Price Revolution in Late Renaissance Europe

Price Revolution in Late Renaissance Europe

Historians call the wave of inflation that swept Europe during the sixteenth and seventeenth centuries the Price Revolution. It is seen as revolutionary in character partly because it followed a long period of stable prices, and partly because the prevailing view at the time was that prices and wages should be matters of fairness and justice rather than functions of supply and demand. By the mid-seventeenth century the inflation had ceased in most countries, followed by a century of stable or even falling prices.

Economists have mostly ascribed the influx of gold and silver from the New World as the cause of the inflation. An increase in the supply of anything, including money, relative to its demand causes its value to go down. A reduction in the value of a unit of money translates as inflation to the public. Scholars in other areas seem less satisfied with this single explanation. The timing of the beginning, the peak, and the end of the inflation only roughly corresponds with the timing of dates for the influx of gold and silver. The economist Jean Bodin (1530–1596) listed five reasons for the inflation: (1) the abundance of gold and silver, (2) monopolies, (3) scarcity of goods caused by exports and waste, (4) the luxury of kings and nobleman, and (5) the debasement of coin. He regarded the abundance of gold and silver as the principal reason.

The inflation struck Spain the hardest, quadrupling prices within a century. In England from 1580 to 1640 prices of necessities rose 100 percent while wages inched up only 20 percent. England’s first series of humane poor laws came into being in the midst of the Price Revolution. The acceleration in prices reached a peak in most countries between 1540 and the 1570s. Wages and rents fell behind prices and profits soared. Entrepreneurs ploughed these profits into new industries and new ventures of trade, speculation, and building, laying the foundation for further economic expansion.