------------ EH.NET BOOK REVIEW --------------
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 maraved???, 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 maraved??? 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 _Saigerh???tten_ 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, H???chstetters,
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 maraved???s) 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 Hammarstr???m
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 maraved???s 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 maraved???s, pesos, or
ducats (worth 375 maraved???s). 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]
Conclusions
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.
Notes:
1. URL:
http://www.scriptorium.lib.duke.edu/economists/hamilton/hama.htm. See
also the University of Chicago Library, Special Collections Research
Center, Guide to the Earl J. Hamilton Papers:
http://marklogic.lib.uchicago.edu:8002/view.xqy?id=ICU.SPCL.HAMILTON&c=h.
And also on EH.Net:
http://www.eh.net/pipermail/hes/1996-October/005291.html
2. 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.
3. 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.
4. See my online review online review:
http://eh.net/bookreviews/library/0146.shtml, 24 February 1999, of
Fischer (1996).
5. 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.
6. See Spufford (1988), chapter 13, "The Scourge of Debasement," pp.
289-318; Munro (1973); and the various studies in Munro (1992).
7. Both published in Le Branchu (1934) and Moore (1946).
8. Grice-Hutchinson (1952), Appendix III, p. 95.
9. 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.
10. 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."
11. 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 maraved???s (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 maraved???s. 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 maraved???s. 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.
12. See Challis (1971, 1978, 1989, 1992a, 1992b); Gould (1970).
13. Van der Wee (1963), Vol. I, pp. 126-29.
14. 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.
15. 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.
16. Spooner (1972), Appendix A, p. 332; Challis (1992a), pp. 365-78;
Challis (1992b), p. 689.
17. 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.
18. Hamilton (1934), pp. 49-64.
19. Hamilton (1934), p. 74.
20. 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."
21. 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.
22. Hamilton (1934), p. 75. A marc of copper was worth 34 maraved???s.
23. 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).
24. See n. 15 above.
25. 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.
26. 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.
27. Spooner (1972), p. 36.
28. See in particular Outhwaite (1982), especially pp. 39-57; and
also the introduction and many of the essays in Ramsay (1971), in
particular Hammarstr???m (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.
29. 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.
31. 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%.
32. 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."
http://repec.economics.utoronto.ca/repec_show_paper.php?handle=tecipa-225
33. 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).
34. 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.
35. Nef (1941, 1952).
36. 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.
37. See my own publications in n. 3, above; and also Munro (2007b).
See also Hatcher (1996) and Nightingale (1997).
38. 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.
39. See Munro (2003a), Table 1.2, pp. 4-5, based in part on Hamilton (1934).
40. 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.
41. See Munro (2003a), Table 1.4, pp. 12-13.
42. See Munro (2003a), Table 1.7, p. 26, based on Van der Wee (1963),
Vol. I, Appendix 44, pp. 522-23.
43. See Munro (1979, 1992); Spufford (1988), pp. 240-66.
44. See Van der Wee (1967, 1977, 2000); Munro (1979, 1991b, 2000, 2003d).
45. 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.
46. See Van der Wee (1967, 1977, 2000), and other sources cited in
notes 43 and 44.
47. See Munro (2003d); Tracy (1985, 1994, 2003).
48. 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).
49. Van der Wee (1977), pp. 375-76; and see the other sources cited
in n. 44 above.
50. 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."
51. The title of Hamilton's Chart 20 (p. 301) is "Total Quinquennial
Treasure Imports and Composite Index Numbers of Commodity Prices."
52. Hammarstr???m (1957). Her other criticisms of Hamilton's
scholarship strike me as being unfounded and thus unfair.
53. 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.
54. 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.
55. 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.
56. 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.
57. See n. 79 below, and also Munro (2007b).
58. 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.
59. 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).
60. For shipments of Spanish silver to pay Charles V's bankers in
Antwerp and Genoa, see Spooner (1972), pp. 22-24.
61. 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.
62. Outhwaite (1982), pp. 31, 36. He is referring to the
Anglo-Spanish trade treaty of 1630.
63. 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).
64. 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).
65. See Flynn (1978), D. Fisher (1989), Frenkel and Johnson (1976),
McCloskey and Zecher (1976), and Floyd (1985).
66. 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.
67. 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.
68. Hamilton (1934), Table 4, p. 71.
69. 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.
70. 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.
71. See note 74, below, for the termination date.
72. 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.
73. TePaske (1983), Tables 2-5, pp. 442-45.
74. 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.
75. Morineau (1968), p. 196; Morineau (1985), especially Table 83, p.
578; Figure 38, p. 579; Table 84, pp. 580-83; Figure 39, p. 585.
76. 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
m???taux_ 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
maraved???s or 450 maraved???s?) 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.
78. 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).
79. 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.
80. See TePaske (1998), tables, pp. 21-32.
81. 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."
82. 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":
http://www.economics.utoronto.ca/ecipa/archive/UT-ECIPA-MUNRO-02-02.html.
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.
83. 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."
84. See notes 79 and 80 above.
85. See note 1.
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Soci???t???s, 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 Beitr???ge
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.
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