is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

Financing the First World War

Author(s):Strachan, Hew
Reviewer(s):Voth, Hans-Joachim

Published by EH.NET (January 2007)

Hew Strachan, Financing the First World War. Oxford: Oxford University Press, 2004. viii + 268 pp. $20 (paperback), ISBN: 0-19-925727-2.

Reviewed for EH.NET by Hans-Joachim Voth, Department of Economics, Universitat Pompeu Fabra, Barcelona.

Long before the trains started to roll towards the battlefields in 1914, the coming of World War I put heavy demands on other types of transport. All over the world, in late July, ships were loading unusual freight, in unusual quantities. As William Silber describes in his When Washington Shut down Wall Street [1], the cargo for the ships waiting in New York harbor came from only a few miles away. Workers at depositories stacked thousands of bars of gold in wooden kegs, covered them with saw dust to reduce abrasion, and nailed them shut. Armed transports took the crates and barrels with their precious cargo to the docks, before they were sent to the strong rooms of the waiting passenger and cargo ships.

As the risk of war grew, the soon-to-be belligerent powers sold foreign assets, and began to repatriate the proceeds in gold. Before the barbarism of the conflict became apparent to all, gold, the “barbarous relic” in the words of Keynes, started to change from currency anchor to strategic asset. Hew Strachan’s Financing the First World War is about the struggle to find the funds necessary to fight World War I — the first and the last of the major armed conflicts when all the main powers were on the gold standard when hostilities broke out. This scramble turned out to be every bit as desperate as the attempts to hoard gold in the summer months of 1914. The history of finance during World War I has often been told with a view to the hyperinflations and deflations, the booms and busts that followed — how economies coped with the large increase in money in circulation, the economic dislocation and the overhang of debt. As the introduction explains, Strachan is less concerned with the consequences of financing World War I. Instead this book aims to explain how the war was fought on the financial battlefield.

This is part of a much larger project. Strachan was commissioned to write a comprehensive replacement of Cruttwell’s (1934) A History of the Great War. Strachan’s To Arms is the first installment in what is promised to be a three-volume history of the conflict. Financing the First World War is not a self-contained book as such, written with the intention to get to the bottom of financing arrangements during the Great War. Rather, Oxford University Press is re-issuing parts of To Arms, the first volume of Strachan’s three-volume book on World War I, as separate paperbacks. In addition to this book, there are The Outbreak of the First World War, and The First World War in Africa. Strachan probably knows as much about the military, political and financial history of belligerents as any other author; he has also done an admirable job summarizing the main secondary works in German, French, Russian, and Italian. Since Strachan’s own university (Oxford) has abolished even basic language requirements (like a two modern languages and Latin) for the study of history because of alleged “elitism,” this is certainly to be welcomed. It is also in pleasing contrast with other English-language books on World War I, which often focus on the Anglo-German rivalry.

This is an ambitious and knowledgeable book. It is also poorly structured, strikingly confusing, and monumentally boring. The main problem seems to be that it has been re-assembled from the ingredients of a larger book. Like meat cuts reassembled into false filets, the book looks like the real thing, but certainly doesn’t taste like it. Chapters starts well enough, with a small, intriguing vignette — how the garbage-strewn battlefield of World War I indicates the prolific use of materiel, how a German Reichstag delegate encountered problems getting change when trying to pay for his dinner in Berlin in August 1914, etc. Yet these are rare morsels in army-style fare of dry prose and even drier numbers, cooked up without salt or spices. This reviewer thinks of himself as a bit of a chiffrephile, in Angus Maddison’s elegant phrase — someone who has a healthy appetite for figures. Yet the main account of financial questions related to the war effort in Strachan’s book is close to unreadable. The reader is treated to a constant bombardment with financial figures, without much explanation. A barrage with millions of Sterling here is followed by salvos of millions of Russian Rubles, Bulgarian Levas, German Marks and French Francs in adjacent sectors. They left this reader shell-shocked. Little or no effort is made to put them into context, nor is there much of an explanation of “how big is big” (they are certainly almost never related to something economically meaningful such as GDP). Only occasionally do we learn that the British tax increases in 1917 — after much back and forth – produced only enough additional revenue to cover the cost of five days’ fighting. A typical example reads like this:

A total of 4,460 million marks was subscribed, producing a surplus of 1,832 million over existing debt. The second, in March 1915, raised 9,060, a surplus of 1,851; the third, in September 1915, 12,101 million, a surplus of 2,410; a fourth 10,712 million, a surplus of 324 million…. The fifth loan was 2,114 million marks short of its target, the sixth (in March 1917) 6,732 million, the seventh (in September 1917) 14,578 million, and the eighth 23,970 million. The total of the last loan, issued in September 1918, fell back to 10,443 million marks, and left a shortfall of 38,971 million (p. 123).

Surely, this is why tables or graphs were invented? Yet not a single table or figure adorns the entire, 278-page book. The author apparently felt no need for such complications. This is no simple oversight, but indicative of his approach to the subject. All too often, we are simply told the sequence of minor political intrigues and major budget moves, in a blow-by-blow sequence, for one belligerent after the other.

For all its command of the minutiae, this book represents a wasted opportunity for comparative history. The book contains no insightful, analytical, systematically comparative discussion of war finances as such, other than a narrative of political maneuvers concerned with financial questions. For the most part, the discussion is strung across countries in a way that clarifies little. We are treated to very brief overviews in the introduction of topics — financial mobilization, taxation, domestic borrowing, foreign borrowing, etc. Then, quasi in subchapters, we are told how individual countries handled these issues. There is no attempt to summarize what the chapters show, nor is there even a brief section that would conclude and argue a case. If there is a guiding theme, I failed to find it. The book simply peters out with some observations on the Balfour mission to the U.S. in 1917, before moving on to suggestions for further reading.

The First Word War produced bouts of nostalgia in many. After the cessation of hostilities, Keynes wrote longingly about a world where goods from all corners of the globe could be ordered quickly, where capital flowed freely and no passports were necessary to cross borders. This book engendered a different kind of nostalgia in this reviewer — for a long-lost world where middle-aged copy editors in sensible shoes corrected spelling mistakes, editors at university presses leaned on authors to write to the best of their ability, a time when authors tried to publish books that were definitive works, not repackaged slices of a bigger volume which also contain prolific quantities of reworked secondary material; a time when charity publishers didn’t go out of their way to boost revenues by academic recycling; and one when publishing a book without a concluding chapter was unthinkable.

Note: 1. William L. Silber, When Washington Shut down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy, Princeton: Princeton University Press, 2007.

Hans-Joachim Voth is ICREA Research Professor in the Economics Department, Universitat Pompeu Fabra, Barcelona, a Research Affiliate at the Center for International Economics (CREI, Barcelona), and a Research Fellow in the CEPR International Macro Research Program. Recent publications include “Interest Rate Restrictions in a Natural Experiment: Loan Allocation and the Change in the Usury Laws in 1714,” Economic Journal 2007 (with Peter Temin, forthcoming), “Why England? Demographic Factors, Structural Change and Physical Capital Accumulation during the Industrial Revolution,” Journal of Economic Growth 2006 (with Nico Voigtlaender), and “Credit Rationing and Crowding Out during the Industrial Revolution: Evidence from Hoare’s Bank, 1702-1862,” Explorations in Economic History 2005 (with Peter Temin).

Subject(s):Military and War
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

Railroading Economics: The Creation of the Free Market Mythology

Author(s):Perelman, Michael
Reviewer(s):Vedder, Richard

Published by EH.NET (January 2007)

Michael Perelman, Railroading Economics: The Creation of the Free Market Mythology. New York: Monthly Review Press, 2006. 238 pp. $20 (paperback), ISBN: 1-58367-135-8.

Reviewed for EH.NET by Richard Vedder, Department of Economics, Ohio University.

The good news about Michael Perelman’s new book is that it is a highly readable, lucidly written, and provocative account of the evolving American economy. Moreover, readers of this site would be pleased that this is a rare economist who draws very heavily on insights from economic history and even the history of economic thought in reaching conclusions about the contemporary American economy. Also, the book has lots of solid footnotes showing a serious appreciation of much of the relevant scholarly literature of the past century or more.

Alas, the bad news is that Perelman is almost certainly wrong, and I suspect most American scholars reading his book would agree. He believes the fundamental core of microeconomic theory as taught by more than 95 percent of American academic economists is misguided and that the American economy is in real decline. A radical economist (who has published more in the Review of Radical Economics — at least seven papers — than in any other scholarly journal), Perelman avoids most of the maddening invective and polemics that sometimes pervades heterodox works, but in the final analysis he thinks Americans live in a society run by a bunch of greedy financiers who seriously exploit workers and cause enormous waste.

According to Perelman, classical economics emerged out of an agrarian society where the presumption of pure competition was fairly reasonable. Over time, however, massive capital-intensive businesses evolved, notably the railroads, with very high fixed costs. The neoclassical notion that profit-maximizing firms would produce where marginal costs equaled marginal revenue and price (in pure competition) simply did not fit the reality of these new natural monopolies. Competition was destabilizing, led to overinvestment, and paved the way for unscrupulous financiers like Jay Gould. In Perelman’s view, “the increasing relative importance of fixed costs means that … competition … would lead to utter chaos” (p. 46). A group of “railroad economists” or corporatists understood all this, but they were largely ignored by conventional economists who developed a “quasi-religious” and “ideological” (p. 99) fervor towards their theoretical models, a fervor that persists today.

Perelman thinks that in pursuing competition, prices were forced so low that many railroads were forced into bankruptcy, much as is happening in airlines today. This opens the door for the “financial capitalists” who make money reducing competition (via mergers) and reorganizing bankrupt companies, getting rich in the process and hurting workers of the involved companies. The Enron/WorldCom problems of the early twenty-first century are not that different from those created by J.P. Morgan organized mergers of a century earlier, best symbolized by the formation of U.S. Steel.

In Perelman’s eyes, the instability arising from the lack of realization of the importance of fixed costs, the machinations of financial interests, and so forth, have caused internal contradictions in capitalism. He opines that “an economy built increasingly on finance is a disaster waiting to happen” (p. 198), concluding “I look forward to the day when we no longer rely on competition for monetary rewards … when cooperation and social planning replace the haphazard world of the market place” (p. 200). In Perelman’s world, “success will … depend upon the education and empowerment of workers rather than their exploitation” (p. 200).

As neo-Marxist accounts go, this one is far less polemical and hysterical than some, but it still simply does not accord with critical facts. Business is not beset with continually rising relative fixed costs, for example, a basic assumption of the book. The largest and most successful businesses of modern times — the Microsofts, Wal-Marts, Googles, major pharmaceutical companies, etc., are mostly firms with little debt and often even large cash hoards. Fixed costs are a trivial part of expenses. Many so-called natural monopolies (e.g., cable and phone companies, electric utilities) are actually becoming more competitive over time with technological change, and the share of American workers employed by large (Fortune 500) firms has declined sharply. Moreover, Perelman’s characterization of contemporary economist’s acceptance of Marshallian economic theory is badly distorted, as he writes as if economists have largely ignored imperfect competition, information costs, etc., while that is very far from the truth.

Despite Perelman’s assertions, by any standard measures, economic instability has declined sharply in the last sixty years. For example, the standard deviation on the annual unemployment rate or growth rate of real GDP was far lower in the last half of the twentieth century than the first half. Two-thirds of a century has passed since we had a year with a ten percent unemployment rate, while there were seventeen such years in the fifty years from 1891 to 1940. “Crises” and “depressions” predicted by Perelman are happening less often and with smaller levels of severity, not greater as the analysis in this volume seems to predict. Real average consumption per American has risen two percent a year in the over one hundred years since the “railroad economists” inveighed about excessive competition, hardly a sign of economic decline or massive worker exploitation. America’s immigrant problem is one of finding human ways of excluding newcomers, not obtaining them, a sign the nation retains a role as a magnet to people who come from economies that, on average, are far less capitalist than America. Where market’s have been suppressed, in places like North Korea or Cuba, people are poor relative to neighbors living in market economies with all of the speculation, financial excesses, and occasional mal-investments that so disturb Perelman.

Richard Vedder, Distinguished Professor of Economics at Ohio University, is coauthor of the just released The Wal-Mart Revolution (AEI Press, 2006). His next book will be on income growth, equality and public policy in the United States.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950

Author(s):Offer, Avner
Reviewer(s):Helliwell, John F.

Published by EH.NET (January 2007)

Avner Offer, The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950. Oxford: Oxford University Press, 2006. xviii + 454 pp. $45 (cloth), ISBN: 0-19-820853-2

Reviewed for EH.NET by John F. Helliwell, Department of Economics, University of British Columbia.

This insightful book provides a fresh and refreshing new look at life in the United States and Britain over the past half century. Many of the chapters have appeared previously, but in all cases the work has been carefully chosen and revised to support the venture at hand. By shrewdly combining reviews of the scientific well-being literature with detailed analysis of particular industries (especially autos, advertising, and consumer appliances) and aspects of personal behavior (driving, obesity, mating and family commitment), Offer shows how much more of human behavior becomes explicable, and open to fresh policy perspectives, when the well-springs of human behavior and the determinants of individual decisions are treated as objects of research rather than dismissed by assumption.

With more than 1400 items in the bibliography, Offer’s survey of a vast and varied literature tracking well-being and its determinants over the past fifty years provides many guideposts for scholars wishing to find out what has been going on in this important domain. He is particularly good at weaving diverse strands of evidence together, and using their combined weight to support his conclusions.

Offer’s review of how people actually make decisions — often myopically, and paying much heed to family, friends, neighbors and the media (sometimes through genuine altruism and regard for others, but sometimes with an envious peek at what the Joneses are driving these days), provides just the right background for his very detailed histories of eating habits, household appliances, and the origin of fins and the Edsel in the 1950s U.S. auto industry. By combining psychological evidence with historical case studies and statistical analysis from several sectors and decades, Offer effectively explains what is often called the “Easterlin Paradox,” that average measures of life satisfaction in Britain and the United States have remained flat over the past half century while average real per capita GDP has soared. From Offer’s review, there are several elements to the answer. It is partly distribution, with much of the income gains accruing at the top end, where they are often dissipated in the negative-sum game of status pursuit, partly the increased commercial exploitation of consumer myopia (credit card approvals in every day’s mail), partly an overload of the wrong sorts of information about how life is and should be lived (TV being a principal culprit here) and partly a decline in the extent to which individuals are connected and committed to each other, as friends, spouses, parents, children, schoolmates, workmates, neighbors and society writ large. All of these trends have been noted and documented before. The contribution of Offer’s book, and the literature he surveys, is to show how these various developments have played out, to estimate their consequences for well-being, and to relate these well-being effects to those that might plausibly be expected to flow from higher incomes. This is a refreshingly far cry from the more usual economic histories of advanced economies, driven mainly by the measurement and analysis of the determinants of factor accumulation, output and productivity.

When Offer tries at the end of the book to draw out the implications of his analysis, he finds it easier to conclude that the challenge of affluence has been mishandled than to think of specific policy changes that might have produced higher levels of well-being in Britain and the United States. He argues, I think correctly, that individuals, families and governments are all likely to do better jobs of supporting and improving the well-being of themselves and others if they understand more clearly the consequences of what they are doing. The hedonic treadmill is wasteful, but it is best abandoned by choice rather than fiat, since well-being is most improved when individuals and communities can set challenges for themselves, and take credit for achieving their objectives. Many government policies, by emphasizing the accumulation of incomes rather than the value of strong and resilient families and communities, may have contributed to welfare loss through unintended consequences.

Once the well-being literature, which Offer surveys so well, is taken seriously, then every public and private decision takes on a different cast. Re-thinking is required of instruments and objectives, and especially recognition of the benefits of community structures in which individuals and families feel themselves to be effectively engaged in the pursuit of their joint destinies. As Offer puts it, well-being “… is a balance between our own needs and those of others, on whose goodwill and approbation our own well-being depends.” His book provides invaluable insights to illuminate, but not simplify, decisions that could improve well-being.

John F Helliwell is Research Fellow and Program Co-Director of the Canadian Institute of Advanced Research Program in “Social Interactions, Identity and Well-Being.” He is also Research Associate of the National Bureau of Economic Research and Professor Emeritus of Economics at the University of British Columbia. Recent books include Globalization and Well-Being (UBC Press 2002).

Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

American Treasure and the Price Revolution in Spain, 1501-1650

Author(s):Hamilton, Earl J.
Reviewer(s):Munro, John

Classic Reviews in Economic History

Earl J. Hamilton, American Treasure and the Price Revolution in Spain, 1501-1650. Cambridge, MA: Harvard University Press, 1934. xii + 428 pp.

Review Essay by John Munro, Department of Economics, University of Toronto.

Hamilton and the Price Revolution: A Revindication of His Tarnished Reputation and of a Modified Quantity Theory

Hamilton and the Quantity Theory Explanation of Inflation

As Duke University’s website for the “Earl J. Hamilton Papers on the Economic History of Spain, 1351-1830” so aptly states: Hamilton “helped to pioneer the field of quantitative economic history during a career that spanned 50 years.”[1]   Certainly his most important publication in this field is the 1934 monograph that is the subject of this “classic review.”  It provided the first set of concrete, reliable annual data on both the imports of gold and silver bullion from Spain’s American colonies — principally from what is now Bolivia (Vice Royalty of Peru) and Mexico (New Spain) — from 1503 to 1660 (when bullion registration and thus the accounts cease); and on prices (including wages) in Spain (Old and New Castile, Andalusia, Valencia), for the 150 year period from 1501 to 1650.[2]  His object was to validate the Quantity Theory of Money: in seeking to demonstrate that the influx of American silver was chiefly, if not entirely, responsible for the inflation of much of the Price Revolution era, from ca.  1520 to ca. 1650: but, principally only for the specific period of ca. 1540 to ca. 1600.  Many economic historians (myself included, regrettably) have misunderstood Hamilton on this point, concerning both the origins and conclusion of the Price Revolution.  Of course the Quantity Theory of Money, even in its more refined modern guise, is no longer a fashionable tool in economic history; and thus only a minority of us today espouse a basically monetary explanation for the European Price Revolution (ca. 1515/20-1650) — though no such explanation can be purely monetary.[3]

If inflations had been frequent in European economic history, from the twelfth century to the present, the Price Revolution was unique in the persistence and duration of inflation over a period of at least 130 years.[4]  Furthermore, if commodity money — i.e., gold and especially silver specie — was not the sole monetary factor that explains the Price Revolution that commodity money certainly played a relatively much greater role than it did in the subsequent inflations (of much shorter duration) from the mid-eighteenth century to the present.  The role of specie, and specifically Spanish-American silver, in “causing” the Price Revolution was a commonplace in Classical Economics and Hamilton cites Adam Smith’s statement in _The Wealth of Nations_ (p. 191) that “the discovery of abundant mines of America seems to have been the sole cause of this diminution in the value of silver in proportion to that of corn [grain].”[5]

 The Comparative Roles of Spanish-American Silver and Coinage Debasements: The Bodin Thesis

According to Hamilton (p. 283) — and indeed to most authorities to this very day — the very first scholar to make this quantity-theory link between the influx of American “treasure” and the Price Revolution was the renowned French philosopher Jean Bodin, in his 1568 response to a 1566 treatise by the royal councilor Jean Cherruyt de Malestroit on the explanations for the then quite evident rise in French prices over the previous several decades.  Malestroit had contended that coinage debasements were the chief culprit — as indeed they most certainly had been in the periodic inflations of the fourteenth and fifteenth centuries.[6] Bodin responded by dismissing those arguments and by contending that the growing influx of silver from the Spanish Americas was the primary cause of that inflation.[7]

Hamilton (in chapter 13) was therefore astounded to find, after voluminous and meticulous research in many Spanish treatises, letters, and other relevant documents, that no Spanish writer of the sixteenth century had voiced similar opinions, all evidently ignorant of Bodin’s views.  Hamilton, however, had neglected to find (as Marjorie Grice-Hutchinson did, much later) one such Spanish treatise, produced in 1556 — i.e., twelve years before Bodin — in which Azpilcueta Navarra, a cleric of the Salamanca School, noted that:  “even in Spain, in times when money was scarcer, saleable goods and labor were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver.”[8]

Hamilton also erred, if forgivably so, in two other respects.  First, in utilizing what were then, and in many cases still are, imperfect price indexes for many countries — France, England, Germany, Italy (but not for the Low Countries) — Hamilton (1934, pp. 205-10) concluded that the rise in the general level of prices during the Price Revolution was the greatest in Spain.  In fact, more recent research, based on the Phelps Brown and Hopkins (1956) Composite Price Index for England and the Van der Wee (1975) Composite Price Index (hereafter: CPI) for Brabant, in the southern Low Countries,  reveals the opposite to be true.  If we adopt a common base of 1501-10 = 100, in comparing the behavior of the price levels in Spain, England, and Brabant, for the period 1511-1650, we find that the Hamilton’s CPI for Spain rose from a quinquennial mean of 98.98 in 1511-15 to one of 343.36 in 1646-50 (for silver-based prices only: a 3.47 fold rise); in southern England, the CPI rose from a quinquennial mean of 103.08 in 1511-15 to one of 697.54 (a 6.77 fold rise); and in Brabant, the CPI rose from a quinquennial mean of 114.80 in 1511-15 to one of 845.07 (a 7.36 fold rise).[9] Both the Phelps Brown and Hopkins and the Van der Wee price indexes are, it must be noted, weighted, with roughly the same weights (80 percent foodstuffs in the former and 74 percent in the latter).  Hamilton, while fully admitting that “only index numbers weighted according to the expenditures of the average family accurately measure changes in the cost of living,” was forced to use a simple unweighted arithmetic mean (or equally weighted for all commodities), for he was unable to find any household expenditure budgets or any other reliable guides to produce such a weighted index.[10]

Undoubtedly, however, the principal if not the only explanation for the differences between the three sets of price indexes — to explain why the Spanish rose the least and the Brabantine the most — is the one offered by Malestroit: namely, coinage debasements.  Spain, unlike almost all other European countries of this era, underwent no debasements of the gold and silver coinages (none from 1497 to 1686),[11] but in 1599 the new Spanish king Philip III (1598-1621) did introduce a purely copper “vellon” coinage, a topic that requires a separate and very necessary analysis.  The England of Henry VIII (1509-1547) is famous — or infamous — for his “Great Debasement.”  He had begun modestly in 1526, by debasing Edward IV’s silver coinage by 11.11% (reducing its weight and silver contents from 0.719 to 0.639 grams of fine silver); but in 1542, he debased the silver by another 23.14% (to 0.491 grams of fine silver).  When the Great Debasement had reached its nadir under his successor (Northumberland, regent for Edward VI), in June 1553, the fine silver contents of the penny had been reduced (in both weight and fineness) to just 0.108 grams of fine silver: an overall reduction in the silver content of 83.1% from the 1526 coinage.  In November 1560, Elizabeth restored the silver coinage to traditional sterling fineness (92.5% fine silver) and much of the weight: so that the penny now contained 0.480 grams of fine silver (i.e., 75.1% of the silver in the 1526 coinage).  The English silver coinage remained untouched until July 1601, when its weight and fine silver contents were reduced by a modest 3.23%.  Thereafter the English silver coinage remained untouched until 1817 (when the silver contents were reduced by another 6.06%).  Thus for the entire period of the Price Revolution, from ca. 1520 to 1650, the English silver coinage lost 35.5% of its silver contents.[12] In the southern Low Countries (including Brabant), the silver coinage was debased — in both fineness and weight — a total of twelve times from 1521 to 1644: from 0.33 grams to 0.17 grams of fine silver in the penny, for an overall loss of 48.5%.[13]

 A New Form of Debasement: The New “Fractional” Copper or _Vellon_ Coinages in Spain and Elsewhere

In terms of the general theme of coinage debasement, a very major difference between Spain and these other two countries, from 1599, was the issue of a purely copper coinage called _vellon_, to which Hamilton devotes two major chapters.[14]  Virtually all countries in late medieval and early modern Europe issued a series of petty or low-denomination “fractional” coins — in various fractions of the penny, chiefly to enable the populace to buy such low-priced commodities as bread and beer (or wine).  But in all later-medieval countries the issues of the petty, fractional coinage almost always accounted for a very small proportion of total mint outputs (well under 5% of the aggregate value in Flanders).[15] They were commonly known as _monnaie noire_ (_zwart geld_ in Flemish): i.e., black money, because they contained so much copper, a base metal.  Indeed all coins– both silver and gold — always required at least some copper content as a hardening agent, so that the coins did not suffer too much erosion or breakage in circulation.

The term “debasement” is in fact derived from the fact that the most common mechanism for reducing the silver contents of a coin had been to replace it with more and more copper, a great temptation for so many princes who often derived substantial seigniorage revenues from the increased mint outputs that debasements induced (in both reminting current coin and in attracting bullion from abroad).  In this respect, England was an exception — apart from the era of the Great Debasement (1542-1553) — for its government virtually always maintained sterling silver fineness (92.5% silver, 7.5% copper), and reduced the silver contents for all denominations equally, by reducing the size and weight of the coin.  In continental Europe, the extent of the debasement, whether by fineness or by weight, or by both together, did vary by the denomination (to compensate for the greater labor costs in minting the greater number of lower-valued coins); but the petty “black money” coins — also known (in French) as _billon_, linguistically related to _vellon_, always contained some silver, and always suffered the same or roughly similar proportional reduction of silver as other denominations during debasements until 1543.  In that year, the government of the Habsburg Netherlands was the first to break that link: in issuing Europe’s first all-copper coin.  France followed suit with an all copper _denier_ (1 d tournois) in 1577; but England did not do so until 1672.[16]

Hamilton gives the erroneous impression that Spain (i.e., Castile) was the first to do so, in issuing an all copper _vellon_ coin in 1599.  Previously, Spanish kings (at least from 1471) had issued a largely copper fractional coinage called _blancas_ , with a nominal money-of-account value of 0.5 maravedí, but with a very small amount of silver — to convince the public that it was indeed precious-metal “money.”  The _blanca_ issued in 1471 had a silver fineness of 10 grains or 3.47% (weighing 1.107g).[17] In 1497, that fineness was reduced to 7 grains (2.43% fine); in 1552, to 5.5 grains (1.909% fine); in 1566, to 4 grains (1.39% fine).  In 1597, Philip II (1556-1598) had agreed to the issue of a maravedí coin itself, with, however, only 1 grain of silver (0.34% fine), weighing 1.576g.; but whether any were issued is not clear.[18]

Hamilton commends Philip II on his resolute stance on the issue _vellon_ coinages: for, in “believing that it could be maintained at parity only by limitation of its quantity to that required for change and petty transactions, he was exceedingly careful to restrict the supply.”[19] That is a very prescient comment, in almost exactly stating the principle of maintaining a sound system of fractional or petty coinage that Carlo Cipolla (1956) later enunciated,[20] in turn inspiring the recent monograph on this subject by Sargent and Velde (2002).[21] But neither of them gave Hamilton (1934) any credit for this fundamentally important observation, one whose great importance Hamilton deduced from the subsequent, seventeenth-century history of copper coinages in Spain.

Thus, as indicated earlier, in the year following the accession of the aforementioned Philip III, 1599, the government issued Spain’s first purely copper coin (minted at 140 per copper _marc_ of 230.047 g), and from 1602 at 280 per marc: i.e., reducing the weight by half from 1.643 g to 0.8216 g).[22] Certainly some of the ensuing inflation in seventeenth-century Spain, with a widening gap between nominal and silver-based prices, ranging from 4.0 percent in 1620 to 104.2 percent in 1650, has to be explained by such issues of a purely copper coinage.  Indeed, in Hamilton’s very pronounced view, the principal cause of inflation in the first half of the seventeenth century lay in such _vellon_ issues — more of a culprit than the continuing influx of Spanish American silver.[23]

If, however, we use Hamilton’s own CPI based on the actual nominal prices produced with the circulation of the _vellon_ copper coinage, from 1599-1600, we find that this index rose only 4.61 fold from the quinquennial mean of 1511-15 (98.98) to the mean of 1646-50 (457.07) — again well less than the overall rise of the English and Brabant composite price indexes.  Nevertheless, the differences between the silver-based and vellon-based price indexes in Spain for the first half of the seventeenth century are significant.  For the former (silver), the CPI rose from a mean of 320.98 in 1596-1600 to one of 343.36 in 1646-50, an overall rise of just 6.97%.  For the latter (vellon-based) index, the CPI rose to 457.09 in 1646-50, for a very substantial overall rise of 41.41%.  What certainly did now differentiate Spain from the other two, and indeed almost all other European countries in this period, is that in all the latter countries the purely copper petty coinage formed such a very much smaller, indeed minuscule, proportion of the total coined money supply.[24]

 The Evidence on Spanish-American Silver Mining and Silver Imports into Seville to 1600

What this discussion of the _vellon_ coinage makes crystal clear is that Hamilton did not attribute all of the inflation of the Price Revolution era to the “abundant mines of the Americas.”  Nevertheless many economic historians, after carefully examining Hamilton’s data on prices and imports of Spanish American bullion, noted — as Hamilton himself clearly demonstrated — that the Price Revolution had begun as early as the quinquennium 1516-20, long before, decades before, any significant amounts of Spanish American silver had reached Seville.  Virtually none was imported in the 1520s; and an annual mean of only 5,090.8 kg in 1531-35.[25]   The really substantial imports took place only after by far the two most important silver mines were brought into production: those of Potosi in “Peru” (modern-day Bolivia) in 1545, and Zacatecas, in Mexico, the following year, 1546.  From that quinquennium of 1546-50, mean annual silver imports into Seville rose from 18,698.8 kg to 273,704.5 kg in the quinquennium of 1591-95, marking the peak of the silver imports.  Between these two quinquennia, the total mined silver outputs of Potosi and Zacatecas (unknown to Hamilton) rose from an annual mean of 64,848.9 kg to one of 219,457.4 kg (indicating that silver was coming from other sources than just these two mines).[26] Even then, their production began to boom only with the application of the mercury amalgamation process (which Hamilton barely mentioned — only on p. 16), greatly aided by abundant local supplies of mercury — at Zacatecas, from about 1554-57, and at Potosi, from 1572.[27]

 The Alternative Explanation for the Price Revolution: Population Growth

If all this evidence does indeed prove that the influx of Spanish silver was certainly not the initial cause of the European Price Revolution, surely the data should indicate that the subsequent influx of that silver, especially from the 1550s, very likely did play a significant role in fueling an ongoing inflation. But so many of the anti-monetarist historians leapt to an alternative — and in my view — false conclusion that population growth was the initial and the prime-mover in “causing” the Price Revolution.[28] My objections to this demographic-oriented thesis are two-fold.

In the first place, the now available evidence on demographic recovery and growth in England and the southern Low Countries (Brabant) does not at all correspond to the statistical evidence on inflation during the early phase of the Price Revolution — in the early sixteenth century. For England the best estimate of population in the early 1520s, when the Price Revolution was already underway, is 2.25 or 2.30 million, about half of the most conservative estimate for England’s population in 1300: about 4.5 million — an estimate still rejected by the majority of medieval economic historians, who prefer the more traditional estimate of 6.0 million.[29] If England in the early 1520s was obviously still very unpopulated, compared to its late-medieval peak, and if its population had just begun to recover, how could any such renewed growth, from such a very low level, have so immediately sparked inflation: how could it have caused a rise in the CPI (Phelps Brown and Hopkins) from a quinquennial mean of 96.70 (1451-75 = 100) in 1496-1500 to one of 146.05 in 1521-25?

We find a similar demographic situation in Brabant.  From the 1437 census to the 1496 census, the number of registered households fell from 92,738 to just 75,343: a fall of 18.76 percent.[30] If we further assume that a fall in population also involved a decline in the average family or household size, the demographic decline would have been much greater than these data indicate.  According to Herman Van der Wee (1963), Brabant, like England, did not commence its demographic recovery until the early sixteenth century; and his estimated average annual rate of population growth from 1496 to 1526 was 0.96%.[31]  For this same period, Van der Wee’s CPI for Brabant shows a rise from 115.35 in 1496-1500 (again 1451-75 = 100) to one of 179.94 in 1521-25.  How can any such renewed population growth explain that inflation?

In the second place, the arguments and analyses supplied involve faulty economics: an erroneous transfer of micro-economic analysis to macro-economics.  One can well argue, for early-modern western Europe, that the effect of sustained population growth for the agrarian sector, with necessary additions of “marginal lands” that were generally inferior in fertility and more distant from markets, and without a widespread diffusion of technological changes to offset diminishing returns in this sector, inevitably led to sharply rising marginal costs.  That in turn resulted in price increases for grains and other agricultural commodities (including timber) that were greater than those for non-agrarian and especially industrial commodities, certainly in both England and the southern Low Countries during the course of the sixteenth and first half of the seventeenth century.[32]  But that basically micro-economic model concerning individual, relative commodity prices is, however, very different from a macro-economic model contending that population growth by itself led to an overall increase in the level of prices — i.e., in the CPI.

We should remember that, almost 35 years ago, Donald McCloskey (1972), in a review of Ramsey (1971), responded to these demographic-oriented explanations of the Price Revolution by contending that, if both monetary variables (M and V) were held constant, then population growth (if translated into an increased T or y, in MV = Py) should have led to a fall in P, in the CPI.  Nevertheless, there is some validity to the argument that population growth and changes in the demographic structures may have influenced the role of another monetary factor in the Price Revolution: namely changes in the income velocity of money, to be discussed as a separate topic later in this review.

 Hamilton’s Explanations for the Origins of the Price Revolution before the Influx of Spanish Treasure: The Roles of Gold, South German Silver Mining, and Changes in Credit

How then did Hamilton — and how do we — explain the origins of the Spanish and indeed European-wide Price Revolution,  in the early sixteenth century, i.e., for the period well before any significant influxes of American silver, and also before there was any significant population growth (at least in England and the Low Countries).  Was Hamilton that ignorant of the implications of his own data?  Certainly not.  On p. 299, in his chapter XIII entitled “Why Prices Rose,” he stated that: “the gold imports from the Antilles significantly influenced Andalusian and New Castilian prices even in the first two decades of the sixteenth century,” without, however, elaborating that point any further.[33]  More important are his observations on p. 301, where he explicitly moderates his emphasis on the role of Spanish-American treasure imports, in stating that:  “Only at the beginning of  the sixteenth century, when, as has been shown, colonial demand, credit expansion, and the increased output of German silver made themselves felt, and at the end of the century, when a devastating epidemic, and an over issue of vellon coinage took place, did other factors play important roles in the price upheaval [i.e., the Price Revolution].”  Indeed, in his own view, the paramount role of the influxes of Spanish-American bullion apply to only, at most, 65 years of the 130 years of the Price Revolution era, i.e., to just half the era — from ca. 1535 to 1600, though the evidence for that role seems to be more clear for just the half-century 1550-1600.

It is most regrettable that Hamilton himself failed to elaborate the role of any these factors, principally monetary, in producing inflation in early-sixteenth century Spain.  Had he done so, surely he would have been spared the subsequent and really unfair criticism that he was offering a simplistic monocausal explanation of the Price Revolution, and one in the form of a very crude Quantity Theory of Money.  The most important of “initial causes” that Hamilton lists was surely the question of “German silver,” or more specifically, the South-German and Central European silver-copper mining boom from about the 1460s to the 1540s.  Where he derived his information is not clear, but from other footnotes it was presumably from the publications of two much earlier German economic historians, Adolf Soetbeer and Georg Wiebe.  The latter was, in fact, the first to write a major monograph on the Price Revolution (_Geschichte der Preisrevolution des XVI.  und XVII.  Jahrhunderts_), and he seems to have coined (so to speak) the term.[34]  The former, though a pioneer in trying to quantity both European and world supplies of precious metals, providing a significant influence on Wiebe,  produced seriously defective data on German mining outputs in the later fifteenth and sixteenth centuries, greatly underestimating total outputs, as  John Nef demonstrated in a seminal article published in 1941, subsequently elaborated in Nef (1952).[35] In Nef’s view, this South German mining boom may have quintupled Europe’s supply of silver by the 1530s, and thus before any major influx of Spanish-American silver.[36]

Since then a number of economic historians, me included, have published their research on this South German-Central European silver-copper mining boom.[37] These mountainous regions contained immensely rich ores bearing these two metals, which, however were largely inaccessible for two reasons: first, there was no known method of separating the two metals in smelting the argentiferous-cupric ores; and second, the ever-present danger of flooding in the regions containing these ore bodies made mined extraction very difficult and costly.  In my view, the very serious deflation that Europe experienced during the second of the so-called “bullion famines,” from the 1440s to the 1460s, provided the profit incentive for the necessary technological changes to resolve these two problems.  Consider that since virtually all of Europe’s money-of-account pricing system was based on, tied to, the silver coinage, deflation (low prices) _ipso facto_ meant a corresponding rise in the real value of silver, gram per gram (just as inflation means a fall in the real value of silver, per gram).  The solutions lay in innovations in both mechanical engineering and chemical engineering.  The first was the development of water-powered or horse-powered piston vacuum pumps (along with slanted drainage adits in the mountain sides) to resolve the water-flooding problem.  The second was the so-called _Saigerhütten_ process by which lead was added to the ore-bodies in smelting (also using hydraulic machinery and the new blast furnaces) — during the smelting process the lead combined with the silver to precipitate the copper, and the silver-lead amalgam was then resmelted to remove the lead.

Both processes were certainly in operation by the 1460s; and by my very conservative estimates, certainly incomplete, the combined outputs of mines in Saxony, Thuringia, Bohemia, Slovakia, Hungary, and the Tyrol rose from a quinquennial mean of 12,973.4 kg in 1471-75 (when adequate output data can first be utilized) to a peak production in 1536-40 (thus later than Nef’s estimates), with a quinquennial mean output of 55,703.8 kg — a  4.29-fold increase overall (i.e.. 329.36% increase) — close enough to Nef’s five-fold estimate, given the likely lacunae in the data.[38]  Consider that this output, for the late 1530s, was not exceeded by Spanish-American silver influxes until a quarter of a century later, in 1561-65, when, thanks to the recently applied mercury amalgamation process, a quinquennial mean import of 83,373.92 kg reached Seville (compared to a mean import of just 27,145.03 in 1556-60).[39]

But where did all this Central European silver go?  Historically, from the mid-fourteenth century, most of the German silver-mining outputs had been sent to Venice, whose merchants re-exported most of that silver to the Levant, in exchange for Syrian cotton and Asian spices and other luxury goods.  Two separate factors helped to reverse the direction of that flow, down the Rhine, to Antwerp and the Brabant Fairs.  The first was Burgundian monetary policy: debasements in 1466-67, which, besides attracting silver in itself, reversed a half-century long pro-gold mint policy to a pro-silver policy, offering a relative value for silver (in gold and in goods) higher than anywhere else in Europe.[40] Thus the combined Flemish and Brabantine mint outputs, measured in kilograms of fine silver rose from nil (0) in 1461-65 to 9,341.50 kg in 1476-80 — though much of that was recycled silver coin and bullion in quite severe debasements.  But in 1496-1500, after the debasements had ceased, the mean annual output in that quinquennium was 4,872.96 kg; and in 1536-40, at the peak of the mining boom (and, again, before any substantial Spanish-American imports) the mean output was 5,364.99 kg.[41]

The second factor in altering the silver flows was increasingly severe disruptions in Venice’s Levant trade with the now major Ottoman conquests in the Balkans and the eastern Mediterranean, from the 1460s (and especially from the mid-1480s) culminating (if not ending) with the Turkish conquest of the Mamluk Levant (i.e., Egypt, Palestine, Syria) itself in 1517 (along with conquests in Arabia and the western Indian Ocean). While we have no data on silver flows, we do have data for the joint-product of the Central European mining boom — copper, a very important export as well to the Levant.  In 1491-95, 32.13% of the Central European mined copper outputs went to Venice, but only 5.22% went to Antwerp; by 1511-15, the situation was almost totally reversed: only 3.64% of the mined copper went to Venice, while 58.36% was sent to Antwerp.  May we conjecture that there was a related shift in the flows of silver?  By the 1530s, the copper flows to Venice, which now had more peaceful relations with the Turks, had risen to 11.07%, but 53.88% of the copper was still being sent to the Antwerp Fairs.[42]  Of course, by this time the Portuguese, having made Antwerp the European staple for their recently acquired Indian Ocean spice trade (1501), were shipping significant (if unmeasurable) quantities of both copper and silver to the East Indies.  Then in 1549, the Portuguese moved their staple to Seville, to gain access to the now growing imports of Spanish-American silver.

 The Early Sixteenth-century “Financial Revolutions”: In Private and Public Credit

The other monetary factor that Hamilton mentioned — but never discussed — to help explain the rise of prices in early sixteenth-century Spain was the role of credit.  Indeed, as Herman Van der Wee (1963, 1967, 1977, 2000) and others have now demonstrated, the Spanish Habsburg Netherlands experienced a veritable financial revolution involving both negotiability and organized markets for public debt instruments.  As for the first, the lack of legal and institutional mechanisms to make medieval credit instruments fully negotiable had hindered their ability to counteract frequent deflationary forces; and at best, such credit instruments (such as the bill of exchange) could act only to increase — or decrease — the income velocity of money.[43] The first of two major institutional barriers was the refusal of courts to recognize the legal rights of the “bearer” to collect the full proceeds of a commercial bill on its stipulated redemption date: i.e., the financial and legally enforceable rights of those who had purchased or otherwise licitly acquired a commercial bill from the designated payee before that redemption date.  Indeed, most medieval courts were reluctant to recognize the validity of any “holograph” bill: those that not been officially notarized and registered with civic authorities.  The second barrier was the Church’s usury doctrine: for, any sale and transfer  of a credit instrument to a third party before the stipulated redemption date would obviously have had to be at some rate of discount — and that would have revealed an implicit interest payment in the transaction. Thus this financial revolution, in the realm of private credit, in the Low Countries involved the role of urban law courts (law-merchant courts), beginning with Antwerp in 1507, then most of other Netherlander towns, in guaranteeing such rights of third parties to whom these bills were sold or transferred.  Finally, in the years 1539-1543, the Estates General of the Habsburg Netherlands firmly established, with national legislation, all of the legal requirements for full-fledged negotiability (as opposed to mere transferability) of all credit instruments: to protect the rights of third parties in transferable bills, so that bills obligatory and bills of exchange could circulate from hand to hand, amongst merchants, in commercial and financial transactions.  One of the important acts of the Estates-General, in 1543 — possibly reflecting the growing influence of Calvinism — boldly rejected the long-held usury doctrine by legalizing the payment of interest, up to a maximum of 12% (so that anything above that was now “usury”).[44]  England’s Protestant Parliament, under Henry VIII, followed suit two years later, in 1545, though with a legal maximum interest of 10%.[45] That provision thereby permitted the openly public discounting of commercial credit instruments, though this financial innovation was slow to spread, until accompanied, by the end of the sixteenth century, with the much more common device of written endorsements.[46]

The other major component of the early-sixteenth century “financial revolution” lay in public finance, principally in the Spanish Habsburg Netherlands, France, much of Imperial Germany, and Spain itself — in the now growing shift from interest-bearing government loans to the sale of annuities, generally known as _rentes_ or _renten_ or (in Spain) _juros_, especially after several fifteenth-century papal bulls had firmly established, once and for all, that they were not loans (a _mutuum_, in both Roman and canon law), and thus not subject to the usury ban.[47] Those who bought such _rentes_ or annuities from local, territorial, or national governments purchased an annual stream of income, either for a lifetime, or in perpetuity; and the purchaser could reclaim his capital only by finding some third party to purchase from him the _rente_ and the attached annuity income.  That, therefore, also required both the full legal and institutional establishment of negotiability, with now organized financial markets.

In 1531, Antwerp, now indisputably the commercial and financial capital of at least northern Europe, provided such an institution with the establishment of its financial exchange, commonly known as the _beurse_ (the “purse” — copied by Amsterdam in 1608, and London in 1695, in its Stock Exchange).  Thanks to the role of the South German merchant-bankers — the Fuggers, Welsers, Höchstetters, Herwarts, Imhofs, and Tuchers — the Antwerp _beurse_ played a major role in the international marketing of such government securities, during the rest of the sixteenth century, in particular the Spanish _juros_, whose issue expanded from 3.586 million ducats (_escudos_ of 375 maravedís) in 1516 to 80.040 million ducats in 1598, at the death of Philip II — a 22.4-fold increase.  Most these perpetual and fully negotiable _juros_ were held abroad.[48] According to Herman Van der Wee (1977), this sixteenth-century “age of the Fuggers and [then] of the Genoese [merchant-bankers, who replaced the Germans] was one of spectacular growth in public finances.”[49] Finally, it is important to note the relationship between changes in money stocks and issues of credit.  For, as Frank Spooner (1972) observed (and documented in his study of European money and prices in the sixteenth century), even anticipated arrivals of Spanish treasure fleets would induce these South German and Genoese merchant-bankers to expand credit issues by some multiples of the perceived bullion values.[50]

 The Debate about Changes in the Income Velocity of Money (or Cambridge “k”)

The combined effect of this “revolution” in both private and public finance was to increase both the effective supply of money — in so far as these negotiable credit instruments circulated widely,  as though they were paper money — and also, and even more so, the income velocity of money.  This latter concept brings up two very important issues, one involving Hamilton’s book itself, in particular his interpretation of the causes of the Price Revolution.  Most postwar (World War II) economic historians, myself included (up to now, in writing this review), have unfairly regarded Hamilton’s thesis as a very crude, simplistic version of the Quantity Theory of Money.  That was based on a careless reading (mea culpa!) of pp. 301-03 in his Chapter XIII on “Why Prices Rose,” wherein he stated, first, in explaining the purpose his Chart 20,[51] that:

The extremely close correlation between the increase in the volume of [Spanish-American] treasure imports and the advance of commodity prices throughout the sixteenth century, particularly from 1535 on, demonstrates beyond question that the “abundant mines of America” [i.e., Adam Smith’s description] were the principal cause of the Price Revolution in Spain.

We should note, first, that the “close correlation” is only a visual image from the graph, for he never computed any mathematical correlations (few did in that prewar era).  Second, Ingrid Hammarström was perfectly correct in noting that Hamilton’s correlation between the _annual_ values of treasure imports (gold and silver in pesos of 450 marevedis) and the composite price index is not in accordance with the quantity theory, which seeks to establish a relationship between aggregates: i.e., the total accumulated stock of money (M) and the price level (P).[52]  But that would have been an impossible task for Hamilton.  For, if he had added up the annual increments from bullion exports in order to arrive at some estimate of accumulated bullion stocks, he would have had to deduct from that estimate the annual outflows of bullion, for which there are absolutely no data.  Furthermore, estimates of net (remaining) bullion stocks are not the same as estimates of the coined money stock; and the coined money stock does not represent the total supply of money.[53]

Third, concerning Hamilton’s views on the Quantity Theory itself, his important monetary qualifications concerning the early sixteenth century and first half of the seventeenth century have already been noted.  We should now note his further and very important qualification (p. 301), as follows: “The reader should bear in mind that a graphic verification of that crude form of the quantity theory of money which takes no account of the velocity of circulation is not the purpose of Chart 20.”  He did not, however, discuss this issue any further; and it is notable that his bibliography does not list Irving Fisher’s classic 1911 monograph, which had thoroughly analyzed his own concepts of the Transactions Velocity of Money.[54]

Most economics students are familiar with Fisher’s Equation of Exchange, to explain the Quantity Theory of Money in a much better fashion than nineteenth-century Classical Economists had done: namely, MV = PT.   If many continue to debate the definition of M, as high-powered money, and of P — i.e., on how to construct a valid weighted CPI — the most troublesome aspect is the completely amorphous and unmeasurable “T” — as the aggregate volume of total transactions in the economy in a given year.  Many have replaced T with Q: the total volume of goods and services produced each year.  But the best substitute for T is “y” (lower case Y: a version attributed to Milton Friedman) — i.e., a deflated measure of Keynesian Y, as the Net National Product = Net National Income (by definition).[55]

The variable “V” thus becomes the income velocity of money (rather than Fisher’s Transactions Velocity) — of the unit of money in the creation of the net national income in the course of a year.   It is obviously derived mathematically by this equation: V = Py/M (and Py of course equals the current nominal value of NNI).  Almost entirely eschewed by students (my students, at least), but much preferred by most economists, is the Cambridge Cash Balances equation: whose modernized form would similarly be M = kPy, in which Cambridge “k” represents that share of the value of Net National Income that the public chooses to hold in real cash balances, i.e., in high-powered money (a straight tautology, as is the Fisher Equation).  We should be reminded that both V and k are mathematically linked reciprocals in that: V = 1/k and thus k = 1/V.  Keynesian economists would logically (and I think, rightly) contend that _ceteris paribus_ an increase in the supply of money should lead to a reduction in V and thus to an increase in Cambridge “k.”  If V represents the extent to which society collectively seeks to economize on the use of money, the necessity to do so would diminish if the money supply rises (indeed, to create an “excess”).  But this result and concept is all the more clear in the Cambridge Cash Balances approach.  For the opportunity cost of “k” — of holding cash balances — is to forgo the potential income from its alternative use, i.e., by investing those funds.  If we assume that the Liquidity Preference Schedule is (in the short run) fixed — in terms of the transactions, precautionary, and speculative motives for holding money — then a rightward shift of the Money Supply schedule along the fixed or stationary LP schedule should have led to a fall in the real rate of interest, and thus in the opportunity cost of holding cash balances.  And if that were so, then “k” should rise (exactly reflecting the fall in V).

 What makes this theory so interesting for the interpretation of the causes of at least  the subsequent inflations of the Price Revolution — say from the 1550s or 1560s — is that several very prominent economic historians have argued that  an equally or even more powerful force for inflation was a continuing rise in V, the income velocity of money (i.e., and thus to a fall in “k”): in particular, Harry Miskimin (1975), Jack Goldstone (1984, 1991a, 1991b), and Peter Lindert (1985).  Furthermore, all three have related this role of “V” to structural changes in the economy brought about by population growth.  Their theories are too complex to be discussed here, but the most intriguing, in summary, is Goldstone’s thesis.  He contended, in referring to sixteenth-century England, that its population growth was accompanied by a highly disproportionate growth in urbanization, a rapid and extensive development of commercialized agriculture, urban markets, and an explosive growth in the use of credit instruments.  In such a situation, with a rapid growth “in occupationally specialized linked networks, the potential velocity of circulation of coins grows as the square of the size of the network.”  Lindert’s somewhat simpler view is that demographic growth was also accompanied by a two-fold set of changes: (1) changes in relative prices — in the aforementioned steep rise in agricultural prices, rising not only above industrial prices, but above nominal wages, thus creating severe household budget constraints; and (2) in pyramidal age structures, and thus with changes in dependency ratios (between adult producers and dependent children) that necessitated both dishoarding and a rapid reduction in Cambridge “k” ( = rise in V).

Those arguments and the apparent contradiction with traditional Keynesian theory on the relationships between M and V (or Cambridge “k”) intrigued and inspired Nicholas Mayhew (1995), a renowned British medieval and early-modern monetary historian, to investigate these propositions over a much longer period of time: from 1300 to 1700.[56]  He found that in all periods of monetary expansion during these four centuries, the Keynesian interpretation of changes in V or “k” held true, with one singular anomalous exception: the sixteenth and early seventeenth-century Price Revolution.  That anomaly may (or may not) be explained by the various arguments set forth by Miskimin, Goldstone, and Lindert.

The Debates about the Spanish and European Distributions of Spanish American “Treasure” and the Monetary Approach to the Balance of Payments Theorem

We may now return to Hamilton’s own considerations about the complex relationships between the influx of Spanish-American silver and its distribution in terms of various factors influencing (at least implicitly) the “V” and “y” variables, in turn influencing changes in P (the CPI).  He contends first (pp. 301-02) that “the increase in the world stock of precious metals during the sixteenth century was probably more than twice — possibly as much as four times — as great as the advance of prices” in Spain.  He speculates, first, that some proportion of this influx was hoarded or converted, not just by the Church, in ecclesiastical artifacts, but also by the Spanish nobility (thus leading to a rise in “k”), while a significantly increasing proportion was exported in trade with Asia, though mentioning only the role of the English East India Company (from 1600), surprisingly ignoring the even more prominent contemporary role of the Dutch, and the much earlier role of the Portuguese (from 1501, though the latter used  principally South German silver).  We now estimate that of the total value of European purchases made in Asia in late-medieval and early modern eras, about 65-70 percent were paid for in bullion and thus only 25-30 percent from the sale of European merchandise in Asia.[57]  Finally, Hamilton also fairly speculated that “the enhanced production and exchange of goods which accompanied the growth of population, the substitution of monetary payments for produce rents [in kind] … and the shift from wages wholly or partially in kind to monetary remunerations for services, and the decrease of barter tended to counteract the rapid augmentation of gold and silver money:”  i.e., a combination of interacting factors that affected both Cambridge “k” and Friedman’s “y.”  Clearly Hamilton was no simplistic proponent of a crude Quantity Theory of Money.

From my own studies of monetary and price history over the past four decades, I offer these observations, in terms of the modernized version of Fisher’s Equation of Exchange, for the history of European prices from ca. 1100 to 1914.   An increase in M virtually always resulted in some degree of inflation, but one that was usually offset by some reduction in V (increase in “ k”) and by some increase in y, especially if and when lower interest rates promoted increased investment.[58]  Thus the inflationary consequences of increasing the money supply are historically indeterminate, though usually the price rise was, for these reasons, less than proportional to the increase in the monetary stock, except when excessively severe debasements created a veritable “flight from coinage,” when coined money was exchanged for durable goods (i.e., another instance in which an increase in M was accompanied by an increase in V).[59]

One of the major issues related to this debate about the Price Revolution is the extent to which the Spanish-American silver that flowed into Spain soon flowed out to other parts of Europe (i.e., apart from the aggregate European bullion exports to Asia and Russia).  There is little mystery in explaining how that outflow took place.  Spain, under both Charles V (I of Spain) and Philip II, ruled a vast, far-flung empire: including not only the American colonies and the Philippines, but also the entire Low Countries, and major parts of Germany and Italy, and then Portugal and its colonies from 1580 to 1640.  Maintaining and defending such a vast empire inevitably led to war, almost continuous war, with Spain’s neighbors, especially France.  Then, in 1568, most of  the Low Countries (Habsburg Netherlands) revolted against Spanish rule, a revolt that (despite a truce from 1609 to 1621) merged into the Thirty Years War (1618-48), finally resolved by the Treaty of Westphalia.  As Hamilton himself suggests (but without offering any corroborative evidence — nor can I), vast quantities of silver (and gold) thus undoubtedly flowed from Spain into the various military theaters, in payment for wages, munitions, supplies, and diplomacy, while the German and then Genoese bankers presumably received considerable quantities of bullion (or goods so purchased) in repayment of loans.[60]  Other factors that Hamilton suggested were: adverse trade balances, or simply expanding imports, especially from Italy and the Low Countries (with an increased marginal propensity to import); and operations of divergent bimetallic mint ratios.  What role piracy and smuggling actually played in this international diffusion of precious metals cannot be ascertained.[61]

But Outhwaite (1969, 1982), in analyzing the monetary factors that might explain the Price Revolution in Tudor and early Stuart England, asserted (again with no evidence) that: “Spanish silver … appears to have played little or no part before 1630 and a very limited one thereafter.”[62]  That statement, however, is simply untrue.  For, as Challis (1975) has demonstrated, four of the five extant “Melting Books,” tabulating the sources of bullion for London’s Tower Mint, between 1561 and 1599, indicate that Spanish silver accounted for proportions of total bullion coined that ranged from a low of 75.0% (1561-62) to a high of 86.3% (1584-85).  The “melting books” also indicate that almost all of the remaining foreign silver bullion brought to the Tower Mint came from the Spanish Habsburg Low Counties (the southern Netherlands, which the Spanish had quickly reconquered).[63]  Furthermore, if we ignore the mint outputs during the Great Debasement (1542-1553) and during the Elizabethan Recoinage (1561-63), we find that the quantity of silver bullion coined in the English mints rose from a quinquennial mean of 1,089.012 kg in 1511-15 (at the onset of the Price Revolution) to a peak of 18,653.36 kg in 1591-95, after almost four decades of stable money: a 17.13 fold increase.  Over this same period, the proportion of the total value of the aggregate mint outputs accounted for by silver rose from 12.32% to 90.35% — and (apart from the Great Debasement era) without any significant change in the official bimetallic ratio.[64]

Those economists who favor the Monetary Approach to the Balance of Payments Theorem in explaining inflation as an international phenomenon would contend that we do not have to explain any specific bullion flows between individual countries, and certainly not in terms of a Hume-Turgot price-specie flow mechanism.[65]  In essence, this theorem states that world bullion stocks (up to 1914, with a wholesale shift to fiat money) determine the overall world price level; and that individual countries, through international arbitrage and  the “law of one price,” undergo the necessary adjustments in establishing a commensurate domestic price level and the requisite money supply (in part determined by changes in private and public credit) — not just through international trade in goods and services, but especially in capital flows (exchanging assets for money) at existing exchange rates, without specifically related bullion flows.

Nevertheless, in the specific case of sixteenth century England, we are naturally led to ask:  where did all this silver come from; and why did England shift from a gold-based to a silver-based economy during this century?   More specifically, if Nicholas Mayhew (1995) is reasonably close in his estimates of England’s Y = Gross National Income (Table I, p. 244), from 1300 to 1700, as measured in the silver-based sterling money-of-account, that it rose from about  £3.5 million pounds sterling in 1470 (with a population of 2.3 million) to £40.88 million pound sterling in 1670 (a population of 5.0 million) — an 11.68-fold increase — then we again may ask this fundamental question.   Where did all these extra pounds sterling come from in maintaining that latter level of national income?   Did they come from an increase in the stock of silver coinages, and/or from a vast increase in the income velocity of money?  Indeed that monetary shift from gold to silver may have had some influence on the presumed increase in the income velocity of money since the lower-valued silver coins had a far greater turnover in circulation than did the very high-valued gold coins.[66]

 Statistical Measurements of the Impact of Increased Silver Supplies: Bimetallic Ratios and Inflation

There are two other statistical measures to indicate the economic impact within Europe itself of the  influx of South German and then Spanish American silver during the Price Revolution era, i.e., until the 1650s.  The first is the bimetallic ratio.  In England, despite the previously cited evidence on its relative stability in the sixteenth-century, by 1660, the official mint ratio had risen to 14.485:1 (from the low of 10.333:1 in 1464).[67]  In Spain, the official bimetallic ratio had risen from 10.11:1 in 1497 to 15.45:1 in 1650; and in Amsterdam, the gold:silver mint ratio had risen from 11.21 in 1600 to 13.93:1 in 1640 to 14.56:1 in 1650.[68]  These ratios indicate that silver had become relatively that much cheaper than gold from the early sixteenth to mid-seventeenth century; and also that, despite very significant European exports of silver to the Levant and to South Asia and Indonesia in the seventeenth century, Europe still remained awash with silver.[69]  At the same time, it is also a valid conjecture that the greatest impact of the influx of Spanish American silver (and gold) in this era was to permit a very great expansion in European trade with Asia, indeed inaugurating a new era of globalization.

The second important indicator of the change in the relative value of silver is the rise in the price level:  i.e., of inflation itself.  As noted earlier, the English CPI experienced a 6.77-fold from 1511-15 to 1646-50, at the very peak of the Price Revolution; and the Brabant CPI experienced a 7.36-fold rise over the very same period (expressed in annual means per quinquennium).[70] Since these price indexes are expressed in terms of silver-based moneys-of-account, that necessarily meant that silver, gram per gram, had become that much cheaper in relation to tradable goods (as represented in the CPI) — though, as noted earlier, the variations in the rates of change in these CPI are partly explained by differences in their respective coinage debasements.

A Comparison of the Data on Spanish-American Mining Outputs and Bullion Imports (into Seville)

Finally, how accurate are Hamilton’s data on the Spanish-American bullion imports?   We can best gauge that accuracy by comparing the aggregate amount of fine silver bullion entering Seville with the now known data on the Spanish-American silver-mining outputs, for the years for which we have data for both of these variables: from 1551 to 1660.[71]  One will recall that the Potosi mines were opened only in 1545; and those of Zacatecas in 1546; and recall, furthermore, that production at both began to boom only with the subsequent application of the mercury amalgamation process (not fully applied until the 1570s).  The comparative results are surprisingly close.  In that 110-year period permitting this comparison, total imports of fine silver, according to Hamilton, amounted to 16,886,815.3 kg; and the combined outputs from the Potosi and Zacatecas mines was very close to that figure: 17,057,938.2 kg.[72]  It is also worth noting that the outputs from the Spanish-American mines and the silver imports both peak in the same quinquennium: 1591-95, when the annual mean mined silver output was 219,457.4 kg and the annual mean silver import was 272,704.5 kg.  By 1626-30, the mean annual mined output had fallen 18.7% to 178,490.0 kg and the mean annual import had fallen even further, by 24.7%, to 206,045.26 kg (both sets of data indicate that the silver imports for these years were not based just on these two mines).  Thereafter, the fall in imports is much more precipitous: declining by 86.4%, to an annual mean import of just 27,965.33 kg in the final quinquennium of recorded import data, in 1656-60.  The combined mined output of the Potosi and Zacatecas mines also fell during this very same period, but not by as much: declining by 27.1%, with a mean output of 130,084.23 kg in 1656-60: i.e., a mean output that was 4.65 times more than the mean silver imports into Seville in that quinquennium.

The decline in the Spanish-American mining outputs of silver can be largely attributed to the expected rate of diminishing returns in a natural-resource industry without further technological changes.  The differences between the two sets of data, on output and imports, were actually suggested by Hamilton himself (even though he lacked any knowledge of the Spanish-American production figures for this era): a higher proportion of the silver was being retained in the Spanish Americas for colonial economic development, and also for export (from Acapulco, in Mexico) across the Pacific to the Philippines and China, principally for the silk trades.  Indeed, as TePaske (1983) subsequently demonstrated, the share of pubic revenues of the Viceroyalty of Peru retained for domestic development rose from 40.8% in 1591-1600 to a peak of 98.9% in 1681-90.  We have no comparable statistics for the much less wealthy Mexico (in New Spain); but TePaske also supplies data on its silver exports to the Philippines. Those exports rose from an annual mean of 1,191.2 kg in 1591-1600 (4.8% of Mexican total silver outputs) to a peak of 9,388.2 kg in 1631-40 (29.6% of the total silver outputs).  Though declining somewhat thereafter, such exports then recovered to 4,990.0 kg in 1681-90 (29.0% of the total silver outputs).[73]

 The Morineau Challenge to Hamilton’s Data: Speculations on Post-1660 Bullion Imports and Deflation

Hamilton’s research on Spanish-American bullion imports into Seville ceased with the year, 1660, because that latter date marked “the termination of compulsory registration of treasure” at Seville.[74] Subsequently, the French economic historian Michel Morineau (1968, 1985) sought to remedy the post-1660 lacuna of bullion import data by extrapolating statistics from Dutch gazettes and newspapers.  In doing so, contended that Spanish-American bullion imports strongly revived after the 1660s, a view that most historians have uncritically accepted.[75]  But his two publications on this issue present a number of serious problems.  First, there is the problem of comparing Spanish apples (actual data on bullion imports) with Dutch oranges (newspaper reports, many being speculations).  Second, the statistics in the two publications differ strongly from each other.  Third, except for one difficult-to-decipher semi-logarithmic graph, they do not provide specific data that allow us to distinguish clearly between gold and silver imports, either by weight or value.[76]  Fourth, the statistics on bullion imports are vastly larger in kilograms of metal than those recorded for Spanish American mining outputs, and also differ radically in the trends recorded for the Spanish-American mining output data.[77]

Nevertheless, these Spanish American mining output data do indicate some considerable recovery in production in the later seventeenth century.  Thus,  while the output of the Potosi mines continued to fall in the later seventeenth century (to a mean of 56,884.9 kg in 1696-1700, and to one of just 30,990.86 kg in 1711-15), those at Zacatecas recovered from the low of 26,373.4 kg in 1656-60 to more than double, reaching an unprecedented peak of 64,139.87 kg in 1676-80.  Then, shortly after, a new and very important Mexican silver mine was developed at Sombrerete, producing an annual mean output of 30,492.83 kg in 1681-85.  Thus the aggregate (known) Spanish-American mining output rose from a low 101,533.96 kg in 1661-65 (mean annual output) to a high of 143,212.93 kg in 1686-90: a 1.41-fold increase.[78]

Whatever are the actual figures for the imports of Spanish-American silver between the 1660s and the 1690s, we are in fact better informed about the export of precious metals, primarily silver, by the two East India Companies: in those four decades, the two companies exported a total of 1,3345,342.0 kg of fine silver to Asia.[79]  An indication of some relative West European scarcity of coined silver money, from the 1660s to the 1690s, can be found in the Consumer Price Indexes for both England and Brabant.  In England, the quinquennial mean CPI (1451-75=100) fell from the Price Revolution peak of 734.39 in 1646-50 to a low of 547.58 in 1686-90: a fairly dramatic fall of 25.43%.  By that time, however, the London Goldsmiths’ development of deposit and transfer banking, with fully negotiable promissory notes and rudimentary paper bank notes, was providing a financial remedy for any such monetary scarcity — as did the subsequent vast imports of gold from Brazil.[80] Similarly, in Brabant, the quinquennial mean CPI (1451-75=100) fell from the aforementioned peak of 1015.138 in 1646-50 to a low of 652.217 — an even greater fall of 35.8% — similarly in 1686-90.  In Spain (New Castile), the deflation commenced somewhat later, according to Hamilton (1947), who, for this period, used a CPI whose base is 1671-80=100.  From a quinquennial mean peak of 103.5 in 1676-80 (perhaps reflecting the ongoing vellon inflation), the CPI fell to a low 59.0 in 1686-90 (an even more drastic fall of 43.0%): i.e., the very same period for deflationary nadir experienced in both England and Brabant.

These data are presented in Hamilton’s third major monograph (1947), which appeared thirteen years later, shortly after World War II, covering the period 1651-1800: in Table 5, p. 119.  In between these two, Hamilton (1936), published his second monograph: covering the period 1351-1500 (but excluding Castile)  One might thus be encouraged to believe that, thanks to Hamilton, we should possess a continuous “Spanish” price index from 1351-1800.  Alas, that is not the case, for Hamilton kept shifting his price-index base for each half century over this period, without providing any overlapping price indexes or even similar sets of prices (in the maravedís money-of-account) to permit (without exhaustive labor) the compilation of such a continuous price index.[81]  That, perhaps, is my most serious criticism of Hamilton’s scholarship in these three volumes (though not of his journal articles), even if he has provided an enormous wealth of price data for a large number of commodities over these four and one-half centuries (and also voluminous wage data).[82]

 Supplementary Criticisms of Hamilton’s Data on Gold and Silver Imports

One of the criticisms leveled against Morineau’s monetary data — that they do not allow us to distinguish between the influxes of gold and silver — can also be made, in part, against Hamilton’s 1934 monograph. The actual registrations of Spanish American bullion imports into Seville, from 1503 to 1660, were by the aggregate value of both gold and silver, in money-of-account pesos that were worth 450 marevedis, each of which represented 42.29 grams pure silver (for the entire period concerned, in which, as noted earlier, no silver debasements took place).  Those amounts, for both public and private bullion imports, are recorded in Table 1 (p. 34), in quinquennial means.  His Table 2 (p. 40) provides his estimates — or speculations — of the percentage distribution of gold and silver imports, by decade, but by weight alone: indicating that from the 1530s to the 1550s, about 86% was in silver, and thereafter, to 1660, from 97% to 99% of the total was consistently always in silver.[83]  His table 3 (p. 42) provides his estimate of total decennial imports of silver and gold in grams.  What is lacking, however, is the distribution by value, in money-of-account terms, whether in maravedís, pesos, or ducats (worth 375 maravedís).  Since these money-of-account values remained unchanged from 1497 to 1598, and with only a few changes in gold thereafter (to 1686), Hamilton should have calculated these values as well, utilizing as well his Table 4 gold:silver bimetallic ratios (p. 71).  Perhaps this is a task that I should undertake — but not now, for this review.  A more challenging task to be explored is to analyze the impact of gold inflows, especially of Brazilian gold from the 1690s, on prices that are expressed almost everywhere in Europe in terms of a silver-based money of account (e.g., the pound sterling).  Obviously one important consequence of increased gold inflows was the liberation of silver to be employed elsewhere in the economy: i.e., effectively to increase the supply of silver for the economy.

At the same time, we should realize that the typical dichotomy of the role of the two metals, so often given in economic history literature — that gold was the medium of international trade while silver was the medium of domestic trade — is historically false, especially when we view Europe’s commercial relations with the Baltic, Russia, the Levant, and most of Asia.[84]


EH.Net’s Classic Reviews Selection Committee was certainly justified in selecting Hamilton’s _American Treasure and the Price Revolution in Spain, 1501-1650_ as one of the “classics” of economic history produced in the twentieth century; and Duke University’s website (see note 1) was also fully justified in declaring that Hamilton was one of the pioneers of quantitative economy history.  In his preface, Hamilton noted (p. xii) that he and his wife spent 30,750 hours in collecting and processing this vast amount of quantitative data on Spanish bullion imports and prices and wages, “entirely from manuscript material,” with another 12,500 hours of labor rendered by hired research assistants — all of this work, about three million computations, done without electronic calculators, let alone computers.  Who today would even contemplate undertaking such an enormous task without powerful modern computers and a bevy or research assistants?  For this task, this truly pioneering task, Hamilton deserves full praise.

How much praise does he deserve for the goals that he pursued?  In his introduction he expressed his hope that all these data “may afford a partial verification of the quantity theory and also throw new light upon the related question of the connection between prices and the supply of precious metals;” but he also stated (pp. 4-5) that “the last lesson concerning the quantity theory has not been drawn from this phenomenon; nor is the final word likely to be spoken before greater knowledge of the history of banking and the contemporary influence of credit on prices becomes available.”

As I have sought to demonstrate in this review, necessarily with very detailed evidence, Hamilton did achieve this more modestly defined goal, certainly as well as any pioneering economic historian could have been expected to achieve in the 1930s.  Of course, a contemporary economic historian, utilizing the vast amount of research conducted on these questions in the past seventy years, and using much more sophisticated techniques of economic analysis and econometrics would have produced a very different book — but possibly one lacking Hamilton’s own insights.  Given the current disfavor into which even the more refined, modern version of the Quantity Theory has fallen, the major goal of this review has been to demonstrate at least a qualified validity of this approach to understanding inflations and deflations, and the Price Revolution in particular.  Thus the complementary goal has been to rescue Hamilton’s reputation, given in particular his frequent use of infelicitous phrases, such as the statement that “American gold and silver precipitated the Price Revolution,” which Hamilton himself demonstrated was clearly not the truth.  Finally, given the enormous importance of the Price Revolution — a truly unique historical experience — in shaping the economy and society of early-modern Europe, and in establishing a more truly global economy, I have also sought to supply data unavailable to Hamilton in demonstrating how and why the behavior of prices during the Price Revolution era was related to the complex combination of changes in the money supplies (including credit), changes in the income velocity of money, and changes in national incomes; and also to explain why (as Hamilton did not) inflation in the Price Revolution era was an international (or at least a European-wide) phenomenon.

 A Biographical Note on Hamilton:[85]

Earl Jefferson Hamilton (1899-1989), born in Houlka, Mississippi, received his B.S. (Honors) from Mississippi State University in 1920; his M.A., from the University of Texas in 1924; and his Ph.D., from Harvard University in 1929.  He was an Assistant Professor of Economics at Duke University from 1927 to 1929, and then Professor of Economics there until 1944, when he became Professor of Economics at Northwestern (to 1947), and finally Professor Economics at the University of Chicago, until retiring in 1967.  He was also the editor of the _Journal of Political Economy_ from 1948 to 1954; and he served as President of the Economic History Association in 1951-52.




  1. URL: See also the University of Chicago Library, Special Collections Research Center, Guide to the Earl J. Hamilton Papers:

And also on EH.Net:

  1. The prices for individual commodities for each year, from 1501 to 1650, are given in Hamilton (1934), Appendices III-V, pp. 319-58; wages, in Appendix VII, pp. 393-402.


  1. For my publications on the Price Revolution, see Munro (1991, 1994a, 1998, 2003a, 2003b, 2004, and 2007 forthcoming). The non-monetary variable is “y,” in the modernized version of the Fisher Identity: MV. = Py; and in the Cambridge Cash Balances equation: M = kPy. It is also the deflated or “real” Keynesian Y = NNI = NNP.


  1. See my online review online review:, 24 February 1999, of Fischer (1996).


  1. Smith (1776/1937), pp. 191-92. Hamilton might have better cited Smith’s passage on p. 34: “The discovery of the mines of American diminished the value of gold and silver in Europe” (i.e. as expressed in silver-based money-of-account prices); and also other similar passage on pp. 198, 236, 241, and 415-16.


  1. See Spufford (1988), chapter 13, “The Scourge of Debasement,” pp. 289-318; Munro (1973); and the various studies in Munro (1992).


  1. Both published in Le Branchu (1934) and Moore (1946).


  1. Grice-Hutchinson (1952), Appendix III, p. 95.


  1. For Spain: Hamilton (1934), Appendix VIII, p. 403; for Brabant, Van der Wee (1975), pp. 413-47; for southern England: Phelps Brown and Hopkins (1956, 1981). Using the Phelps Brown worksheets, now housed in the Archives of the British Library for Political and Economic Sciences (LSE), I have corrected many of their statistical data.


  1. By constructing various hypothetical “trial” budgets, Hamilton (1934, pp. 273-79) hypothesized that his unweighted index numbers may have underestimated rises in the cost of living by perhaps as much as ten percent in the later sixteenth century, but by perhaps only two percent in the first half of the seventeenth century. See also Hamilton (1947), pp. 113-14, where he more explicitly states: “The contemporaneous account books have failed to yield an inductive basis for weighting the index numbers of commodity prices, and it seemed unlikely that any system of arbitrary weights would give me more accurate results than simple indices. A detailed comparison of unweighted and crudely-weighted index numbers for New Castile in 1651-1700 tended to confirm this hypothesis.”


  1. From 1497 to 1686, the Spanish crown consistently minted (with one exceptional, minor deviation in 1642-43) two silver coins at 93.06 percent fineness: the _Real_, with 3.195g pure silver (67 cut from an alloyed marc of 230.0465 g., with a silver fineness of 11 _dineros_ and 4 grains = 93.056%) and a nominal money-of-account value of 34 maravedís (375 to the ducat money of account; 350 to the peso money of account). In fact, it differed from the earlier _Real_ , struck from 1471, only in its money-account-value, having been raised from 31 to 34 maravedís. Also struck from 1497 was the heavy-weight Real known as the “piece of eight” (real de a ocho), with just over eight times as much fine silver, 25.997 g, and a value of 272 maravedís. In 1686, it was subjected to a very minor weight reduction that reduced its fine silver content to 25.919 g.  The American dollar can trace its descent from this Spanish coin.  Hamilton (1934), chapter III, pp. 46-72; Hamilton (1947), chapter II, pp. 9-35; Ulloa (1975); Motomura (1994, 1997); Munro (2004a), Vol. 4, pp. 174-84.


  1. See Challis (1971, 1978, 1989, 1992a, 1992b); Gould (1970).


  1. Van der Wee (1963), Vol. I, pp. 126-29.


  1. Hamilton (1934): Chapter IV: “Vellon Inflation in Castile, 1598-1650,” pp. 73-103; and Chapter X: “Prices under Vellon Inflation, 1601-1650,” pp. 211-21.


  1. Munro (1988), pp. 387-423: especially for the debasement formula. In medieval and early-modern Flanders the silver penny _groot_ was divided into 24 _mijten_ or _mites_, almost entirely copper in composition.


  1. Spooner (1972), Appendix A, p. 332; Challis (1992a), pp. 365-78; Challis (1992b), p. 689.


  1. The silver fineness was based on theoretical purity of 12 _dineros_, with 24 grains each, and thus a total of 288 grains. The weight was defined as the number cut from an alloyed marc of 230.0465 grams. See n. 11 above.


  1. Hamilton (1934), pp. 49-64.


  1. Hamilton (1934), p. 74.


  1. Cipolla (1956). He states (p. 27): “Every elementary textbook of economics gives the standard formula for maintaining a sound system of fractional money: [1] to issue on government account small coins having a commodity value lower than their monetary value; [2] to limit the quantity of these small coins in circulation; [3] to provide convertibility with unit money. … Simple as this formula may seem, it took centuries to work out.  In England, it was not applied until 1816, and in the United States it was not accepted before 1853.” Cipolla (p. 29) cites a seventeenth-century Italian treatise, by Geminiano Montanari (a mathematics professor at Padua), who had stated that: “it is not necessary for a prince to strike petty coins having a metallic content equal to their face value, provided [that] he does not strike more of them than is sufficient for the use of his people, sooner striking too few than striking too many.”


  1. Sargent and Velde (2002). The title of their book is adapted from the title of chapter 3 in Carlo Cipolla’s book (cited in the previous note): “The Big Problems of the Petty Coins,” pp. 27-37. Sargent and Velde do cite my article on “Deflation and the Petty Coinage Problem” (in n. 15 above), in which I supplied statistical evidence from the Flemish mint accounts, from 1334 to 1484 that the Flemish counts and the Burgundian dukes who succeeded them were always careful to restrict the supply of the petty, copper-based coinages, which rarely accounted for more than 2% of mint outputs by value, during this entire era.


  1. Hamilton (1934), p. 75. A marc of copper was worth 34 maravedís.


  1. On the _vellon_ based inflation in seventeenth-century Spain, see Sargent and Velde (2002), chapter 14, pp. 230-53; Motomura (1994), pp. 104-27; Motomura (1997), pp. 331-67; Spooner (1972), pp. 41-53 (and for western Europe in general).


  1. See n. 15 above.


  1. See Munro (2003a): Table 1.2, pp. 4-5: extrapolated from data in Hamilton (1934), Table 1, p. 34, Table 2, p. 40, Table 3, p. 42; and Hamilton (1929a), pp. 436-72.


  1. These mining output data do not come from Hamilton, but rather from these following sources: Bakewell (1975), pp. 68-103; Bakewell (1984), pp. 105-51; Garner (1987), pp. 405-30; and Cross (1983), pp. 397-422. The only Spanish-American mining data available to Hamilton was Haring (1915), pp. 433-79, which he cited, but did not use.


  1. Spooner (1972), p. 36.


  1. See in particular Outhwaite (1982), especially pp. 39-57; and also the introduction and many of the essays in Ramsay (1971), in particular Hammarström (1957) and Brenner (1961). See also the rather hostile review of this collection by McCloskey (1972), pp. 1332-35. Brenner makes the fundamental error in not treating the Fisher Identity in aggregate terms, and thus talking about a relative (i.e., per capita) diminution in Q (= T, or “y”) that presumably resulted from population growth.  Many of the authors engage in another error, one scorned by Anna Jacobson Schwartz (1974), who, in a review of Spooner (1972), p.  253, comments that: “the author subscribes to a familiar fallacy, namely that a monetary explanation to be valid requires that all prices move in unison.”  On this very common error, see Munro (2003c); and n. 58 below.


  1. For those favoring the lower bound estimate for 1300 (4.0 to 4.5 million), see Campbell, Galloway, Keene and Murphy (1993); Campbell (2005); Nightingale (1996); Nightingale (1997); Nightingale (2005); Russell (1966); and Harvey (1966). For those favoring the upper-bound estimate (6.0 to 7.0 million), see Postan (1950); Hatcher (1977); Hallam (1988); Mayhew (1995); and Dyer (1989). For population estimates in the early sixteenth century, see Cornwall (1970); and Campbell (1981).


30.Cuvelier (1912), vol. I, 432-33, 446-47, 462-77, 484-87; and also pp. cxxxv, clxxvii-viii, and ccxxiii-xviii.


  1. Van der Wee (1963), Vol. I: Appendix 49/1, p. 546. In comparison, the average annual rate of population decline from 1480 to 1496 was -0.81%.


  1. There is yet another explanation why agrarian prices rose more than did most industrial prices: a household budget constraint, when agricultural prices and the CPI rose more than did money wages, as was almost always the case in the sixteenth century. Thus the share of disposable income spent on foodstuffs (and fuels) would have necessarily reduced the share of such income to be spent on other commodities, and thus the relative demand for most other industrial products. At the same time, most labor-intensive industries, with elastic supply schedules, could have readily hired more labor to expand output without experiencing significant rises in marginal costs, when wages were rising so much less than most commodity prices.  See my online 2006 Working Paper: “Real Wages and the ‘Malthusian Problem’ in Antwerp and South-Eastern England, 1400-1700: A Regional Comparison of Levels and Trends in Real Wages for Building Craftsmen.”


  1. Mean annual imports of fine gold rose from 517.24 kg in 1503-05 to 865.93 kg in 1526-30. See n. 25 above, and also Hamilton (1934), p. 45, on the role of gold. For somewhat different figures, but in decennial means, see TePaske (1998).  His estimates of decennial mean New World gold outputs (per year) are 1,209.8 kg in 1501-10 and 1,071.1 kg in 1511-20.  Hamilton, however, made no mention of the much more important Portuguese imports of West African gold: about 17 metric tons, from Sao Jorge da Mina, from about 1460 to 1520 (when other sources of gold, in Africa and Brazil, became more important.  See Wilks (1993).


  1. Adolf Soetbeer (1879); and Wiebe (1995), especially pp. 253-321. See the tables on German silver production from 1493 to 1700, on pp. 265 and 267, based on Soetbeer.


  1. Nef (1941, 1952).


  1. Nef (1941) estimates that aggregate European silver mining outputs in the peak decade 1526-1535 (in his view) ranged between 84,200 kg to 91,200 kg per year.


  1. See my own publications in n. 3, above; and also Munro (2007b). See also Hatcher (1996) and Nightingale (1997).


  1. See Munro (2003a), Table 1.3, p. 8; and Munro (2007b). By far the most important of the new mines was Joachimsthal in Bohemia (from 1516), which reached its peak production in 1531-35, with a quinquennial mean production of 16,554.81 kg of fine silver.


  1. See Munro (2003a), Table 1.2, pp. 4-5, based in part on Hamilton (1934).


  1. The ratio was altered from 11.98:1 to 10.83:1 (June 1466), while in England, it was altered in the opposite direction, to become pro-gold: from 10.33:1 to 11.16:1. See Munro (1973), pp. 155-80, 198-211, Tables C-K; and Munro (1983), Table 10, pp. 150-52; Van der Wee (1963), Vol. I, pp. 126-28, Table XV; Vol. II, pp. 80-101.


  1. See Munro (2003a), Table 1.4, pp. 12-13.


  1. See Munro (2003a), Table 1.7, p. 26, based on Van der Wee (1963), Vol. I, Appendix 44, pp. 522-23.


  1. See Munro (1979, 1992); Spufford (1988), pp. 240-66.


  1. See Van der Wee (1967, 1977, 2000); Munro (1979, 1991b, 2000, 2003d).


  1. See Statutes 37 Henrici VIII, c. 9 of 1545, permitting interest up to 10%; repealed by 5-6 Edwardi VI, c. 20 in 1552, which was in turn repealed in 1571 by 13 Elizabeth I, c. 8, which thus restored 37 Hen. VIII, c. 9, in _Statutes of the Realm_, vol. III, p. 996; and IV.i, pp. 155 and 542, respectively.


  1. See Van der Wee (1967, 1977, 2000), and other sources cited in notes 43 and 44.


  1. See Munro (2003d); Tracy (1985, 1994, 2003).


  1. Van der Wee (1977), pp. 373-76, Table 28. See also Usher (1943), Table 7, p. 169, using older data, which shows a rise in the Spanish funded debt from 4.320 million ducats in 1515 to one of 76.540 million ducats in 1598; and also Spooner (1972), pp. 56-57: “Wherever data [on public borrowing] are available they show that the expansion was certainly spectacular”: in Rome, France, the Low Countries, Germany. In Antwerp, Charles V’s loans rose from about £1.0 million groot Flemish in the 1520s to about £7.0 million in 1557 (on the eve of the Spanish royal bankruptcy). In Genoa, the issue of civic bonds rose from 193,185 _luoghi_ in 1509 to about 500,000 _luoghi_ in 1560 (p.  66).


  1. Van der Wee (1977), pp. 375-76; and see the other sources cited in n. 44 above.


  1. Spooner (1972), pp. 4, 54-55, stating that: “The structure of credit was, in effect, supported by progressive increases in the stocks of precious metals.” Very similar observations have been made in Nightingale (1990), Mueller (1984), Spufford (1988), p. 347: commenting that “when money [coined specie] is freely available, credit is also; when money is scarce, so is credit.”


  1. The title of Hamilton’s Chart 20 (p. 301) is “Total Quinquennial Treasure Imports and Composite Index Numbers of Commodity Prices.”


  1. Hammarström (1957). Her other criticisms of Hamilton’s scholarship strike me as being unfounded and thus unfair.


  1. Many, many years ago, one of my graduate students did run regressions involving both annual values of treasure imports and estimates of residual Spanish stocks of bullion, and achieved better results (high R-squared and better t-statistics) with the latter regressions.


  1. See I. Fisher (1911). The only reference in Hamilton (1934, p. 5, n.6) or in his other publications, to this famous economist is I. Fisher (1927), on index numbers.


  1. For various reasons, too complex to discuss here, I prefer to use the Gross National Product – as many economic historians, in fact do, in the absence of reliable figures for Net National Product.


  1. Mayhew (1995), p. 240, states that: “My own investigation of velocity in the medieval period up to 1300 also suggests that in periods of growth in terms of money, prices, and economic activity, velocity may be expected to fall rather than rise. … It will be argued here [in this article] that velocity does not rise with increasing urbanization and monetization. Indeed, the increasing use of money usually seems to require an enlarged money supply which will actually permit a reduction in velocity rather than an increase.” His intriguing and exceptionally important article makes some very heroic assumptions about the levels of NNI and of M (the money supply) over this long period, not all of which will earn general consent.


  1. See n. 79 below, and also Munro (2007b).


  1. See Gould (1964): who contended that inflation itself promoted capital investment during the Price Revolution era by cheapening the cost of previously borrowed capital: i.e., the relative cost of annual interest payments and repayment of the principal. Gould, however, was one of the critics of the Hamilton thesis; and also one of those who promoted the fallacy that the validity of a monetary interpretation would require that all prices move in unison (p. 251). See Schwartz (1974) in n. 28 above.


  1. The period of England’s “Great Debasement,” 1542 – 1553, was however, surprisingly, not one such example — nor can any be cited in English monetary history (in contrast to medieval French monetary history). As noted earlier, during the “Great Debasement,” the English penny lost 83.1% of it silver content. The formula for relating a debasement to the potential rise in prices (or the rise in the money-of-account price of silver) is: [ (1 / (1 – x) ] – 1, in which x represents the percentage reduction of fine silver in the penny coin and in the linked money-of-account (sterling). By this formula, prices should have risen by 491.72%; but they did not.  The Phelps Brown and Hopkins (1956) CPI rose from a quinquennial mean of 152.33 in 1536-40 to one of 315.85 in 1556-60: an increase of only 107.34%. See also Gould (1970) and Challis (1971, 1978, 1989, 1992a, 1992b).


  1. For shipments of Spanish silver to pay Charles V’s bankers in Antwerp and Genoa, see Spooner (1972), pp. 22-24.


  1. See Hamilton, pp. 44-45: but the analysis and evidence is very thin. On p. 19, he states more explicitly that “In view of the popular misconceptions concerning the amounts of treasure taken by the English, French, and Dutch, one who works with the records is impressed by the paucity rather than the plethora of the specie that fell prey to foreign powers.” See also Hamilton (1929a), pp. 436-72.


  1. Outhwaite (1982), pp. 31, 36. He is referring to the Anglo-Spanish trade treaty of 1630.


  1. Challis (1975). One other account, for June to December 1567 is incomplete, and does not provide the amount of bullion coined, though indicating that Spanish silver may have accounted for only 7.4% of such bullion. Surprisingly, this seminal article is not mentioned in Outhwaite’s second edition of 1982, referring only to Challis (1978).  See also Challis (1984).


  1. The bimetallic ratio in 1526-42 was 11.16:1, as it had been from 1465; in 1600, the bimetallic ratio was 11.10:1. For the mint data, see Challis (1978, 1989, 1992a, 1992b).


  1. See Flynn (1978), D. Fisher (1989), Frenkel and Johnson (1976), McCloskey and Zecher (1976), and Floyd (1985).


  1. In the sixteenth century, apart from the Great Debasement period (1542-1553), gold coins varied in official value from the sovereign worth 20s or £1 (=240d) to the half crown, worth 2s 6 (=30d). The silver coins varied from the farthing (0.25d) to the groat (4d). On this very point about varying circulation velocities on the coinages, see Spooner (1972), p. 74.


  1. My own calculations of the official bimetallic mint ratios indicate a rise from 12.109 in 1604 to 13.363 in 1612 to 13.348 in 1623 to 14.485 in 1660 to 15.210 in 1718 (remaining at this level until 1815). Based on data supplied in Challis (1992b), pp. 673-98.


  1. Hamilton (1934), Table 4, p. 71.


  1. The Dutch East India Company’s exports of fine silver rose from an annual mean 6,959.7 kg in 1600-09 to a mean of 11,563.7 kg in 1660-69. Gaastra (1983), pp. 447-76, especially Appendix 5, p. 475. Spooner (1972), pp. 76-77 and Chart 11, has estimated that Venetian silver exports to the Levant in 1610-14 amounted to 6% of the total Spanish-American silver bullion imports into Seville during those years.


  1. See note 9 above for the statistics (for a base of 1501-10), and the sources used to compute the three sets of CPI. If we use the Phelps Brown and Hopkins base (1451-75=100), instead of the earlier base for 1501-10 (to include Spanish prices), we find that the English weighted CPI rose from an annual mean of 108.52 in 1511-15 to one of 734.19, at the peak of the Price Revolution, in 1646-50: an overall rise of 6.77 fold. Similarly, in Brabant, the Van der Wee CPI rose from an annual mean of 137.904 in 1511-15 to one of 1015.14 in 1646-50, also the peak of the Price Revolution in Brabant: an overall rise of 7.36 fold.


  1. See note 74, below, for the termination date.


  1. See Munro (2003a), Table 1.2, pp. 4-5: and the sources cited in notes 24 and 25 above. In the period 1521 to 1550, total silver imports into Seville amounted to just 263,915.8 kg. During the period from 1551 to 1660, a total of 122,902.24 kg of gold was also imported.


  1. TePaske (1983), Tables 2-5, pp. 442-45.


  1. Hamilton (1934), p. 11, note 1. Most economic historians have wrongly assumed that Hamilton was forced to end his research on bullion imports with the outbreak of the Spanish Civil War in 1936 — an argument obviously refuted his earlier articles of 1928, 1929a, in which bullion import data cease in 1660.


  1. Morineau (1968), p. 196; Morineau (1985), especially Table 83, p. 578; Figure 38, p. 579; Table 84, pp. 580-83; Figure 39, p. 585.


  1. Morineau (1985): except for the semi-logarithmic graph, Figure 39, on silver imports and exports, which is very difficult to decipher; and it certainly does not allow to attribute actual values to the small-scale bar chart lines. His Figure 37, p. 563, with imports in millions of pesos, also has estimations for the period 1630-56, not indicated as such in the other tables and graphs.


77.The title of his 1986 monograph, _Incroyables gazettes et fabuleux métaux_ seems, in retrospect, to be ironic.  In Morineau (1968), the data presented on p. 196, evidently for the total value of bullion imports in each quinquennium, even when divided by 5, to produce annual means, exceed the data on mined outputs from a minimum of 12.12-fold  to a maximum of 41.07-fold.  In Morineau (1984), Table 83, p. 578, presents decennial means of bullion imports, expressed as equivalent amounts of silver, that, for the period from 1660 to 1700, range from being 3.653 times to 18.684 times greater than the recorded aggregate mined outputs of Spanish-American silver.  (See also his bar-graph, Figure 37, on p. 563, displaying in five-year periods — totals or annual means? — the values of “treasure” imports, expressed in millions of piastres or pesos: those of 272 maravedís or 450 maravedís?)  Hamilton (1929a, 1934) indicated that, in the seventeenth century, up to the cessation of recorded data, in 1660, almost all the imports were in the form of silver.  The great boom in Brazilian gold exports did not really begin until 1700.  See TePaske (1998), pp. 21-32.


  1. See the sources in notes 25 and 26 above. The Sombrerete mining outputs, however, began to fall sharply from the 1680s, reaching a low (quinquennial mean) of 3,957.14 kg in 1716-20. Subsequently, by the mid eighteenth century, Mexico experienced another and very major silver-mining boom: See Brading (1970), Garner (1987).


  1. Gaastra (1983), Appendix 5, p. 475; Chaudhuri (1968), pp. 497-98. We have no data on the Dutch Company’s exports of merchandise, but we do for the English East India Company. Between 1660 and 1700, it exported a total of 645,486.0 kg of silver (worth £5,795.793.65) and 21,552.0 kg of gold (worth £2,788.035.34), and a total value of £2,593.114.00 in merchandise.   Thus gold and silver “treasure” accounted for 76.80% of total exports to Asia, and merchandise for 23.20%.  Of the total value of bullion exports, silver accounted for 67.52% and gold for 32.48% of the total value.  (For the long period of 1660-1720, silver accounted from 81.35% and gold for 18.65% of the total values of bullion exports).  In the English East India Company’s early history, however, from 1601 to 1624, it exported a total of £753,336 in precious metals (‘treasure’) and £351,236 in merchandise, for an aggregate export value of £1,104,572, so that precious metals then accounted for a somewhat lower percentage of the total value: 68.20%.  Chaudhuri 1963), p. 24.


  1. See TePaske (1998), tables, pp. 21-32.


  1. Fortunately, for the book under review (Hamilton 1934), he did provide an Appendix (number VIII, pp. 403-04) for “The Composite Index Numbers of Silver Prices, 1501-1650.”


  1. My most serious criticism — and one voiced by many other economic historians — is the one concerning his concept of “profit-inflation,” in Hamilton (1929b). His thesis was warmly endorsed by John Maynard Keynes (1930), the following year, Vol. II, pp. 152–63, especially pp. 154-55: “But it is the teaching of this Treatise that the wealth of nations is enriched, not during Income Inflations but during Profit Inflations — at times, that is to say, when prices are running away from costs.” Keynes in fact really coined this term (so to speak).  Subsequently Hamilton published two more articles on this theme — in 1942, and 1952.  The latter was his Presidential Address to the Twelfth Annual Meeting of the Economic History Association.  Since this concept does not appear in the book under review, it would be unfair to criticize this thesis, here, even if space did permit it.  But I have posted on my web site an unpublished Working Paper, entitled “Prices, Wages, and Prospects for ‘Profit Inflation’ in England, Brabant, and Spain, 1501-1670:  A Comparative Analysis”:  It should be noted, however, that Hamilton (1934) did devote his chapter XII, pp. 262-82, to “Wages: Money and Real” and his Appendix VII (pp.  393-402) is devoted to “Money Wages.”  But space limitations have prevented me from discussing this aspect of his monograph.


  1. He warns the reader (p. 40) “that these are estimates based on partial information, into which the determination of arbitrary assumptions of correlations have entered, not exact compilations of complete data.”


  1. See notes 79 and 80 above.


  1. See note 1.




Bakewell (1975), Peter, “Registered Silver Production in the Potosi District, 1550 – 1735,” _Jahrbuch für Geschichte von Staat, Wirtschaft und Gesellschaft Lateinamerikas_, 12 (1975), 68-103.

Bakewell (1984), Peter, “Mining in Colonial Spanish America,” in Leslie Bethell, ed., _The Cambridge History of Latin America_, Vol. II: _Colonial Latin America_ (Cambridge and New York: Cambridge University Press, 1984), 105-51.

Bordo (1986), Michael D., “Explorations in Monetary History:  A Survey of the Literature,” _Explorations in Economic History_, 23 (1986), 339-415.

Brading (1970), D.A.,   “Mexican Silver Mining in the Eighteenth Century: the Revival of Zacatecas,” _Hispanic American Historical Review_, 50:4 (1970), 665-81.

Braudel (1967), F.P. , and F. Spooner, “Prices in Europe from 1450 to 1750”, in E. E. Rich, ed., _ Cambridge Economic History of Europe_, Vol. IV: _The Economy of Expanding Europe in the 16th and 17th Centuries_ (Cambridge: Cambridge University Press, 1967), 374-486.

Brenner (1962), Y.S., “The Inflation of Prices in Early Sixteenth-Century England,” _Economic History Review_, 2nd ser., 14:2 (1962), pp. 225-39; reprinted in Peter Ramsey, ed., _The Price Revolution in Sixteenth-Century England_, Debates in Economic History series (London, 1971), 69-90

Campbell (1981), Bruce M. S., “The Population of Early Tudor England:  A Re-evaluation of the 1522 Muster Returns and the 1524 and 1525 Lay Subsidies,” _Journal of Historical Geography_, 7 (1981), 145-54.

Campbell (1993), Bruce M. S., James A. Galloway, Derek Keene, and Margaret Murphy, _A Medieval Capital and Its Grain Supply: Agrarian Production and Distribution in the London Region c.  1300_, Institute of British Geographers, Historical Geography Research Series no. 30 (London, 1993).

Campbell (2005), Bruce M. S., “The Agrarian Problem in the Early Fourteenth Century,” _Past and Present_, no. 188 (August 2005), 3-70.

Challis (1971), Christopher, “The Circulating Medium and the Movement of Prices in Mid-Tudor England,” in Peter Ramsey, ed., _The Price Revolution in Sixteenth-Century England_ (London, 1971), 117-46.

Challis (1975), Christopher, “Spanish Bullion and Monetary Inflation in England in the Later Sixteenth Century,” _Journal of European Economic History_, 4 (1975), 381-92.

Challis (1978), Christopher, _The Tudor Coinage_ (Manchester, 1978).

Challis (1984), Christopher, “Les trésors d’Espagne et l’inflation monétaire en Angleterre à la fin du XVIe siècle,” in John Day, ed., _Etudes d’histoire monétaire, XIIe-XIXe siècles_ (Lille, 1984), 179-91.

Challis (1989), Christopher, _Currency and the Economy in Tudor and Early Stuart England_ (Oxford and New York: Oxford University Press, 1989).

Challis (1992a), Christopher, “Lord Hastings to the Great Silver Recoinage, 1464-1699,” in Christopher Challis, ed., _A New History of the Royal Mint_ (Cambridge: Cambridge University Press, 1992), 179-397.

Challis (1992b), Christopher, “Appendix 1: Mint Output, 1220-1985,” in Christopher E. Challis, ed., _A New History of the Royal Mint_ (Cambridge: Cambridge University Press, 1992), 673-698.

Chaudhuri (1963), K.N., “The East India Company and the Export of Treasure in the Early Seventeenth Century,” _Economic History Review_, 2nd ser., 16:1 (1963), 23-38.

Chaudhuri (1968), K.N., “Treasure and Trade Balances: the East India Company’s Export Trade, 1660-1720,” _Economic History Review_, 2nd ser. 21 (Dec. 1968), 480-502.

Cipolla (1956), Carlo M., _Money, Prices, and Civilization in the Mediterranean World: Fifth to Seventeenth Century_ (Princeton: University Press, 1956; Reissued New York: Gordian Press, 1967).

Cornwall (1970), Julian, “English Population in the Early Sixteenth Century,” _Economic History Review_, 2nd ser. 23:1 (April 1970), 32-44.

Cross (1983), Harry E., “South American Bullion Production and Export, 1550 – 1750”, in John F. Richards, ed., _Precious Metals in the Later Medieval and Early Modern Worlds_ (Durham, N.C.: Carolina Academic Press, 1983), 397-422.

Cuvelier (1912), Joseph, _Les dénombrements de foyers en Brabant, XIV-XVIe siècle_, 2 vols.  (Brussels, 1912-14).

Dyer (1989), Christopher, _ Standards of Living in the Later Middle Ages: Social Change in England c. 1200-1520_ (Cambridge, 1989).

Fischer (1996), David Hackett, _The Great Wave: Price Revolutions and the Rhythm of History_ (Oxford and New York: Oxford University Press, 1996).  See also my online review:  <>, 24 February 1999.

Fisher (1989), Douglas, “The Price Revolution: A Monetary Interpretation,” _Journal of Economic History_, 49 (December 1989), 883 – 902.

Fisher (1911), Irving,   _The Purchasing Power of Money: Its Determination and Relation to Credit, Interest, and Crises_ (New York: Macmillan, 1911; reissued in 1926; and New York: A.M. Kelly, 1963).

Fisher (1927), Irving, _The Making of Index Numbers_ (New York, 1927).

Floyd (1985), John E., _World Monetary Equilibrium: International Monetary Theory in an Historical-Institutional Context_ (University of Pennsylvania Press, 1985).

Flynn (1978), Dennis O., “A New Perspective on the Spanish Price Revolution: The Monetary Approach to the Balance of Payments,” _Explorations in Economic History_, 15 (1978), 388-406.

Frenkel (1976), Jacob A. and Harry G. Johnson, eds., _The Monetary Approach to the Balance of Payments_ (Toronto: University of Toronto Press, 1976).

Gaastra (1983), F.S., “The Exports of Precious Metal from Europe to Asia by the Dutch East India Company, 1602-1795 A.D.,” in John F. Richards, ed., _Precious Metals in the Medieval and Early Modern Worlds_ (Durham, N.C., 1983), 447-76.

Garner (1987), Richard L., “Long-term Silver Mining Trends in Spanish America: A Comparative Analysis of Peru and Mexico,” _American Historical Review_, 67:3 (1987), 405-30.

Goldstone (1984), Jack A., “Urbanization and Inflation:  Lessons from the English Price Revolution of the Sixteenth and Seventeenth Centuries,” _American Journal of Sociology_, 89 (1984), 1122-60.

Goldstone (1991a), Jack A., “Monetary versus Velocity Interpretations of the ‘Price Revolution’: A Comment,” _ Journal of Economic History_, 51 (March 1991), 176-81

Goldstone (1991b), Jack A., “The Causes of Long Waves in Early Modern Economic History,” in Joel Mokyr, ed., _The Vital One: Essays in Honor of Jonathan R. T. Hughes_ (Research in Economic History, Supplement no. 6, Greenwich, Conn., 1991), 51-92.

Gould (1964), J.D., “The Price Revolution Reconsidered,” _Economic History Review_, 2nd ser., 17:2 (1964), 249-66; reprinted in Peter Ramsey, ed., _ The Price Revolution in Sixteenth-Century England_, Debates in Economic History series (London, 1971), 91-116.

Gould (1970), J.D., _The Great Debasement: Currency and the Economy in Mid-Tudor England_ (Oxford: Oxford University Press, 1970).

Grice-Hutchinson (1952), Marjorie, _The School of Salamanca: Readings in Spanish Monetary Theory, 1544-1605_ (Oxford, 1952).

Hallam (1988),  H. E., “Population Movements in England, 1086-1350,” and “Rural England and Wales, 1042-1350,” in H. E. Hallam, ed., _The Agrarian History of England and Wales_, vol. II: _1042 – 1350_ (Cambridge University Press, 1988), 508-93 and 966-1008.

Hamilton (1928), Earl, “American Treasure and Andalusian Prices, 1503-1660: A Study in the Spanish Price Revolution,” _Journal of Economic and Business History, 1 (February 1928), 1-35, reprinted in P.H. Ramsey, ed., _The Price Revolution in Sixteenth-Century England_(London, 1971), 147-81.

Hamilton (1929a), Earl, “Imports of American Gold and Silver into Spain, 1503-1660,” _Quarterly Journal of Economics_, 43 (1929), 436-72.

Hamilton (1929b), Earl J., “American Treasure and the Rise of Capitalism, 1500-1700,” _Economica_, 27 (Nov. 1929), 338-57.

Hamilton (1934), Earl J., _American Treasure and the Price Revolution in Spain, 1501-1650_ Harvard Economic Studies vol. XLIII (Cambridge, Mass., 1934; reissued New York: Octagon Books, 1965).

Hamilton (1936), Earl, _Money, Prices, and Wages in Valencia, Aragon, and Navarre, 1351-1500_ (Cambridge, Massachusetts: Harvard University Press, 1936; reprinted and reissued: Philadelphia: Porcupine Press, 1975).

Hamilton (1942),  Earl J., “Profit Inflation and the Industrial Revolution, 1751-1800,” _Quarterly Journal of Economics_, 56:2 (February 1942), 256-73; reprinted in F.C. Lane and J.C. Riemersma, eds., _Enterprise and Secular Change: Readings in Economic History_ (London, 1953), 322-49.

Hamilton (1947), Earl, _War and Prices in Spain, 1651-1800_ (Cambridge, Mass: Harvard University Press, 1947).

Hamilton (1952), Earl J., “Prices as a Factor in Business Growth: Prices and Progress,” _Journal of Economic History_, 12:4 (Autumn 1952), 325-49.

Hammarström (1957), Ingrid, “The Price Revolution of the Sixteenth Century: Some Swedish Evidence,” _The Scandinavian Economic History Review_, 5 (1957);  reprinted in Peter Ramsey, ed., _The Price Revolution in Sixteenth-Century England_, Debates in Economic History series (London, 1971), 42-58.

Haring (1915), Clarence H., “American Gold and Silver Production in the First Half of the Sixteenth Century,” _Quarterly Journal of Economics_, 29:3 (May 1915), 433-79.

Harvey (1966), Barbara, “The Population Trend in England Between 1300 and 1348,” _Transactions of the Royal Historical Society_, 5th ser. 16 (1966), 23-42.

Hatcher (1977), John, _Plague, Population, and the English Economy, 1348-1530_ (London: MacMillan, 1977).

Hatcher (1996), John  “The Great Slump of the Mid-Fifteenth Century,” in Richard Britnell and John Hatcher, eds., _Progress and Problems in Medieval England_ (Cambridge and New York: Cambridge University Press, 1996), 237-72.

Keynes (1930), John Maynard, _A Treatise on Money_, 2 vols. (London, 1930).

Le Branchu (1934), Jean-Yves, ed., _Écrits notables dur la monnaie, XVIe siècle: De Copernic à Davanzati reproduits, traduits, d’après les éditions originales et les manuscrits, avec une introduction, des notices et des notes_, Collection des principaux économistes, nouvelle édition, 2 vols. (Paris, 1934): _Les paradoxes du Seigneur de Malestroict, conseiller du Roy, et Maistre ordinaire de ses comptes, sur le faict des monnoyes, presentez à sa Majesté, au mois de mars MDLXVI (Paris, 1566); La response de maistre Jean Bodin advocat en la cour au paradoxe des monsieur de Malestroit touchant l’enchérissement de toutes choses et le moyen d’y remedier_ (Paris, 1568).

Lindert (1985), Peter, “English Population, Wages, and Prices: 1541-1913,” _Journal of Interdisciplinary History_, 15 (Spring 1985), 609-34.

Mayhew (1995), Nicholas J., “Population, Money Supply, and the Velocity of Circulation in England, 1300-1700,” _Economic History Review_, 2nd ser., 48:2 (May 1995), 238-57.

McCloskey (1972), Donald, “Review of Ramsey: _The Price Revolution_,” _Journal of Political Economy_, 80 (1972), 1332-35.

McCloskey (1976), Donald N. , and J. Richard Zecher, “How the Gold Standard Worked, 1880-1913,” in Jacob A. Frenkel and Harry G. Johnson, eds., _The Monetary Approach to the Balance of Payments_ (Toronto: University of Toronto Press, 1976), 357-85.

Miskimin (1975), Harry, “Population Growth and the Price Revolution in England,” _Journal of European Economic History_, 4 (1975), 179-85; reprinted in his _Cash, Credit and Crisis in Europe, 1300-1600_ (London: Variorum Reprints, 1989).

Moore (1946), George A., ed., _The Response of Jean Bodin to the Paradoxes of Malestroit and The Paradoxes, translated from the French Second Edition, Paris 1578_ (Washington, 1946).

Morineau (1968), Michel, “D’Amsterdam à Seville: de quelle réalité l’histoire des prix est-elle le miroir?,” _Annales: Economies, sociétés, civilisations_, 23 (1968), 178-206.

Morineau (1985), Michel, _Incroyables gazettes et fabuleux métaux: les retours des trésors américains d’après les gazettes hollandaises (XVIe – XVIIIe siècles)_, Studies in Modern Capitalism (Paris: Editions de la Maison des Sciences de l’Homme; and Cambridge and New York: Cambridge University Press, 1985).

Motomura (1994), Akira, “The Best and Worst of Currencies: Seigniorage and Currency Policy in Spain, 1597-1650”, _Journal of Economic History_, 54:1 (March 1994), 104-27.

Motomura (1997), Akira, “New Data on Minting, Seigniorage, and the Money Supply in Spain (Castile), 1597-1643”, _Explorations in Economic History_, 34:3 (July 1997): 331-67.

Mueller (1984), Reinhold, “‘Chome l’ucciello di passegio’:  la demande saisonnière des espèces et le marché des changes à Venise au moyen âge,” in John Day, ed., _Études d’histoire monétaire, XIIe-XIXe siècles_ (Université de Paris VII, Lille, 1984), 195-220.

Munro (1973), John, _Wool, Cloth and Gold: The Struggle for Bullion in Anglo-Burgundian Trade, ca. 1340-1478_   Centre d’Histoire Economique et Sociale  (Brussels and Toronto: Editions de l’ Université  de Bruxelles, 1973).

Munro (1979), John, “Bullionism and the Bill of Exchange in England, 1272-1663: A Study in Monetary Management and Popular Prejudice,” in Center for Medieval and Renaissance Studies of the University of California (Fredi Chiappelli, director), ed., _The Dawn of Modern Banking_ (New Haven and London: Yale University Press, 1979), 169-239; reprinted in Munro (1992).

Munro (1983), John, “Bullion Flows and Monetary Contraction in Late-Medieval England and the Low Countries,” in  John F. Richards, ed., _Precious Metals in the Later Medieval and Early Modern Worlds_ (Durham, 1983), 97-158; reprinted in John Munro, _Bullion Flows and Monetary Policies in England and the Low Countries, 1350-1500_, Variorum Collected Studies series CS 355 (Aldershot, 1992).

Munro (1988), John, “Deflation and the Petty Coinage Problem in the Late-Medieval Economy: The Case of Flanders, 1334-1484,” _Explorations in Economic History_, 25:4 (October 1988), 387-423; reprinted in John Munro, _Bullion Flows and Monetary Policies in England and the Low Countries, 1350 – 1500_, Variorum Collected Studies series CS 355 (Aldershot, Hampshire; and Brookfield, Vermont: Ashgate Publishing Ltd., 1992).

Munro (1991a), John, “The Central European Mining Boom, Mint Outputs, and Prices in the Low Countries and England, 1450-1550,” in Eddy H.G. Van Cauwenberghe, ed., _Money, Coins, and Commerce: Essays in the Monetary History of Asia and Europe (From Antiquity to Modern Times), Studies in Social and Economic History (Leuven: Leuven University Press, 1991), 119-83.

Munro (1991b),  John, “The International Law Merchant and the Evolution of Negotiable Credit in Late-Medieval England and the Low Countries,” in Dino Puncuh, _Banchi pubblici, banchi privati e monti di pietà nell’Europa preindustriale: amministrazione, tecniche operative e ruoli economici_,   Atti della Società Ligure di Storia Patria, Nouva Serie, Vol. XXXI (Genoa: Società Ligure di Storia Patria, 1991), 49-80; reprinted in John Munro, _Textiles, Towns, and Trade: Essays in the Economic History of Late-Medieval England and the Low Countries_ (Ashgate and Brookfield, NY:  1994).

Munro (1992), John, _Bullion Flows and Monetary Policies in England and the Low Countries, 1350-1500_, Variorum Collected Studies series CS 355 (Aldershot, Hampshire; and Brookfield, Vermont: Ashgate Publishing Ltd., 1992).

Munro (1994), John, “Patterns of Trade, Money, and Credit,” in James Tracy, Thomas Brady Jr., and Heiko Oberman, eds., _Handbook of European History: The Later Middle Ages, Renaissance and Reformation, 1400-1600_, 2 vols. (Leiden: E.J. Brill, 1994-95):  Vol. I: _Structures and Assertions_, (1994), 147-95.

Munro (1998), John, “Precious Metals and the Origins of the Price Revolution Reconsidered: The Conjuncture  of Monetary and Real Forces in the European Inflation of the Early to Mid-Sixteenth Century,” in  Clara Eugenia Núñez, ed., _Monetary History in Global Perspective, 1500-1808_, Proceedings of the Twelfth International Economic History Congress at Madrid, August 1998 (Seville, 1998), 35-50.

Munro (2000), John, “English ‘Backwardness’ and Financial Innovations in Commerce with the Low Countries, 14th to 16th centuries,” in Peter Stabel, Bruno Blondé, and Anke Greve, eds.,_ International Trade in the Low Countries (14th – 16th Centuries): Merchants, Organisation, Infrastructure_, Studies in Urban, Social, Economic, and Political History of the Medieval and Early Modern Low Countries (Marc Boone, general editor), no. 10 (Leuven-Apeldoorn: Garant, 2000), 105-67.

Munro, John (2003a), “The Monetary Origins of the ‘Price Revolution’: South German Silver Mining, Merchant-Banking, and Venetian Commerce, 1470-1540,”  in Dennis Flynn, Arturo Giráldez, and Richard von Glahn, eds., _Global Connections and Monetary History, 1470-1800_  (Aldershot and Brookfield, VT:  Ashgate Publishing, 2003), 1-34.

Munro, John (2003b), “Money, Wages, and Real Incomes in the Age of Erasmus: The Purchasing Power of Coins and of Building Craftsmen’s Wages in England and the Southern Low Countries, 1500-1540,” in Alexander Dalzell and Charles G. Nauert, Jr., eds., _The Correspondence of Erasmus_, Vol. 12: _Letters 1658-1801, January 1526- March 1527_ (Toronto: University of Toronto Press, 2003), Appendix: 551-699.

Munro (2003c), John, “Wage Stickiness, Monetary Changes, and Real Incomes in Late-Medieval England and the Low Countries, 1300 – 1500:  Did Money Matter?” _Research in Economic History_, 21 (2003), 185-297.

Munro (2003d), John, “The Medieval Origins of the Financial Revolution: Usury, Rentes, and Negotiability,” _The International History Review_, 25:3 (September 2003), 505-62.

Munro (2004), John, “Money and Coinage: Western Europe,” in Jonathan Dewald, et al, eds., _The Dictionary of Early Modern Europe, 1450-1789_ (New York: Charles Scribner’s Sons/The Gale Group, 2004), Vol. 4, 174-184.

Munro (2007a), John, “The Price Revolution,”  in Steven N. Durlauf and Lawrence  E. Blume, eds., _The New Palgrave Dictionary of Economics_, 2nd edition, 6 vols. (London and New York:  Palgrave Macmillan, forthcoming).

Munro (2007b), John, “South German Silver, European Textiles, and Venetian Trade with the Levant and Ottoman Empire, c. 1370 to c. 1720: A Non-Mercantilist Approach to the Balance of Payments Problem,” in Simonetta Cavaciocchi, ed., _Relazione economiche tra Europa e mondo islamico, seccoli XIII – XVIII_, Atti delle ‘settimana di Studi” e altri convegni, no. 38, Istituto Internazionale di Storia Economica, “Francesco Datini” (Florence: Le Monnier, 2007), forthcoming.

Nef (1941), John, “Silver Production in Central Europe, 1450-1618,” _Journal of Political Economy_, 49 (1941), 575-91.

Nef (1952), John, “Mining and Metallurgy in Medieval Civilisation,” in M. M. Postan and E. E. Rich, eds., _The Cambridge Economic History of Europe_, Vol. II: _Trade and Industry in the Middle Ages_, 2nd rev. ed., (Cambridge, 1987), 691-761 (1st ed. published in 1952, 430-92).

Nightingale (1990), Pamela, “Monetary Contraction and Mercantile Credit in Later Medieval England,” _Economic History Review_, 2nd ser. 43 (November 1990), 560-75.

Nightingale (1996), Pamela, “The Growth of London in the Medieval English Economy,”  in  Richard Britnell and John Hatcher, eds., _Progress and Problems in Medieval England_ (Cambridge and New York: Cambridge University Press, 1996), 89-106.

Nightingale (1997), Pamela, “England and the European Depression of the Mid-Fifteenth Century,” _Journal of European Economic History_, 26:3 (Winter 1997), 631-56.

Nightingale (2005), Pamela, “Some New Evidence of Crises and Trends of Mortality in Late Medieval England,” _Past and Present_, no. 187 (May 2005), 33-68.

Outhwaite (1982), R.B., _Inflation in Tudor and Early Stuart England_, 2nd ed., Studies in Economic and Social History (London: MacMillan Press, 1982; 1st ed, 1969).

Phelps Brown (1956), E.H., and Sheila V. Hopkins, “Seven Centuries of the Prices of Consumables, Compared with Builders’ Wage Rates,” _Economica_, 23:92 (November 1956), 296-314; reprinted, with additional appendices, in E.H. Phelps Brown and Sheila V. Hopkins, _A Perspective of Wages and Prices_ (London, 1981).

Postan (1950), Michael, “Some Economic Evidence of Declining Population in the Later Middle Ages,” _Economic History Review_, 2nd ser. 2 (1950), 130-67; reprinted in Michael Postan, _Essays on Medieval Agriculture and General Problems of the Medieval Economy _(Cambridge, 1973), 186-213 (with the revised title of “Some Agrarian Evidence of Declining Population in the Later Middle Ages.”)

Ramsay (1971), Peter H., ed., _The Price-Revolution in Sixteenth-Century England_ (London: Methuen and Co., 1971).

Russell (1966), J.C., “The Pre-Plague Population of England,” _Journal of British Studies_, 5 (1966), 1-21.

Sargent (2002), Thomas, and François Velde, _The Big Problem of Small Change_ (Princeton: Princeton University Press, 2002),

Schwartz (1974), Anna Jacobson, “Review of Spooner’s _International Economy and Monetary Movements in France_,” _Journal of European Economic History_, 3: 1 (Spring 1974), 253.

Smith (1776/1937), Adam, _An Inquiry into the Nature and Causes of the Wealth of Nations_, [1776], ed. with an introduction by Edwin Cannan (New York: The Modern Library, 1937)

Soetbeer (1879), Adolf,  _Edelmetall-Produktion und Werthverhältniss zwischen Gold und Silber seit der Entdeckung Amerika’s bis zur Gegenwart_ (Gotha, 1879).

Spooner (1972), Frank, _The International Economy and Monetary Movements in France, 1493-1725_ (Paris, 1956; Cambridge, MA:  Harvard University Press, 1972, for the English edition).

Spufford (1988), Peter, _Money and Its Use in Medieval Europe_ (Cambridge, 1988).

TePaske (1983), John Jay, “New World Silver, Castile and the Philippines, 1590-1800,” in John F. Richards, ed., _Precious Metals in the Later Medieval and Early Modern Worlds_ (Durham: Carolina Academic Press, 1983), 425-46.

TePaske (1998), John Jay, “New World Gold Production in Hemispheric and Global Perspective, 1492 – 1810,”  in Clara Nuñez, ed., _Monetary History in Global Perspective, 1500-1808_, Papers presented to Session B-6 of the Twelfth International Economic History Congress (Seville, 1998), 21-32.

Tracy (1985), James D., _A Financial Revolution in the Habsburg Netherlands: Renten and Renteniers in the County of Holland, 1515-1565_ (Berkeley-London, 1985).

Tracy (1994),  James D., “Taxation and State Debt,”  in Thomas Brady, Heiko Oberman, and James Tracy, eds., _Handbook of European History, 1500-1600: Late Middle Ages, Renaissance and Reformation_, 2 vols. (Leiden, 1994-95), vol. I: _Structures and Assertions_, 563-88.

Tracy (2003), James D., “On the Dual Origins of Long-Term Debt in Medieval Europe,” in Karel Davids, Marc Boone, and V. Janssens, eds., _Urban Public Debts, Urban Governments, and the Market for Annuities in Western Europe, 14th-18th Centuries_ (Turnhout: Brepols, 2003), 13-26

Ulloa (1975), Modesto, “Castilian Seigniorage and Coinage in the Reign of Philip II,” _Journal of European Economic History_, 4 (1975), 459-80.

Usher (1943), Abbott Payson, _The Early History of Deposit Banking in Mediterranean Europe_, Vol. I: _The Structure and Functions of the Early Credit System: Banking in Catalonia: 1240-1723_, Harvard Economic Studies, Vol. 75 (Cambridge, Mass., 1943; reissued New York, 1967).

Van der Wee (1963), Hermann, _Growth of the Antwerp Market and the European Economy, 14th to 16th Centuries_, 3 Vols. (The Hague, 1963).

Van der Wee (1967), Herman, “Anvers et les innovations de la technique financière aux XVIe et XVIIe siècles,” _Annales: Economies, Sociétés, Civilisations_, 22 (1967): 1067-89; republished as “Antwerp and the New Financial Methods of the 16th and 17th Centuries,” in Herman Van der Wee, _The Low Countries in the Early Modern World_, translated by Lisabeth Fackelman (London, Variorium, 1993), 145-66.

Van der Wee (1975), Herman, ‘Prijzen en lonen als ontwikkelingsvariabelen:  Een vergelijkend onderzoek tussen Engeland en de Zuidelijke Nederlanden, 1400-1700,’ in _Album aangeboden aan Charles Verlinden ter gelegenheid van zijn dertig jaar professoraat_ (Wetteren: Universum,  1975), 413-470;  reissued in English translation (without the tables) as “Prices and Wages as Development Variables: A Comparison Between England and the Southern Netherlands, 1400-1700,” _Acta Historiae Neerlandicae_, 10 (1978), 58-78; republished in Herman Van der Wee, _The Low Countries in the Early Modern World_ , trans. by Lizabeth Fackelman (Cambridge and New York: Cambridge University Press, 1993), 223-41

Van der Wee (1977), Herman, “Monetary, Credit, and Banking Systems,” in E.E. Rich and Charles Wilson. eds., _Cambridge Economic History of Europe_, vol. V: _The Economic Organization of Early Modern Europe_, (Cambridge: Cambridge University Press, 1977), 322-32.

Van der Wee (2000), Herman, “European Banking in the Middle Ages and Early Modern Period (476-1789),” in Herman Van der Wee and Ginette Kurgan-Van Hentenryk, eds., _A History of European Banking_, 2nd ed. (Antwerp, 2000), 152-80.

Wiebe (1895), Georg, _Geschichte der Preisrevolution des XVI. und XVII. Jahrhunderts_, Staats- und Socialwissensschaftliche Beiträge no. 2 (Leipzig: Dunder and Humblot, 1895).

Wilks (1993), Ivor, “Wangara, Akan, and the Portuguese in the Fifteenth and Sixteenth Centuries,” in Ivor Wilks, ed., _Forests of Gold: Essays on the Akan and the Kingdom of Asante_ (Athens, Ohio, 1993), 1-39.

John Munro is Professor Emeritus of Economics at the University of Toronto, where he has taught since 1968, and where, despite mandatory retirement, he continues to teach a full course load in European economic history, both medieval and modern (to 1914).  His publications, in medieval and early modern economic history, are in two fields: (1) money, prices, and wages; and (2) textiles (including labor history and thus wages), which have predominated in his recent years of published output.  In the first field, his recent publications include “Wage Stickiness, Monetary Changes, and Real Incomes in Late-Medieval England and the Low Countries, 1300-1500: Did Money Matter?” _Research in Economic History_, 21 (2003) and “The Medieval Origins of the Financial Revolution: Usury, Rentes, and Negotiability,” _The International History Review_, 25:3 (September 2003). Forthcoming is the entry on “The Price Revolution,” in Steven N. Durlauf and Lawrence  E. Blume, eds., _The New Palgrave Dictionary of Economics_, second edition.

Copyright (c) 2007 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (; Telephone: 513-529-2229). Published by EH.Net (January 2007). All EH.Net reviews are archived at

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):17th Century

Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries

Author(s):Chandler, Alfred D.
Reviewer(s):Bruce, Kyle

Alfred D. Chandler, Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries. Cambridge, MA: Harvard University Press, 2005. viii + 366 pp. $30 (cloth), ISBN: 0-674-01720-X.

Reviewed for EH.NET by Kyle Bruce, Economics and Strategy Group, Aston Business School.

As with much if not of all his earlier work (including the companion volume Inventing the Electronic Century concerning consumer electronics and the PC industry) in this volume, business history doyen Chandler utilizes his stock concepts of “strategy and structure” and “scale and scope” to “record” (a phrase about which I will say more below) the inception and evolution of high-tech chemical and pharmaceutical industries and the enduring legacy of key players therein, from the end of the nineteenth century to the end of the twentieth century. In essence, the relative success or failure of American and European companies in these respective industries is explained with reference to three central and interrelated themes: “barriers to entry,” “strategic boundaries,” and “limits to growth.” Successful firms followed definite “paths of learning” whereby first movers and close followers created entry barriers to would-be rivals by building “integrated learning bases” (or what he has earlier referred to as organizational capabilities) which enabled them to develop, produce, distribute, and sell in local and then global markets. A related key to this ongoing success is that of the “virtuous strategy” of reinvestment of retained earnings and growth via related diversification, particularly to utilize “dynamic” scale and scope economies relating to new learning in launching “next generation” products. This is how those firms with staying power more or less simultaneously defined their “strategic boundaries” and overcome “limits to growth.”

The volume is divided into eleven chapters, with chapters 3-6 reviewing the evolution of the chemical industries (with extensive discussion of DuPont, Dow Chemicals, Monsanto, American Cyanamid, Union Carbide, and Allied as well as European chemical producers, such as Bayer, Farben, and ICI), and chapter 7-10 those in pharmaceuticals (with the focus on Merck, Pfizer, Eli Lilly, SmithKline, Upjohn, and Glaxo). The first chapter provides a useful overview of the distinctly Chandlerian analytical frameworks mentioned above, and lays out his familiar methodology, while chapter 2 provides a summary history of the key players in both the chemical and pharmaceutical industries. The final chapter is an excellent summary of the key arguments, as well as a comparison of the industrial, informational and biotech “revolutions” driving change not only in chemicals and pharmaceuticals, but also in consumer electronics and computers, thereby linking up the companion volumes.

Notwithstanding some typographical and spelling errors, if one subscribes to Chandler’s view that the job of the historian is “to record when, where, and by who”, then there are no significant problems with this volume. If, however, one’s view of history is more diverse and critical, then the major shortcoming of the volume is one that similarly afflicted his prior work: the lack of socio-institutional context at various levels. For instance, insufficient detail is given to wider socio-economic forces shaping the respective industries, and also to the significance of the context in which companies engage in the types of strategies chronicled, not only as regards politico-legal issues of government regulation and/or financial support (particularly relevant to pharmaceuticals), but also pertaining to organizational-sociological issues. In this context, and as per earlier critiques of Chandler, the possibility that firms’ strategies (and ultimate success) are more about mimetic isomorphism and gaining legitimacy than they are about long-term growth, is never really explored, but given Chandler’s analytical lenses are decidedly economics-rather than sociology-centric, then this is not at all surprising.

It is also tempting to dismiss Chandler’s analysis as “old wine in new bottles,” as both the frame of reference, and terms and tools, seem all too familiar to readers of his earlier work, yet this would be myopic and overlook the fact that much of the analysis is complementary and builds on his existing ideas. There is much of interest to both old and new Chandler readers; the book would be of foremost interest to business historians (in general and those particularly interested in chemicals, pharma, and biotech in particular), strategy scholars and teachers (particularly as regards what makes “good” corporate parents and the primacy of strategy over structure) and economists (as regards the enduring utility of their box of analytical tools). The other attractive feature of the book is its organization in that it can just as easily be read in stand-alone sections or chapters depending on one’s interest without loss of meaning; chapter 10 on biotech and chapter 11 comparing and contrasting the industrial, informational and biotech “revolutions,” are cases in point. Above all else, despite its shortcomings, it is typically ambitious, broad-brush history, but with a strong and sustained thesis that one comes to associate with someone who has justifiably been anointed the dean of business history.

Kyle Bruce is a Lecturer in Strategy at Aston Business School whose broad research interests traverse institutional theory in the social sciences, U.S. business history, and the history of American management and economic thought. His most recent paper, concerning the contribution to labor economics of workaday, managerial practices, is forthcoming in History of Political Economy.

Copyright (c) 2007 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (; Telephone: 513-529-2229). Published by EH.Net (January 2007). All EH.Net reviews are archived at

Subject(s):Business History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Rise of the Amsterdam Market and Information Exchange: Merchants, Commercial Expansion and Change in the Spatial Economy of the Low Countries, c. 1550-1630

Author(s):Lesger, Clé L
Reviewer(s):Neal, Larry

Published by EH.NET (January 2007)

Cl? Lesger, The Rise of the Amsterdam Market and Information Exchange: Merchants, Commercial Expansion and Change in the Spatial Economy of the Low Countries, c. 1550-1630. Burlington, VT: Ashgate, 2006. xii + 326 pp. $100 (cloth), ISBN: 0-7546-5220-3.

Reviewed for EH.NET by Larry Neal, Department of Economics, London School of Economics.

Cl? Lesger, Senior Lecturer in Economic and Social History at the University of Amsterdam, provides quantitative evidence guided by economic theory to show that what really mattered at the end of the sixteenth century for Amsterdam’s rise to economic preeminence in Europe in the seventeenth and eighteenth centuries was its institutions, not its geography. The impetus for its rise was not inherent in its institutions, however, but came from the external shock of the failure of the revolt against Spanish rule in the southern Netherlands combined with the failure of the Spanish to reestablish control over the northern Low Countries. Geography played a role in determining those military outcomes, but not, Lesger argues, in determining the resulting changes in the patterns of trade.

This argument, familiar to readers of Jonathan Israel’s voluminous writings on the Dutch Republic, nevertheless runs counter to a tendency among historians to see very long-lived movements in historical developments that persist despite occasional shocks. Lesger notes that this has led historians, led by Fernand Braudel and others including some contemporary Dutch historians, to trace Amsterdam’s rise to preeminence to its geography and especially the attempts of its citizens to alter and control that geography. Not so, argues Lesger. The older historical literature was correct when it attributed Amsterdam’s rise to closing Antwerp’s access to the Scheldt. This destroyed Antwerp’s role as the major gateway for transportation networks throughout the Low Countries and forced its merchant community to disperse.

Amsterdam’s elite welcomed the new merchants because they saw no conflict between the trades of the Antwerp merchants who dealt in luxury goods, sugar, spices, and naval stores from distant lands and the trades of the Amsterdam merchants who dealt more with transshipping these goods on to its regional hinterland, northern Germany and the Baltic. Very quickly during the 1590s, the new merchants and their information networks combined with the older merchants and their continued trade networks to make Amsterdam the next global entrep?t, replacing Antwerp through the eighteenth century.

The entire region of the Low Countries comprising modern Belgium, the Netherlands, and Luxembourg was a well-integrated economic unit by the middle of the sixteenth century. Using the concept of a network of transportation gateways, Lesger shows that each city had a geographically determined hinterland and its niche for trade in specific commodities with the outer world. Prior to the revolt of the Netherlands against Philip II, Antwerp was the primary gateway through which the other cities in the Low Countries participated in the long-distance trades, the so-called “rich trades” in textiles, spices, porcelain, and luxury goods in general. Amsterdam was a major regional gateway, but focused on South Holland as its hinterland while re-exporting a wide variety of products to the Baltic and northern Germany, with emphasis on low value, bulky commodities. Overall, it accounted for only 6% of total exports, compared to Antwerp’s 75%.

After the Revolt disrupted trade patterns, especially for Antwerp, Lesger argues that there was little change in the gateway role of Amsterdam. Figures on both exports and imports for 1580 and 1584 show that Amsterdam was still oriented in its trade toward northern and eastern Europe. Starting in the 1590s, however, Amsterdam’s trade began a vertiginous rise that continued up to 1630. Lesger argues that rise had to be the consequences of the Revolt. To explain this sudden and dramatic break with geographically determined trade patterns, Lesger examines the role of the wealthy merchants displaced from Antwerp who increasingly fled to Amsterdam. Examining the records of the Wisselbank by various groups of depositors, he shows that the new merchants led the explosion of trade activity from Amsterdam, especially to Russia through the port of Archangel. Both the new merchants and various groups of North Hollanders led the way to the Indies, both East and West.

Part II turns to explore the institutional determinants in Amsterdam that enabled the influx of foreign merchants to occur so quickly with such dramatic results, and then to be sustained for the next century and a half. The answer, he argues, came from the ability of the incumbent Amsterdam elite to extract rents from the increased trading activity by maintaining political control while levying low indirect taxes on a rapidly increasing base of trade that did not conflict with Amsterdam’s traditional trade flows as a regional hub, and indeed helped to expand those trade flows as well.

The rising importance of Amsterdam’s traditional transit trade with the lower Rhine leads Lesger to see most of it increased trade with the wider world as really transit trade as well. In fact, he argues, Amsterdam displayed in the early seventeenth century all the features that modern trade analysts associate with transit trade. For a trade center to maintain its role in transit trade it must provide cost advantages to suppliers and customers in the services it provides in the form of finance, information, and price discovery, as well as in the physical facilities it maintains for transshipment. Ultimately then, the secret of Amsterdam’s success as the preeminent entrep?t for Europe’s long-distance trade lay not in its port and warehousing facilities for transshipments, but rather in its information processing facilities.

Overall, Lesger’s valuable quantitative study amplifies the importance of the service sector, which played a very modern role in establishing and then maintaining Amsterdam’s preeminence. Finally, this reviewer was very pleased to see the emphasis on external and irreversible shocks for explaining Amsterdam’s rise. A similar story, of course, helps explain its eventual demise in the nineteenth century and its replacement by London.

Larry Neal is Professor Emeritus at the University of Illinois, a Research Associate with the NBER and Visiting Professor at the London School of Economics.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):Europe
Time Period(s):17th Century

The Evolution of the Trade Regime: Law, Politics, and Economics of the GATT and the WTO

Author(s):Barton, John H.
Goldstein, Judith L.
Josling, Timothy E.
Steinberg, Richard H.
Reviewer(s):Aaronson, Susan Ariel

Published by EH.NET (January 2007)

John H. Barton, Judith L. Goldstein, Timothy E. Josling and Richard H. Steinberg, The Evolution of the Trade Regime: Law, Politics, and Economics of the GATT and the WTO. Princeton, N.J: Princeton University Press, 2006. xiv + 242 pp. $30 (cloth), ISBN: 0-691-12450-7.

Reviewed for EH.NET by Susan Ariel Aaronson, Graduate School of Business, George Washington University.

If success is about results, then the most successful international organization is the GATT/WTO. (The World Trade Organization superseded the General Agreement on Tariffs and Trade in 1995.) Under its aegis, trade has expanded dramatically. The ratio of world exports of goods and services to GDP rose from 13.5% in 1970 under the GATT to 32% in 2005 under the WTO. All major geographic regions recorded an excess of trade over output growth. In its almost 60 year history, the GATT/WTO has stimulated multilateral trade liberalization, settled disputes, and provided a forum for ongoing trade talks. The WTO has 150 members as of October 2006, and nations such as Iran and Russia, major world/regional powers, are clamoring to be admitted as members. But past success is no guarantee of the future; and the WTO’s future in governing world trade is under threat from multiple sources such as the proliferation of bilateral regional trade agreements, the failure to find common ground on agriculture and other sectors largely outside the WTO, and the unwillingness to several large trading nations to implement WTO dispute settlement decisions. Moreover, the current round of trade talks, the Doha Round, is in jeopardy. In the five years of negotiations (since November 2001), WTO members have been unable to find common ground on a wide range of issues (particularly related to market access in agriculture). Thus, the Director General of the WTO suspended the talks in July, 2006. .

This book attempts to explain the multiple threats to the future success of the WTO by examining the political, legal and economic foundations of the GATT/WTO. The authors come from different scholarly traditions: law, political science, and economics. They then apply those multiple lens to their analysis of the evolution of the world trading system. They maintain that the key to the success of the GATT/WTO over this almost 60 year period is its “legitimacy” both to policymakers and the public engaging in trade. They argue that the GATT/WTO “was once oriented towards free trade and thus served a goal believed to be globally beneficial. But as it entered into other areas, it became a rule-oriented institution and therefore needed a new form of legitimacy” (pp. xi-xii). The book “argues that this ‘authoritative gap’ reflects the regime’s inability to recast its rules and norms of behavior in line with the changing interest and power of its members” (p. 2). But as the authors note, the WTO’s 150 members no longer share norms. Many of the features that explained its success “later turned out to be its Achilles heel, creating demand for institutional change” (p. 2). The authors note that one key flaw in the design of the GATT/WTO is that it allowed nations to join preferential regional trading groups. “The result has been an explosion of such arrangements, even though the trade and investment diversion resulting from regionalization … often conflict with the goals of the multilateral regime” (p. 3). I would argue slightly differently that the United States, one of the creators of the GATT/WTO, has deliberately undermined the institution it created. This focus of bilateral trade liberalization began with the first President Bush, but has reached its apex under Bush II, George W. Bush. His trade representative, Robert B. Zoellick, argued that competitive liberalization would stimulate greater attention to multilateral talks, but in fact it has undermined multilateralism and led more nations to develop such bilateral arrangements. On October 9, 2006, EU Trade Minister Peter Mandelson noted that the EU would also pursue bilateralism. It is hard not to believe that such agreements take up time and energy from a focus on the WTO.

The book is at its best when it explains how the trade regime has evolved over time. The authors provide a thorough analysis of how GATT/WTO members have dealt with problems such as allowing China (an original GATT member) to rejoin the WTO; new issues such as accommodating health and safety standards, the environment, and services; and why it has failed to deal with key problems such as labor standards and movement of people. I was surprised to see that the book did not discuss why the inclusion of intellectual property rules was revolutionary for the GATT. The GATT/WTO delineates what policymakers can not do — a form of negative regulation. But the Trade Related Intellectual Property Agreement (TRIPS) is positive regulation. Such an approach to global governance signified a major change in regulatory approach to the world trading system, yet the authors do not examine that change in that manner.

The book also contains some interesting findings. The authors describe a study that proclaims that while each nation has benefited from GATT/WTO membership, “nations may have been best off in a world absent this international institution” (p. 206). They make this point in regards to developing countries that have to comply with rules they did not devise. Yet I would have liked to see more on this analysis. Maybe policymakers from the newest entrants to the GATT/WTO didn’t write the rules, but they have benefited from them. In addition, whatever the failures of the Doha Round, the focus on the needs of developing countries declared in that round has inspired WTO members to focus greater attention on what poor countries and people living in poverty need to participate in trade. The poor don’t just need lower tariffs or abstract access to markets. They need low cost capital, education about land productivity and planting techniques, roads, understanding of national standards and the like. To put it differently, trade liberalization is insufficient to enable the bulk of the world’s poorest people to reap the benefits of trade.

The authors also describe a study published in the American Economic Review that claims that the GATT/WTO has not increased trade and that non-members may have had a larger increase in trade than did members (p. 213). But the authors disagree, citing the role of the GATT/WTO in assuring that agreements are honored, and they stress that the GATT/WTO has instilled among policymakers a shared notion of proper trade etiquette (pp. 213-14).

Yet this reader was left hanging about the authors’ view of the future of the WTO. As of this writing, its future looks murky indeed. The Doha Round of trade talks is at death’s door and no member state has been willing (or able) to make sufficient concessions to entice other members to take similar steps. The authors conclude that the WTO must find ways to change — but the WTO is nothing but the sum of its members’ wills. If they are unwilling to support change, the WTO will become an institution with a proud history and lost potential.

This book deserves a broad audience. It is not a book for entry-level undergraduate students in trade, political science, or governance. I highly recommend it for students that have already had some introduction to the politics and the economics of trade. It would be useful in advanced classes in trade, global governance, and law. The volume is a good synthesis of intellectual perspectives that can help students gain greater understanding of the nuances of trade.

Susan Ariel Aaronson teaches at George Washington University and is the author (with Jamie Zimmerman) of Righting Trade: Public Policies at the Intersection of Trade and Human Rights (Cambridge University Press, 2007).

Subject(s):International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Mills in the Medieval Economy: England, 1300-1540

Author(s):Langdon, John
Reviewer(s):Beek, Karine van der

Published by EH.NET (January 2007)

John Langdon, Mills in the Medieval Economy: England, 1300-1540. New York: Oxford University Press, 2004. xx + 369 pp. $150 (cloth), ISBN: 0-19-926558-5.

Reviewed for EH.NET by Karine van der Beek, Department of Economics and Business, Universitat Pompeu Fabra.

Mills represent one of the largest and most significant investments in physical capital in the pre-industrial European economy. Nevertheless, economic aspects of milling have received little scholarly attention so far and most studies in this field are dedicated to technological aspects of milling and to their pattern of diffusion.

Mills in the Medieval Economy by John Langdon, professor at the University of Alberta and a leading figure in the field of medieval economy and technology, is a well-written study, based to a great extent on original data, that not only provides an exceptional survey, but also explores key economic aspects of medieval milling and offers the reader an overall understanding of the industry.

This book focuses on England from 1300 to 1540 and examines various aspects of milling in a period that saw a dramatic peak in mill numbers and in population. Through skilled and convincing use of numerous documents and other sources, Langdon shows that the development of the industry displayed continuity over the period, both in terms of technology and investment, rather than a radical breakdown, as has often been emphasized in Marxist analyses of the Middle Ages.

Langdon’s book is obviously of great value to technology historians and social historians in general. Nevertheless, I find it to be of prime interest to economic historians. It presents an interesting case of entrepreneurial organization of a capital-intensive key industry that was characterized by low profitability and that was highly sensitive to periods of instability.

In successive chapters that examine most aspects of milling, it is shown for the first time that mills, which were traditionally seen as the symbol of peasant exploitation and as an important source of feudal income, were in fact hard to uphold. Their construction and maintenance required vast resources, and their revenues were highly volatile. The milling industry was widely exposed to demographic disasters caused by bad weather, wars, and plagues, which were commonplace from the mid-fourteenth to the end of the sixteenth centuries. These features of milling, which are noticed by Langdon but which should have been more emphasized throughout the book, are what makes the observation of continuity in this industry interesting, to my opinion.

The total number of mills in 1300 was about 10,000. This number remained relatively unchanged in the half century leading up to the Black Death. Yet, although the number of mills was clearly affected by the catastrophic demographic outcomes of the Black Death, the overall impact was not as critical as one might expect and it declined by only 10 percent in the first decades following the plague.

Langdon sees this moderate fall and quick adjustment of the industry as a testimony to what he refers to as “the determined entrepreneurial spirit” (p. 236). He explains it by an adjustment of the use of mills, which he observes in the documents. Mills, which had been most commonly used for grain grinding, were widely converted into industrial activities, such as textile fulling, after the Black Death. Such use was more profitable than grain grinding in periods of demographic crisis due to the relative rise in real wages.

Nevertheless, mill operation involved regular and costly maintenance, which was difficult to maintain during long periods of instability and low profitability. This is why, from the late fourteenth century to the early sixteenth, following a long period of instability that delayed the recovery of the milling sector, many mills were abandoned and mill numbers shrank by another 10 percent.

The different managerial strategies of dealing with the volatile profitability of mills are described in depth by Langdon in chapter five. This chapter demonstrates to the reader once again that medieval entrepreneurs were no different than modern ones. It shows that owners tended to lease the mills for a fixed rent. The relative bargaining power of mill owners, usually feudal lords, and lessees was reflected in the contract, in the degree of risk imposed on each part, revealed in the repair agreements. Langdon provides extensive data concerning the level of risk sharing and how it has changed over the period. The data show, for example, that as the situation in the milling industry worsened and revenues declined in the beginning of the fifteenth century, owners began to take a larger share of the maintenance costs.

Langdon also examines the extent to which the legal framework affected peasant demand and challenges the thesis posited by Marc Bloch. He argues that customers generally came to mills because they wanted to, not because they were coerced by lords to do so. There is much evidence that supports this claim, particularly in areas where feudal lords were holding small scattered estates and could not prevent peasants from going to nearby rival mills, such as in the South of England.

To conclude, Mills in the Medieval Economy is an in-depth study of late medieval milling which deals with the wider nature of industrial change. It is an admirable study that provides economic historians with a comprehensive description and thoughtful analysis of the medieval milling industry and of pre-modern entrepreneurship in general.

Karine van der Beek is currently a Post-Doctoral Fellow at Universitat Pompeu Fabra, Barcelona, as part of the CEPR Economic History RTN: “Unifying the European Experience.” Her research focuses on early European growth and on the effects of political structures on institutional formation, market organization, and productivity. Her recent papers include: “Political Fragmentation and Technology Adoption: Watermill Construction in Feudal France,” and “Political Fragmentation and Investment Decisions: The Milling Industry in Feudal France (1150-1250).”

Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):Medieval

Lever of Empire: The International Gold Standard and the Crisis of Liberalism in Prewar Japan

Author(s):Metzler, Mark
Reviewer(s):White, Eugene N.

Published by EH.NET (January 2007)

Mark Metzler, Lever of Empire: The International Gold Standard and the Crisis of Liberalism in Prewar Japan. Berkeley: University of California Press, 2006. xxii + 370 pp. $50 (cloth), ISBN: 0-520-24420-6.

Reviewed for EH.NET by Eugene N. White, Department of Economics, Rutgers University.

Drawing extensively on archival sources, University of Texas professor Mark Metzler provides a detailed history of Japan’s experience with the gold standard. Japan’s interwar quest to return to gold is instructive not only as a policy problem but also because it was a key issue in Japan’s struggle over whether to join a liberal global economy or build a state-controlled empire.

Following Germany’s example after the Franco-Prussian War of extracting reparations to facilitate a move to the gold standard, Japan gained the needed reserves after the Sino-Japanese War of 1894-1895 yielded an indemnity from China. Whether the gold standard offered a nation a seal of good housekeeping when it sought to borrow abroad is currently hotly debated. For Japan, Metzler shows that moving to gold was considered as vital to gaining access to Western capital markets. But empire and gold went hand in hand. To prevent Russian dominance of Korea, Britain signed an alliance with Japan in 1902 that recognized Japanese interest in Korea, after which the British Foreign Office supported the sale of Japanese bonds in London. Japan had equal success on Wall Street, where a critical role was played by Jacob Schiff of Kuhn, Loeb who was eager to see anti-Semitic Russia (and the Morgan bank) defeated. As a result 40 percent of the 1904-1905 Russo-Japanese war was funded with overseas borrowing.

While conquest and the gold standard marched together up to this point, they now pulled Japan in opposite directions. Military-industrial interests wanted to increase government spending, while those committed to the gold standard pressed for balancing the budget and husbanding resources to pay the foreign debt. Metzler translates the two competing policies (sekkyoku seisaku and sh?kyoku seisaku) as “positive” and “negative” policies, suggesting that they represented Keynesian and monetarist approaches. Better translations would be “active” and “passive” policy, which reflected the expansionary imperialist program and the “rules of the game” followed by a liberal state. Two dramatis personae occupied center stage in this battle: Inoue Junnosuke (finance minister and governor of the Bank of Japan) and Takahashi Korekiyo (vice governor of the Bank of Japan, finance minister and prime minister) who respectively campaigned for classic liberal and expansionary economic polices.

By declaring war against Germany in 1914, Japan easily seized German concessions in China. Emboldened, Japan attempted to gain hegemony, issuing the infamous but unsuccessful “Twenty-One Demands” to the Chinese government. The war cost relatively little and created extraordinary export opportunities. The trade surplus led to an inrush of gold, producing a monetary expansion and inflation, and Japan only exited the gold standard after the U.S. embargoed gold exports in 1917.

The worldwide postwar boom was amplified by “positive” policies pursued by finance minister Takahashi who saw an opportunity for Japan to catch up. The government floated new bonds to finance military spending, notably the anti-Bolshevik Siberian expedition. Warning about the dangers of a speculation boom, governor of the Bank of Japan Inoue, lobbied the cabinet to lift the gold embargo. When the Bank of Japan was permitted to raise interest rates in 1919, the boom came to a resounding end with a stock market crash and bank runs.

The battered economy never truly recovered in the 1920s. A gold standard at the prewar parity was a distant goal because postwar deflation was insufficient. Although volatile, the yen was often 20% below its prewar value. A key problem that worsened with time was the Japanese military’s political independence, which made budget cuts difficult. Fiscal policy was loose, but the Bank of Japan kept its key rate over 8% from 1919 to 1925. Chances of an early return to gold ended with the great 1923 Kant? earthquake that devastated Tokyo and Yokohama. The Bank of Japan provided massive credits to banks. Rolled over year after year, they added to the bad loans from the collapse of the postwar boom, undermining the solvency of the banking system.

After Britain’s return to gold in 1925, the government hoped to follow and began a retrenchment in 1926. The costs of an appreciating yen proved to be very high, wounding export industries. When the finance minister moved to clean up the banking system, a storm erupted in Parliament over the disclosure of weak banks. Rumors swirled, setting off a severe panic in 1927, in which 36 banks with 9% of deposits closed. The government fell, and Takahasi returned to the finance ministry, where he halted retrenchment and allowed the yen to depreciate.

Yet by 1929, a new government concluded that a restoration of the gold standard was necessary as Japan’s foreign loans were coming due and needed to be refinanced. Assistance came from the House of Morgan led by Thomas Lamont. An enthusiastic supporter of (some would say, apologist for) Japan, Lamont demanded a “thorough-going” deflation and an end to the government’s “extravagance.” He supported Inoue for whom a return to gold was a matter of honor. The government began an extraordinary campaign, exhorting people to give up unneeded luxuries; and a propaganda pamphlet was distributed to almost every household. Movies and popular songs promoted the government’s plan. The “Retrenchment Ditty,” a movie theme song, entreated the public: Let’s retrench, let’s retrench?..

You give up salt, I’ll give up tea isn’t it so? Lifting the gold embargo (that’s right absolutely) until the joyful lifting of the embargo.

In spite of the 1929 stock market crash a Morgan-led group of banks provided a $25 million loan (to which London added ?5 million) for a cushion of reserves that enabled Japan to lift the gold embargo on January 11, 1930. An overvalued yen caused gold to flow out, yielding a 25% decline in prices. The effects were wrenching. Wage cuts spread across industry, followed by strikes and rising unemployment. Indebted farmers began to fail when world rice and silk prices collapsed. Panics hit the Tokyo stock exchange in April and September 1930.

Whatever control the government had over the military was lost in 1931 when faked Chinese sabotage on the South Manchurian Railway allowed the army to attack China. After Britain abandoned gold in September 1931, a run on the yen began. Inoue tried to stop it by raising interest rates. For his efforts to restrain military spending, he was assassinated in 1932 by a member of the right-wing Blood Pledge Corps. Back at the finance ministry, Takahashi took the yen off gold in December 1931. Budget deficits were financed with money creation; but when inflation picked up, he tried to cut the military budget in 1936. Wrathful ultranationalist officers shot and hacked the 82-year-old finance minister to death in his bed. Gearing up for war, the army’s general staff drafted a five-year plan in 1937 that buried what remained of the liberal economy.

Metzler’s book provides a solid, nuanced and depressing account of the failure of the interwar gold standard in Japan. One can only speculate that had Japan returned to gold at less than its prewar value, the country could have avoided the wrenching deflation that radicalized the public and produced allies for the fanatics promoting imperial expansion.

Eugene N. White is professor of economics at Rutgers University and a NBER research associate. His most recent publication is “Bubbles and Busts: The 1990s in the Mirror of the 1920s,” in G. Toniolo and P. Rhode, editors, The Global Economy in the 1990s: A Long-run Perspective (Cambridge University Press, 2006). He is currently writing on war finance and the microstructure of the NYSE and the Paris Bourse.

Subject(s):Military and War
Geographic Area(s):Asia
Time Period(s):20th Century: Pre WWII

Creating the Twentieth Century: Technical Innovations of 1867-1914 and Their Lasting Impact

Author(s):Smil, Vaclav
Reviewer(s):Mokyr, Joel

Published by EH.NET (December 2006)

Vaclav Smil, Creating the Twentieth Century: Technical Innovations of 1867-1914 and Their Lasting Impact. Oxford: Oxford University Press 2005. vi + 350 pp. $35 (hardcover), ISBN: 0-19-516874-4.

Vaclav Smil, Transforming the Twentieth Century: Technical Innovations and Their Consequences. Oxford: Oxford University Press, 2006. vi +358 pp. $45 (hardcover), ISBN: 0-19-516875-5.

Reviewed for EH.NET by Joel Mokyr, Departments of Economics and History, Northwestern University.

It is hard to describe in a short sentence the kind of intellectual that Vaclav Smil represents. Professor of Geography and Environmental Science (whatever that exactly embodies) at the University of Manitoba, he has produced in the past decades an incessant stream of books on the technological developments of the modern age and their significance. Of those, my favorite is Enriching the Earth, in which he made the plausible case that the Haber-Bosch ammonia-producing process should be regarded as the invention that was as epochal as it was paradigmatic of the twentieth century. The ammonia process provided in abundance the food that was necessary if humanity was to be able to do other things and sustain even growing numbers at the same time.[1] Other books by him have discussed the energy revolution and the earth’s biosphere. In these two volumes, Smil sums up what he has learned about what made the modern age. His scholarship mocks the boundaries that separate history from economics, geography from technology studies. He is unusually adept at combining his knowledge of how techniques actually work with his ability to illustrate their overall effects on society and the human condition.

The amount of pure learning and erudition that Smil brings to these 700 pages has to be experienced to be believed. In telling the story of modern technology since 1870 in a coherent way these 700 pages totally eclipse the competition.[2] Smil’s writing, richly but not excessively illustrated, with a keen eye for the telling anecdote, the right illustrative number, makes his points with an eloquence and authority that has become all too rare in a world of technical scholarship in which hypothesis testing has taken precedence over a good narrative. While the narrative inevitably concerns the big breakthroughs, there are neat and cleverly presented little case studies of inventors who are anything but household names: George de Mestral, the Swiss inventor of Velcro, or Nils Bohlin, the inventor of the car seatbelt. Yet these books are anything but coffee table readings. They are thoughtful, analytical, even pensive at times. Smil full-well understands the environmental impact that the age of energy has had on the planet that unleashed it, and worries, like the rest of us, about nightmarish scenarios of the kind that Albert Gore has recently brought to every thinking person’s home in America.

These volumes, in this reviewer’s judgment, establish Vaclav Smil as another entry in a list of illustrious and erudite scholars whose main competence is in the History of Technology, yet who were able to lift themselves out of the quagmire of old gears and cogs to see a bigger picture, a picture of humanity struggling with the harshness of the environment and the niggardliness of nature, the deviousness of germs and the sheer violence of natural disasters. Other masters in this genre, familiar to every trained economic historian are A.P. Usher, David Landes, Donald Cardwell, Nathan Rosenberg, and Arnold Pacey. The big picture produced by Smil, it should be added, is more about the immediate effects of technology than about what it did to the economy. Smil is not much interested in the standard things that economic historians do: he uses patents for illustration (and ridicule) but does not count them, he seems to have little regard for national income statistics, and he has very mixed views about our ability to measure progress through total productivity. He does not engage in social savings calculations, and his interest in the economic models that explain economic growth is rather limited. Intellectual property rights and economic incentives hardly figure in his story at all. Oddly enough, then, this is a book that gives to economic history much more than it takes from it.

There is no real explanation of what happened. Smil’s view of technology is that it is all rather inevitable; when the ideas are there and have been tested, “subsequent advances appear to have the inexorability of water flowing downhill” (I, p. 280). In the context of the Western economies after 1870 this view seems to make sense, but in fact history is full of examples in which technology did indeed freeze in its tracks for long periods, to be revived only when some further breakthrough or social change allowed it do so. Smil does not stress enough, to the taste of this reviewer, that the Western World (later to include a few Asian Tigers) was a highly unusual economic environment, in which a large number of factors had come together that were absent almost anywhere else. Conditional on that environment, progress may seem inevitable. But there was nothing inexorable about the technological blast-off in the West that is described in Volume I.[3] Indeed, Smil here and there seems to be subconsciously given to what is known as “hindsight bias” — the notion that what happened had to happen. He has little interest in techniques that might have been but were not: the airship — a rather substantial technological achievement at the time — does not get a mention, presumably because it did not make it. The electric car is dismissed in one short paragraph and the steam car deserves no mention at all, even hydroelectric power barely gets two paragraphs (I, pp. 90-91). For Smil, history is definitely written backwards: start with what we have now and see where it came from. Let the economic historian who is without this sin cast the first reprint.

The two volumes here start in the late 1860s and take us all the way to the present. The first volume is dedicated to illustrate one central proposition: that the period between 1867 and 1914 — the age that most of us refer to in our classes as the second Industrial Revolution and which Smil calls the “age of synergy” — was the age in which the technological foundations of twentieth century developments were laid. These two generations invented most of the technology that twentieth century growth was built upon.

The second volume proceeds to tell the tale of how these seeds blossomed, in the post 1914 period, into the kind of technology that has transformed our world. Not much in these chapters will surprise a practicing economic historian teaching the origins of economic growth, but no one in our profession, I venture, is familiar with the enormous detail of technological progress that Smil provides on the sectors he is interested in. Technological progress, more than any other topic in economics, has had a certain black-box kind of nature. It is supposed to be somehow emerging as the result of the right kind of incentives and investment in human capital and R&D. It enjoys increasing returns, suffers from market failure, and in general is approximated by total factor productivity figures, patent data, and social savings computations if feasible. Smil puts a great deal of factual flesh and blood on that skimpy skeleton. Inside the black box of technological change, as he shows so richly, was a complex world of ambitious and curious creators, and greedy businessmen hoping to profit from their innovations. In the end, the consumer was the one that benefited by far the most, but, as Smil stresses, at a price.

These two volumes are not quite tantamount to a full history of technology in the second Industrial Revolution and the twentieth century. Smil is interested in energy and materials, and devotes a great deal to these favorite topics. In his picture of the world, so to speak, given enough energy and materials, we can lift the earth.[4] He also devotes much space to information processing and communications. When all is said and done, he argues, what sets our modern age apart is it consumption of fossil-fuel burning energy, which increased from 22 EJ/year to 320 EJ/year (an EJ, as some digging will reveal, is an exajoule or 10 to the 18th joules, or a very large number of very small units of energy). The average American household today, he reflects, commands about 500 kW, as much energy as a Roman landlord with 6,000 strong slaves (II, p. 260) but without the management hassles. Energy drove everything, but, as Smil reflects wistfully, it also is the Achilles heel of the entire system. There is also a long chapter on “rationalized production” in Volume II, and the development of mass production, Taylorism, Fordism, and TPS (Toyota Production System — Smil loves acronyms, one of the few faults in his otherwise highly engaging writing style). There are some major advances that are left out, such as pharmaceuticals, genetic engineering, textiles, and civil engineering to name a few, but the areas he covers are so important and the coverage so competent and persuasive, that these are minor flaws. Underneath this improved use of energy and new materials, of course, was something deeper: better knowledge of natural processes and regularities, pure science, better mathematics, improved engineering, and networks of scientists and people of knowledge who distributed and applied a growing body of useful knowledge that made all this possible.

The two volumes are structured in similar way: the core of each consists of four chapters on specific areas of technology, preceded by an introductory chapter, and followed by two concluding chapters. The core chapters do not follow exactly the same pattern, but the overlap reflects Smil’s interest and expertise. Much of the two volumes is dedicated to reproducing over and over the hockey stick effect, namely that somewhere around the end of the nineteenth century the world started to change at a high and accelerating rate compared to which the rest of human history looks rather flat.[5] Smil’s hockey stick numbers are quite mind-numbing due to his virtuoso ability to pick numbers that really illustrate his points. To demonstrate the fact that new technology was biased toward destruction, for instance, he points out that the kinetic energy of a World War I shrapnel shell was about 50,000 times that of a prehistoric hunter’s stone tipped arrow but the Soviet 100 Megaton of 1961 was 140 billion times that of the shell (II, p. 295).

In the somewhat tedious debate between “gradualists” and “saltationists” — again, a discussion that every economic historian knows well from the Industrial Revolution literature — Smil takes a firm position with the saltationists, and is not coy in actually using the term saltation. He cites H.G. Wells as noting that this was the greatest change that humanity has ever undergone, and while there was no single “shock,” neither is there one at daybreak. This observation, reminiscent of the statement attributed to Edmund Burke that he could not tell when day ends and night begins, but he surely could tell one from the other, represents Smil’s saltationism. His view is that between 1867 and 1914 more changed in human control over their environment and their ability to manipulate natural regularities than ever before or after, or in his own felicitous phrase (I, p. 13), “the pre World War I innovations tumbled in at a frenzied pace.” Many of the great advances in productivity and product innovation were building on the discoveries of these two generations of miracles.

Much of what is wrong with the modern age is summarized by Smil in a citation from H.G. Wells from 1905 (I. p. 312): “were our political and social and moral devices only as well contrived to their ends as the linotype machine, an antiseptic operating plant, or an electric streetcar, there need now be … only the smallest fraction of the pain, the fear, and the anxiety that now makes human life so doubtful in value.”[6] In general, Smil argues, this is what bedevils the advances in technology, not the technology itself. In the closing chapters of Volume II, his earlier techno-enthusiasm seems to have cooled. Until July 1914, it seems, the human race was on a path toward progress, but then it all fell apart through violence, destruction, and collective irrationality. However, Smil is not blaming only politics and institutions for the wrong turns that technology has taken, he also pours disdain on some private decisions. For instance, he does not like cars. If a sapient extraterrestrial civilization observed the earth they would see that “wheeled organisms, besides killing annually one million bipeds … were also responsible for very rapid climatic change and make life for the bipeds increasingly precarious” (II, p. 266). Elsewhere he heaps scorn on SUV’s referring to them as ridiculously oversized, incongruous and wasteful machines (II, p. 207). Above all, he notes caustically that all the technological disasters that the twentieth century was supposed to have inflicted are dwarfed by smoking and excessive eating, and cites a study that notes that most supposedly negative consequences of technology are the result of lifestyle choice rather than environment factors caused by technical advances (II, p. 294).

There are only two serious risks that the “Great Synergy” has brought about that he thinks are worth talking about, the proven risk of armed conflicts between technologically-advanced societies, and global warming. On both of this he sounds concerned, but not alarmist. At the end of the day he concedes that the energy-intensive society that the 1880s and 1890s created cannot be sustained. He does not tell us how society can move away from this flawed system, and at times he equivocates. Thus he concludes after much fascinating technical detail in his survey of the nuclear industry that the twentieth century use of fission for electricity generation was a “successful failure” (II, p. 63), technologically successful but too costly. It is hard to see it this way from Smil’s own account, because nuclear power was the only large-scale energy generation system that does not contribute to global warming, and was probably much cheaper than the solar, wind- and tidal sources that are currently discussed.

Smil is measured and balanced even when he discusses distinct technophobes like Ivan Illich and Jacques Ellul, and while he dubs Illich “an unorthodox thinker,” he does not engage Illich’s well-known neo-Luddite views. Smil himself is no Luddite. He is deeply impressed by the triumphs of modern technology, as he demonstrates over and over again. He knows full well that the technophobes’ notions of the serenity of pre-industrial pastoral life is a risible cartoon, and that the view that industrialization deepened, rather than relieved, human misery, is “indefensible” (I, p. 299). But he is too smart and too learned to be a triumphalist. In the end, his judgment remains ambiguous and full of contradictions, much like the tale he tells so well.


1. Vaclav Smil, Enriching the Earth: Fritz Haber, Carl Bosch, and the Transformation of World Food Production. Cambridge, MA: MIT Press, 2001.

2. The closest are Trevor I. Williams, editor, A History of Technology, Volume VI: The Twentieth Century, part I and II. Oxford: Clarendon Press, 1978; and Ian McNeil, editor, An Encyclopedia of the History of Technology, London: Routledge, 1990.

3. See Philip Tetlock, Richard Ned Lebow and Geoffrey Parker. editors, Unmaking the West: “What-If?” Scenarios That Rewrite World History. Ann Arbor: University of Michigan Press. 2006.

4. Even in his discussion of agricultural productivity, energy dominates the story, arguing the importance of increased energy inputs rather than improved know-how in using the sun, in a section significantly entitled “potatoes partly made of oil” (II, pp. 154-56). One might object that the oil represents stored-up solar energy, and that the increased input of energy in farming was very much dependent on improved knowledge.

5. Joel Mokyr, “”Hockeystick Economics,” a review essay of Robert William Fogel, The Escape from Hunger and Premature Death: Europe, America, and the Third World. Technology and Culture, Vol. 46, No. 3 (July 2005), pp. 613-17.

6. Freud, in Future of an Illusion (1927), said much the same thing: “While mankind has made continual advances in its control over nature and may be expected to make still greater ones, it is not possible to establish with certainty that a similar advance has been made in the management of human affairs.”

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University. His The Enlightened Economy will be published by Yale University Press and Penguin Books in the near future.

Subject(s):History of Technology, including Technological Change
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII