Classic Reviews in Economic History

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

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

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

Hamilton and the Quantity Theory Explanation of Inflation

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

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

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

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

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

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

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

A New Form of Debasement: The New "Fractional" Copper or Vellon Coinages in Spain and Elsewhere

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

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

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

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

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

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

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

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

The Alternative Explanation for the Price Revolution: Population Growth

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The extremely close correlation between the increase in the volume of [Spanish-American] treasure imports and the advance ofcommodity prices throughout the sixteenth century, particularly from 1535 on, demonstrates beyond question that the "abundant mines of America" [i.e., Adam Smith's description] were the principal cause of the Price Revolution in Spain. We should note, first, that the "close correlation" is only a visual image from the graph, for he never computed any mathematical correlations (few did in that prewar era). Second, Ingrid Hammarström was perfectly correct in noting that Hamilton's correlation between the annual values of treasure imports (gold and silver in pesos of 450 marevedis) and the composite price index is not in accordance with the quantity theory, which seeks to establish a relationship between aggregates: i.e., the total accumulated stock of money (M) and the price level (P).[52] But that would have been an impossible task for Hamilton. For, if he had added up the annual increments from bullion exports in order to arrive at some estimate of accumulated bullion stocks, he would have had to deduct from that estimate the annual outflows of bullion, for which there are absolutely no data. Furthermore, estimates of net (remaining) bullion stocks are not the same as estimates of the coined money stock; and the coined money stock does not represent the total supply of money.[53]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 maravedís (375 to the ducat money of account; 350 to the peso money of account). In fact, it differed from the earlier Real , struck from 1471, only in its money-account-value, having been raised from 31 to 34 maravedís. Also struck from 1497 was the heavy-weight Real known as the "piece of eight" (real de a ocho), with just over eight times as much fine silver, 25.997 g, and a value of 272 maravedís. In 1686, it was subjected to a very minor weight reduction that reduced its fine silver content to 25.919 g. The American dollar can trace its descent from this Spanish coin. Hamilton (1934), chapter III, pp. 46-72; Hamilton (1947), chapter II, pp. 9-35; Ulloa (1975); Motomura (1994, 1997); Munro (2004a), Vol. 4, pp. 174-84.

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 maravedí­s.

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

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/repecshowpaper.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 ВЈ1.0 million groot Flemish in the 1520s to about ВЈ7.0 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. Hammarström (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 ВЈ1 (=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 métaux seems, in retrospect, to be ironic. In Morineau (1968), the data presented on p. 196, evidently for the total value of bullion imports in each quinquennium, even when divided by 5, to produce annual means, exceed the data on mined outputs from a minimum of 12.12-fold to a maximum of 41.07-fold. In Morineau (1984), Table 83, p. 578, presents decennial means of bullion imports, expressed as equivalent amounts of silver, that, for the period from 1660 to 1700, range from being 3.653 times to 18.684 times greater than the recorded aggregate mined outputs of Spanish-American silver. (See also his bar-graph, Figure 37, on p. 563, displaying in five-year periods — totals or annual means? — the values of "treasure" imports, expressed in millions of piastres or pesos: those of 272 maravedís or 450 maravedís?) Hamilton (1929a, 1934) indicated that, in the seventeenth century, up to the cessation of recorded data, in 1660, almost all the imports were in the form of silver. The great boom in Brazilian gold exports did not really begin until 1700. See TePaske (1998), pp. 21-32.

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 ВЈ5,795.793.65) and 21,552.0 kg of gold (worth ВЈ2,788.035.34), and a total value of ВЈ2,593.114.00 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 ВЈ753,336 in precious metals ('treasure') and ВЈ351,236 in merchandise, for an aggregate export value of ВЈ1,104,572, 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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Munro (1973), John, Wool, Cloth and Gold: The Struggle for Bullion in Anglo-Burgundian Trade, ca. 1340-1478 Centre d'Histoire Economique et Sociale (Brussels and Toronto: Editions de l' Université de Bruxelles, 1973).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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.