Editing Price revolution (section)

==Causes==

===Influx of gold and silver===
From an economic viewpoint the discovery of new [[silver]] and [[gold]] deposits as well as the [[productivity]] increase in the silver mining industry perpetuated the price revolution. When precious metals entered Spain, this influx drove up the Spanish price level and caused a balance of payments deficit. This deficit occurred on account of Spanish demand for foreign products exceeding exports to foreign markets.<ref name=PriceRev /> The deficit was financed by the metals that entered these foreign countries and in turn increased their money supply and drove up their price levels.<ref name=PriceRev />

The increased importation of [[commodity money|specie]] to Spain started in Central Europe around the beginning of the sixteenth century. According to Michael North (1994) central European silver output doubled between 1470 and 1520, and increased even more in the 1520s with the new mine of [[Jáchymov|Joachimsthal]].<ref name="North 1994" /> Also during this time the Spanish and Portuguese brought a large amount of gold from the New World to Europe. Starting in the 1540s a growing amount of silver was shipped to Europe from [[Zacatecas City|Zacatecas]], [[Guanajuato City|Guanajuato]] and [[Taxco]] mines in Mexico and the [[Potosí]] mountain in Peru.<ref name="North 1994"/> The production of the [[Cerro Rico|Potosí mine]] increased greatly in the 1560s after [[Mercury (element)|mercury]] deposits had been discovered in the Andes, as mercury was necessary to process the silver.<ref name="North 1994"/> Based on the records of Earl J. Hamilton (1934), the total imports of specie from the Americas during the 16th century amounted to around 210 million pesos, with 160 million of these pesos being imported in the second half of the 16th century.<ref name="Hamilton, Earl J. 1650">{{cite book |last=Hamilton |first=Earl J. |title=American treasure and the price revolution in Spain, 1501–1650 |publisher=New York: Octagon Books |date=1934}}</ref> The total amount of silver imported added up to about 3,915 metric tons of silver.<ref name="Hamilton, Earl J. 1650"/> However these numbers underestimate the total amount imported to Spain because Hamilton only counted imports recorded by the official [[Casa de Contratación]] in Seville, not including the specie shipped directly to [[Cadiz]] by the [[Dutch East India Company|Dutch]] and [[East India Company|British East India Companies]].<ref>Kindleberger, Charles Poor. ''Economic and Financial Crises and Transformations in Sixteenth-century Europe''. Princeton, N.J.: International Finance Section, Department of Economics, Princeton University, 1998.</ref> The influx of these precious metals and the resulting money supply shocks help explain the price increase in Spain during the 16th century.{{Citation needed|date=March 2015}}

===European silver production===
Some accounts emphasize the role of increased silver production within Europe itself. According to Nef, the output of silver mines in [[Bohemia]], Germany and Hungary increased rapidly from {{circa|1460}} to {{circa|1510}}. Production peaked in the 1530s, thereafter slowly declining for the next 30 years. After 1560, the decline in European silver production was rapid.<ref>{{cite journal |last=Nef |first=J. U. |year=1941 |title=Silver Production in Central Europe, 1450–1618 |journal=[[Journal of Political Economy]] |volume=49 |issue=4 |pages=575–591 |doi=10.1086/255744 }}</ref> Flynn contends that imports of silver from Spanish America is behind this decline in European silver mining.<ref>{{cite book |author=D. Flynn |chapter=Comparing the Tokugawa Shogunate with Hapsburg Spain: two silver-based empires in a global setting |editor=James Tracy |title=The Political Economy of Merchant Empires, 1350–1750 |year=1991 |page=352 }}</ref>

=== Quantity theory of money ===
{{main|Quantity theory of money}}
The first scholar to make a quantity-theory link between the influx of American "treasure" and the Price Revolution was [[Martín de Azpilcueta]] in 1556, although French philosopher [[Jean Bodin]] is more often credited, because of his 1568 response to a 1566 treatise by the Royal Councilor [[Jean de Malestroit]].<ref name= Hamilton>{{cite book|last=Hamilton |first=Earl J. |title=American Treasure and the Price Revolution in Spain, 1501-1650 |place=New York |publisher=Octagon |date=1965 }}</ref> Malestroit argued that lower-quality coins were the chief culprit of price influx—similar to the periodic inflations of the 14th and 15th centuries. Bodin dismissed this argument, contending that the growing influx of silver from the Spanish Americas was the primary cause of price inflation.<ref name=Hamilton/> Championed for the [[quantity theory of money]], Bodin was able to demonstrate that the inflation of prices in France was due far more to Spanish-American influx than to any change in coin debasement.<ref>{{cite book |last1=Greaves |first1=Percy L. |first2=Ludwig |last2=Mises |title=Mises Made Easier: A Glossary for Ludwig Von Mises' Human Action |place=Dobbs Ferry, N.Y. |publisher=Free Market |year=1974}}</ref>

Earl Hamilton, a contemporary price revolution theorist, found that no Spanish writer of the 16th century had voiced opinions similar to those of Jean Bodin despite having conducted meticulous research into Spanish treatises, letters, and other documents. This, however, was not true; less well known is an even earlier Spanish publication in a treatise from 1556 by the cleric [[Martín de Azpilcueta]] of the [[School of Salamanca|Salamanca School]], which made virtually the same claim about the role of Spanish-American silver in the rise of prices.<ref>{{cite book |last=Hutchinson |first=Marjorie |title=The School of Salamanca; Readings in Spanish Monetary Theory, 1544-1605 |place=Oxford |publisher=Clarendon |year=1952}}</ref>

=== Debasement ===
{{See also|The Great Debasement}}
Regardless, Malestroit did put forth several valid claims about the price revolution that continue to hold up today, particularly his argument explaining the different [[price index]]es and why the Spanish prices rose the least and the [[Duchy of Brabant|Brabantine]] the most. Spain, unlike most other European countries of this era, underwent no [[debasement]]s of the gold and silver coinages during most of the period, but that all changed in 1599, when the new Spanish king [[Philip III of Spain|Philip III]] (1598–1621) introduced the purely [[copper]] "vellon" coinage.<ref name=Munro/>

Following [[Henry VIII of England]] and his infamous "[[Great Debasement]]" programme that began 1526, the Spanish King Philip III tried to cement his Spanish legacy through changes in coinage strategy. Previously, Spanish kings (at least from 1471) 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".<ref name=Hamilton/> The blanca issued in 1471 had a silver [[fineness]] of 10 grains or 3.47% (weighing 1.107&nbsp;g).<ref name=Munro/> 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). By the start of the 17th century, inflation took hold of Spain as the gap between nominal and silver-based prices dramatically shifted. The purely copper coinage had done its damage to Spain. The difference between the silver- and vellon-based price indexes in Spain showed that the purely copper coinage other European countries used made up a much smaller proportion of the total coined money supply (something the Spanish kings had overlooked and Malestroit was able to pinpoint).<ref name=Munro/>

===Black Death===
{{main|Black Death}}
Demographic factors also contributed to upward pressure on prices with the resurgence of European population growth after the century of depopulation following the Black Death (1347–1353).<ref name=bd/> The price of food rose during the years of the plague, and then began to fall as the population of nations decreased.<ref name="Hamilton, Earl J. 1650"/><ref name=bd2/> At the same time prices of manufactured goods rose because of a displacement of supply.<ref name=bd3 /> As the nations began to recover and repopulate after the Black Death, the increase in population placed greater demands on agriculture. Later on, increased population placed greater demands on an agricultural area that had contracted significantly after the 1340s, or had been converted from arable to less intensive [[livestock]] production.{{Citation needed|date=March 2015}}

However, population growth and recovery in countries such as England are not consistent with inflation during the early stages of the price revolution. In 1520 at the beginning of the price revolution England's population was roughly 2.5 million people.<ref name="Hamilton, Earl J. 1650"/> This is about half of the English population of 5 million in 1300.<ref name="Hamilton, Earl J. 1650"/> Critics of the population argument raise the question that if England at the beginning stages of the price revolution was very unpopulated, how could any renewed growth from such a low level immediately spark inflation? It can be argued that population growth led to a price increase in the agrarian sector because of an increase demand for food. Marginal lands that were not very fertile and far away from markets were unable to adopt the technological developments to offset the lower returns of farming. In turn this led to a higher [[marginal cost]] to farming and resulted in a price increase for grains and other agricultural goods that surpassed the price increase for non-agrarian commodities during the 16th and beginning of the 17th century.<ref name="Hamilton, Earl J. 1650"/> The resurgence of population after the plague is linked with the demand-pull explanation of the price revolution. This "demand-pull" theory states that an increase in the demand for money and the growth of economic activity produced the rise in prices and a pressure to increase the supply of money.<ref name=supply />

===Urbanization===
Some accounts emphasize the role of [[urbanization]].{{Citation needed|date=March 2015}} Urbanization contributed to increased trade between Europe's regions, which made prices more responsive to distant changes in demand, and provided a network for the flow of silver from Spain through western and central Europe.<ref name=PriceRev /> Urbanization is often connected with the increased [[velocity of money]] theory because the frequency of transactions increases as urban centers grow relative to rural areas. For example, in England, many lands held as common lands were enclosed so that only the landlord could graze his animals. This forced his former tenants either to pay an increased rent, or to leave their own farms. An increase in the number of people unable to afford their farms led to migration into the cities in search of employment. This in turn led to an increase in the velocity of monetary transactions, but was frustrated by the high demand and [[Elasticity (economics)|inelastic]] supply of food.<ref name=PriceRev />

=== Population and agricultural growth ===
If the influx of Spanish silver was not the initial cause of the European Price Revolution then the best explanation for the Price Revolution is population growth. This theory developed under Earl Hamilton argues that prices were not driven by specie (which, at most, sets a floor to prices) but by the actions of monopolists (or governments) whose positions in this period were enhanced by the steady population growth in Western Europe. The resurgence of population after the plague is linked to the "demand-pull" explanation of the price revolution, which states that an increase in the demand for money and the growth of economic activity produced the rise in prices and a pressure to increase the supply of money.<ref>{{cite book|last=Clough |first=Shepard B. |title=European Economic History; the Economic Development of Western Civilization |edition=3rd |place=New York |publisher=McGraw-Hill |year=1968}}</ref>

The significant increase of European population in the period 1460–1620 meant that there were now more people to be fed, clothed, and housed raising the demand for goods of all kinds. Agricultural products then became crucial to the European market. Producers were unable to respond to the rising demand as new and less fertile land were cultivated. Essentially, [[marginal cost]]s were increasing and per-capita yields were shrinking, while demand continued to rise. The price of agricultural commodities, especially grain, rose sooner and faster than those of other goods, and the inflation of agricultural prices eventually caused a general increase in price level in all industries. Until the mid-17th century, the number of mouths to feed outran the capacity of agriculture to supply basic foodstuffs, causing the vast majority of people to live in a constant state of hunger.<ref name=Wernham>{{cite book |last=Wernham |first= R. B. |title=The Counter-Reformation and Price Revolution, 1559–1610 |place=Cambridge |year=1968 |publisher=Cambridge University Press}}</ref> Until food production could catch up with the increasing population, prices, especially those of the staple food, bread, continued to rise.<ref name=Wernham/> Hamilton's theory pointed to evidence of agricultural price growth, slow nonagricultural price growth and poor timing (of the specie outflow to the East) as tangible evidence of the failure to fix prices and feed the growing populace. Hamilton also pointed to monopolistic and other non-competitive techniques as the typical pricing behavior for European products and factor markets of the period.