveal the self interest of legislators. While political and cultural forces were of greater importance than economic forces, it is economic forces that made the difference in leading to the passage of Free banking
Keywords: Illinois, Free Banking, Banks, Whigs, Democrats, Voting,
JEL codes: B41,E42,G21