For a long time, short term US Treasury Bills have been treated as a proxy for the “risk free” interest rate. Obviously this hasn’t always been the case. The history of finance is far longer than the history of the United States. So what was the instrument that was the “risk free” asset before it became US Treasuries and how did that asset lose its place. Was it sudden? Gradual? What was the transition like?
I’m curious about how stable things get overturned or replaced and why.
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The risk-free rate didn’t gain much traction until CAPM in the early 1960s, which provided a practical, easily-implemented approach to build a risk-weighted portfolio of assets that essentially anchor on the assumption of the risk-free rate; this quickly become part of standard finance and is taught to every business student and is the foundation of much of modern finance. (The idea builds on Markowitz from the 1950s who deserves much of the credit, but did not break through until CAPM.) The proxy for the risk-free rate is government securities due to “full faith and credit”, and most textbooks simply define government securities to be risk-free assets.
As to your question of what came before, the concept of risk-free rate has only been important post-WW2 during the still-continuing era where the US is and remains the most important economy and the dollar is the reserve currency. So to answer your question, there was no such asset because the concept of “risk free asset” came into vogue when US treasuries were king, and that era has not (yet?) come to an end.