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February 7, 2021 - December 31, 2023
On the surface, prices are a running record of the cost of commodities as they change hands in the market. This is their most common and familiar meaning. At the same time, they may also be studied in a different way, as evidence of the changing value of money—which is how some economists prefer to think of them. On a third level, prices tell us about systems of production, and especially about structures of exchange—a subject of growing historical importance, as scholars begin to discover that processes of exchange may have played much of the role that Marx attributed to the means of
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At a still higher level of abstraction, prices may be studied as clues to the nature of change itself.
We shall find empirical evidence of distinct “change-regimes” in the past that were often highly dynamic, but stable in their dynamism. Sooner or later, even the strongest of these change-regimes broke down in moments of what might be called “deep change.”
The economic consequences of decelerating population growth are slowing demand and downward pressure on prices throughout the world, which lead in turn to severe financial crisis in economies that were organized on expectations of very rapid growth.
Here again the cause is to be found outside the conventional frame of economic analysis, in social and cultural tendencies that have caused investment in certain classes of assets to increase more rapidly than the supply of assets themselves. We might have a major problem here, in what an historian would call a shearing effect, created by countervailing price movements.
If we study the Phelps-Brown-Hopkins index and others like it, we find that most inflation in the past eight centuries has happened in four great waves of rising prices.
The discipline of price history, which flourished during the 1930s, is now in the early stages of revival.
fourth, the pattern of change in rent and interest.
Even so, price historians in Europe have suggested seven causal explanations, which might be called the monetarist, Malthusian, Marxist, neoclassical, agrarian, environmental, and historicist models.
Malthusians think of price movements in a different way as a material representation of the changing value of commodities that money might buy, caused primarily by imbalances between demographic and economic growth.
This one and neoclassical seem the most pertinant today.
All are flourishing today. The differences between them rise in large part from their assumptions about what prices are, and what the world is made of.
The darkest tendencies of our troubled era—the growth of violence and drug use and family disruption which many people identify as the most urgent social problems of our age— are closely connected to price movements
It should be understood clearly that the movements we are studying are waves—not cycles. To repeat: not cycles, but waves.
One great price-wave lasted less than ninety years; another continued more than 180 years. The irregularities in individual price-movements make them no more (or less) predictable than individual waves in the sea.
All major price revolutions in modern history began in periods of prosperity. Each ended in shattering world-crises and were followed by periods of recovery and comparative equilibrium.
This book is written mainly for general readers who share the author’s interest in understanding patterns of historical change for their own sake.
But it also finds evidence that what happens in the future is contingent on our choices in the present, which derive from our memory of the past.
The south cloister was opened to the stalls of the money-changers.
All of these movements rose from an expanding demographic base.
But it was not to be. Ironically, the era when Chartres was built was a time of a deep change in European history—a moment when one change regime yielded silently to another. Even as the great vault of the Cathedral was completed in the year 1224, dangerous stresses were beginning to develop within the structure of medieval civilization.
medieval price revolution. This was a long wave of rising prices that began late in the twelfth century, and continued to the middle of the fourteenth century.
Why did medieval prices go up? Some historians find the cause in an expansion of the money supply; others, in the growth of population. Both factors were involved, but population appears to have been the prime mover.
After a long period of comparative stability and growing prosperity, women throughout Europe married at earlier ages and decided to have more children.
This medieval baby boom had important economic consequences. It changed the age-structure of the population. As long as it continued, a larger proportion were dependent children. Fewer were mature adults in the prime of their productive years. This happened at the same time that people needed more food, fuel, houses and land. Demand for life’s necessities expanded more rapidly than supply could increase. Inexorably, prices went up.15
The opposite is happening In the Modern world,
The most rapid rises appeared in the price of energy, food, shelter and raw materials— items most heavily in demand during a period of population growth, and least elastic in their supply.
By contrast with energy and food, the price of finished manufactures such as cloth and nails increased comparatively little—less than the cost of raw materials such as wool and iron. The inflation of industrial prices was moderate, because the supply of manufactured goods could be expanded more easily to meet rising demand.
The growth of commerce and industry had major consequences for monetary systems. Expanding markets increased the velocity of money in circulation. This added a monetary inflation to a demand inflation, and caused prices to keep on rising, once the increase had begun.
Scholars have estimated that as late as the year 1500, all the gold in Europe would have fit within a two-meter cube (that is, eight cubic meters in all).
At the same time, there were also heavy losses of silver from Europe. France’s unfortunate King Louis IX (1214–70) was captured on a crusade in the year 1250. His royal ransom (together with expenses of the crusade itself) cost his nation 240 tons of silver—a heavy burden on a medieval economy.27
Mints throughout Europe coined money on demand; merchants commonly appeared with a supply of silver, and asked to have it converted into coin, which was done for a fee.30
As the quantity of money increased, its value declined. The effect was to drive prices higher.31
In the mid-thirteenth century, the Italian city-states became the first in the West to mint gold coin since the fall of Rome.
The ducat became renowned for its stability, by keeping its gold content unchanged for more than five hundred years, from 1284 to the fall of the Venetian republic in 1797.
The continuing rise in commodity prices during the later stages of the price-revolution was linked to these monetary factors. Deliberate increases in the quantity of precious metal, debasements of various kinds, and the development of other instruments of exchange all sent prices higher.
In cultural terms their actions helped individuals and institutions to cope with high prices, but had the collective effect of driving prices higher.
In the early stages of the great wave, wages had kept pace with prices, and during some decades even increased more rapidly. But as inflation continued in the mid-thirteenth century, money wages began to lag behind.
Strife continued at St. Albans for many years, while the abbots waxed fatter and the peasants grew thinner. Similar scenes were enacted throughout Europe.
This growing gap between returns to labor and capital was typical of price-revolutions in modern history. So also was its social result: a rapid growth of inequality that appeared in the later stages of every long inflation.
In Constantinople, the last Latin Emperor Baldwin II (1217–1273), was so hard pressed for ready cash between 1237 and 1261 that he surrendered the Crown of Thorns as collateral for loans by Venetian bankers.
In the late thirteenth century, the growth of population was pressing very hard against resources. Many people found themselves living precariously near the edge of survival. As the number of people increased, lands of lesser quality had been brought into cultivation. Farmers on these poor lands had to work much harder to scratch a living from the soil. Production and productivity fell for both land and labor. Many were driven to the margin of subsistence.43
Agricultural conditions were apt to vary from one region to another, even from one village to the next. The transportation of bulk-commodities such as wheat or barley across the countryside was not easy in the thirteenth century.
Scarcity and surplus often existed within a few miles of one another.
No supply chains
recoinages.
To put more metal in specie
Debasements drove prices up; recoinages brought them down again.
When one medieval state debased its coinage, merchants responded by carrying their silver to another kingdom and having it reminted in a currency that held its value.
A historian of this sudden inflation concludes that the leading cause was a change in the size of the money supply.
Multiple ways inflation occured from debasing currency, to overloading the money suppy with reminting. A debasment of currency in France led to an increase in prices in England due to capital flight.
The big Florentine banks made foreign loans to the kings of England and Naples. This was a dangerous business. Once it had begun, the loans grew inexorably larger. The banks could not call them in, for fear of default or confiscation. The results were inexorable.
Behind these events, many factors were operating at the same time: climatological, demographic, monetary, commercial, fiscal and financial. Together they unsettled social relationships throughout Europe, and caused deep suffering among the poor.
“How contrary to reason is an ordinance on prices, when the fruitfullness or sterility of all living things are in the power of God alone, from which it follows that the fertility of the soil and not the will of man must determine the price.”
God becomes Free Market
The arguments of medieval theologians differed in detail from those of modern neoclassical economists, but the conclusions were much the same.
