The Great Wave: Price Revolutions and the Rhythm of History

By David Hackett Fischer, 1996 (536 p.)

The thesis of this book is that prices fluctuate in large, durable waves for reasons other than changes in money supply. The author refers to these waves as price revolutions that can last for over a century. By his definition, “each price revolution developed through five stages: slow beginnings in a period of high prosperity; a period of surge and decline; a time of discovery and institutionalization; an era of growing imbalances and increasing instability; and finally a general crisis.”

While he does not deny that money printing can cause prices to go up, Fischer challenges Milton Friedman’s credo that inflation is always a monetary phenomenon. “American economists whom I consulted,” writes Fischer, “believed that inflation in the twentieth century began with Lyndon Johnson and the war in Vietnam.” He asserts that historians generally fail to grasp the nature of price movements. Of the historians that Fischer claims to have talked with, “none remembered the medieval price revolution. Even medievalists expressed surprise and even skepticism, until they were invited to examine the data, which was largely unknown to them.”

This book provides abundant evidence of how price waves have been governed by human experience, social mood, and spurious events (i.e. black swans), instead of just money supply growth. Weather, population growth, technological change, pandemics, wars and famines, are just some of the reasons that Fischer cites. Instead of blaming inflation on changes in money supply sparked by greed and incompetence of governments, Fischer helps us appreciate that it’s not so simple. “A monetary explanation cannot tell us why people choose to expand the money supply in the first place,” he argues, “or why they do so in some periods more than others.”

David Hackett Fischer is an American scholar and university professor who devoted most of his life to the study of economic history.  He has written a dozen other history books beside this one, with his latest titled African Founders (2022), on how slavery expanded American ideals.  His best known book was Washington’s Crossing (2004), which won the 2005 Pulitzer Prize for History.  While his specialty and most of his works relate to U.S. history, he claims that the thesis in The Great Wave was inspired by his PhD studies at The Johns Hopkins University under Frederic Chapin Lane, who specialized in Medieval and Renaissance economic history.

While Fischer makes a convincing case that he backs with fascinating accounts and data, I couldn’t help but question some of his historical inferences. In a sense, this book is similar to Ray Dalio’s Principles for Dealing with The Changing World Order (2021), in that it uses observations of long cycles in history to draw conclusions about what comes next. Unlike Dalio, though, who seems to believe that he possesses the gift of clairvoyance, Fischer admits that the study of history cannot reveal the future. But after reminding us of that caveat, he concludes that “the evidence of this inquiry tells us that we are living in the late stages of a very long price-revolution, perhaps in the critical stage.”

Ironically, “today” for Fischer was almost 30 years ago, when technology was about to change the world by more than he could have appreciated. He postulated that the great price revolution of the 20th Century, which started in the late 1900s and included the inflationary surge in the 1970s, still had not peaked. He did not mention the internet, and could not have mentioned the iPhone, which was still ten years away, but he rightly observed that a “cycle” of deflation had taken hold in the 1990s. “It should be understood clearly,” he writes, “that the movements we are studying are waves—not cycles. To repeat: not cycles, but waves.” Good thing he left that door open, since a multi-decade cycle of disinflation was only just getting started as his book went to print.

Fischer does engage in plenty of generalization and oversimplification when he tries to frame the history of price movements over the last 4000 years. It’s interesting and fascinating to study the distant past, but in my opinion it’s a bit too ambitious to try to draw simple patterns from periods spanning centuries. While there are lessons to be gleaned from Fischer’s studies, we should not forget the English historian Herbert Fisher’s assertion that “all of history is one great fact, about which there can be no generalization.”

While not perfect, this was a worthwhile read that I would recommend to anyone interested in the history of inflation. It is well written and organized, and as Barton Biggs put it in his 1997 review of the book, “Fischer is no sensationalist trying to crank out a pseudo-economic best-seller, but a serious economic historian.”





With all of this material in hand, it is possible to follow the movement of prices through nearly four thousand years of recorded history. The interpretive opportunities in these sources are limited only by the reach of our imagination.

Deep change may be understood as a change in the structure of change itself. In the language of mathematics, deep change is the second derivative. It may be calculated as a rate of change in rates of change.

In other ways the new era of the late 1990s is entirely without precedent. A novel tendency in a period of disinflation is a very powerful inflation of asset values, and especially in the price of common stocks on many exchanges. Here again the cause is to be found outside the conventional frame of economic analysis, in social and cultural tendencies that have caused investment in certain classes of assets to increase more rapidly than the supply of assets themselves. We might have a major problem here, in what an historian would call a shearing effect, created by countervailing price movements.

The world changes faster than our thoughts about it. For example, in the late 1990s, central bankers in many countries continued to think of themselves as inflation- fighters in a new era when greater dangers rose from disinflation or even deflationEconomists in the 1990s (monetarists especially) predicted that large increases in the money supply would cause inflation to pick up again, as would have happened a generation ago. But other factors have been more powerful.

The Greeks called it hubris, and thought that it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave- riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again. Wayland Massachusetts D.H.F. June 1999


Upswing in the thirteenth century . . . downswing in the later middle ages . . . upswing in the sixteenth century which breaks in the seventeenth century; a third upswing in the eighteenth century . . . what is the meaning of these movements?—Wilhelm Abel, 1935

If we study the Phelps- Brown-Hopkins index and others like it, we find that most inflation in the past eight centuries has happened in four great waves of rising prices. The first wave continued from the late twelfth century to the early fourteenth century, and has been called the medieval price-revolution. The second was the familiar “price-revolution of the sixteenth century,” which actually began in the fifteenth century and ended in the mid-seventeenth. The third wave started circa 1730, and reached its climax in the age of the French Revolution and the Napoleonic Wars. It might be called the price-revolution of the eighteenth centuryThe fourth wave commenced in the year 1896, and has continued since, with a short intermission in some nations during the 1920s and early 1930s. It is the price-revolution of the twentieth century.

Economists in the United States also have little memory of these historical events, except for the price- revolution of the sixteenth century, which is distantly remembered as proving the truth of the axiom that inflation is “always and everywhere primarily a monetary phenomenon,” as the American economist Milton Friedman wrote in another context. Otherwise, the author has found that price-revolutions in general are (with some exceptions) entirely unknown to most economists, political leaders, social planners, business executives, and individual investors, even as they struggle to deal with one price- revolution in particular.

Before we begin to study these relationships, a caveat is necessary. It should be understood clearly that the movements we are studying are waves—not cycles. To repeat: not cycles, but waves. One great price-wave lasted less than ninety years; another continued more than 180 years.

All great waves had important qualities in common. They all shared the same wave-structure. They tended to have the same sequence of development, the same pattern of price-relatives, similar movements of wages, rent, interest-rates; and the same dangerous volatility in later stages. All major price revolutions in modern history began in periods of prosperity. Each ended in shattering world-crises and were followed by periods of recovery and comparative equilibrium.

Today, we are living in the late stages of the price revolution of the twentieth century. Disaster does not necessarily lie ahead for us. This book does not predict the apocalypse. It does not attempt to tell the future. To the contrary, it finds that uncertainty about the future is an inexorable fact of our condition.

Many readers who are literate in economics will remember the special meaning of the Keynesian dictum that in the long run we are all dead. The events of the twentieth century should have taught us that this idea, in its most common application, is very much mistaken. American economist Herbert Stein, after a term of service in Washington, wrote ruefully in 1979, “we woke up to discover that we were living in the long run, and were suffering for our failure to look after it.”


The Crisis of the Fourteenth Century

The king was seized and tightly bound. A red- hot iron was driven slowly upward through his anus until it penetrated his brain. It is said that his dying screams could be heard for miles across the Severn Valley. The folk memory of this event is still alive in Gloucestershire. Some swear that the death cry of Edward II can still be heard in the silence of a moonless night.

These disorders, cruel as they may have been, were not the worst of Europe’s sufferings. Famine, pestilence, war and insurrection returned repeatedly to Europe during the 1320s and 1330s. Some places— Tuscany for example— suffered worse famines in the period 1328– 30 than in 1315– 20. Prices surged and declined in great swings. The rural population shrank, arable lands began to be abandoned, and peasants grew poorer. At the same time, some of the rich continued to grow richer. This was the period when the French popes lived in high luxury at Avignon. Pope John XXII (1316– 34) spent vast sums for jewels and ornaments and gold cloth for his vestments. Papal banquets were served on gold plate beneath gilded frescoes and ceilings. Petrarch protested that even the papal horses were “dressed in gold, fed on gold, and soon to be shod in gold if God does not stop this slavish luxury.” The cardinals accumulated great wealth; one Prince of the Church required 51 houses for his servants. Similar scenes were enacted in royal courts and noble households.

Meanwhile, the peasants suffered and the poor starved. The generation born in this age of crisis was so debilitated by hunger, disease, exploitation, war and disorder that a few years later it succumbed to a still greater catastrophe, the worst in world history.  In 1346 a Tartar army besieged the Genoese town of Caffa (now Feodosia) in the Crimea. The attackers were stricken by plague, and converted their misfortune into a weapon of war— catapulting their dead into the city in a deliberate attempt to spread the infection. This tactic succeeded so well that the Genoese abandoned the city and fled in their galleys through the Black Sea, the Aegean and the Mediterranean, carrying with them the plague that came to be called the Black Death. By October 1347, the Black Death had established itself in Sicily, and spread swiftly to Africa, Sardinia, Corsica and the mainland of Europe. In January 1348, it reached Venice, Genoa and Marseilles, where 56,000 people died. By June it crossed the Alps and Pyrenees. England was infected by December, and Scotland and Scandinavia by 1349. A few cities miraculously escaped— Milan, Nuremberg, Liège, and several fortunate regions such as Bearn, as well as much of eastern Germany and Poland where the population was sparse.

The Equilibrium of the Renaissance

The new Ottoman Empire was a mixture of light and shadow. It was created by slaughter and maintained by terror. Sultan Mehmed II alone was thought to have been responsible for the murder of more than 800,000 people. But brutal as the Turks may have been, they were humanitarians by contrast with some of the despots whom they destroyed. One of their enemies was the sadistic Vlad Dracul of Wallachia— the original Dracula who ordered mass murders merely for amusement, and once impaled and crucified 20,000 captives in a single orgy of violence. The Turks drove Dracula from power.

Throughout that region, a remarkable transformation occurred in the life of the mind during the quattrocento. “Ever since the humanists’ own days,” writes historian Hans Baron, “the transition from the fourteenth to the fifteenth century has been recognized as a time of big and decisive changes.” During the early decades of the fifteenth century, Florentine humanists such as Leonardo Bruni, Coluccio Salutati and Poggio Bracciolini produced a literature which celebrated republican virtue, the rule of law, and the power of reason.


The Equilibrium of the Renaissance

The starving poor, driven to desperation by rising food prices, gathered before the granary in such numbers that some were crushed and others were suffocated. The surging crowd broke down the doors and attacked the granary, crying “Palle, palle,” the nickname of the Medici who had so often helped them in the past.

In 1498, the people of Florence began to blame Savonarola himself for their misfortunes, and turned savagely against their spiritual leader. On the eve of Ascension Day they burned him at the stake while the mob jeered, “Prophet, now is the time for a miracle.”

The Price Revolution of the Sixteenth Century

What set this change- regime in motion? There are many answers in the literature: monetarist, Malthusian, Marxist, and more. As the evidence continues to grow, many historians (including this one) have come to believe that prime mover of the price-revolution was a revival of population growth, which placed heavy pressure on material resources. …  The growth of population caused the price of food to rise, faster and farther than that of other commodities. Industrial products and wages lagged behind.

In an environment that was rapidly losing its forest cover, the rising price of firewood and charcoal soon outstripped even the cost of food. After 1530 or thereabouts, the price of wood in all its forms (including charcoal) increased more rapidly than that of grain or meat or any other commodity. Wood prices rose sharply in England, France, Germany and Poland. Energy prices were among the most volatile in the long inflation of the sixteenth century.

Some people, more than others, were able to respond to rising prices. As a consequence, social imbalances began to develop. At the beginning of the price- revolution, wages had risen more or less together with the cost of food and shelter. While they did so, there was a heady sense of high prosperity. In later stages of the price- revolution that pattern changed. Money- wages lagged behind the rising cost of living, and real wages fell sharply. By 1570 real wages were less than half of what they had been before the price- revolution began.

The largest part of this increase was American silver and gold, which flowed abundantly into Europe after 1500. The cause of the price- revolution of the sixteenth century has often been attributed to this single factor: large imports of American metal, which increased the quantity of money in circulation, and reduced its purchasing power by expanding its supply. In light of much historical research, this monetarist explanation must be revised, without being rejected. American treasure could not have been the first cause of a price-revolution. Prices began to go up as early as 1480, many years before American silver and gold arrived in Europe. In England and Germany, prices nearly doubled during the half century before American silver could have had a significant effect on their economies. … The evidence shows that American treasure contributed in a major way to the momentum of the price revolution, but did not set it in motion, or sustain it to the end… The effect of vast new supplies of gold and silver was to support an existing economic trend and to intensify its effect.

Monetary theory explains why an increase in the supply of money drives up prices. It cannot explain why the money- supply increases in the first place, except by introducing the monetarist’s favorite diabolus ex machina in the form of corrupt and incompetent politicians who are believed to be too stupid or weak to understand the monetarist’s favorite remedies.

The same processes worked in other ways. Another monetary factor (small by the measure of American treasure but still important) was the mining of precious metals within Europe, which also expanded during the sixteenth century. The great inflation created a voracious hunger for a larger circulating medium. Old mines were reopened at heavy expense. Once again, most of this activity came after the price- revolution had begun.

The Crisis of the Seventeenth Century

As these very dangerous trends continued, the western world experienced a major disaster. In 1591, the weather turned wet and cold. European peasants watched helplessly as their wheat and rye were beaten down in the fields, and their hay crops rotted in the meadows. The same thing happened the next year, and the year after that, and altogether seven years running. In France, the wine harvest was late and small from 1591 to 1597. Grain crops fared even worse. English historian W. G. Hoskins observed, “the 1594 harvest was bad; 1595 was even worse; 1596 was a disaster; 1597 was bad too.” This was more than merely a short spell of bad weather. It was a shift in the climate— one of several sharp downturns in the early modern era that have been called collectively the “little ice age.” The decade of the 1590s was so cold that Alpine glaciers began to send rivers of ice through inhabited valleys. In 1595 the Giétroz glacier buried the villages of Martigny and killed seventy people. Disasters of the same sort happened at Grindelwald and Chamonix and the Val d’Aosta. 4 Similar events had happened before, but in the 1590s they came at a time when the economy was dangerously overstrained. Families had little in reserve. Food riots broke out in many parts of Europe. As the troubles continued, people began to starve. A season of scarcity grew into a massive famine that was called the “great dearth.” There were terrible scenes of suffering in many parts of Europe. A Swede wrote in 1597:

The combined effect of rising mortality and falling fertility caused a reversal of demographic growth in the seventeenth century. This was the only period after the Black Death when the population of Europe actually declined. As if these sufferings were not enough, a major economic collapse occurred in the period from 1610 to 1622. This was more than merely a cyclical downturn. It was a major break in the secular trend. Historian Ruggiero Romano observed its effects almost everywhere in Europe. In the Baltic, the number of ships passing through the Danish Sound reached its peak near the year 1600, and then after a period of fluctuation declined steadily for more than fifty years.

These works were dark visions of a disordered world that seemed to conspire against human hope and happiness. At the same time, Cervantes produced perhaps the greatest masterpiece of Spanish literature, Don Quixote (1605, 1615), which for all its mordant humor was a sad and bitter description of a world that had dissolved into social chaos.

In Poland, Catholic nobles destroyed most of the Protestant churches in that nation. In the Ukraine, the revolt of the Cossacks was in part a religious movement. Throughout central and eastern Europe, the people of Russia, Poland, and Germany expressed their unhappiness in the customary way, by slaughtering the Jews. Chmielnicki’s rebellion in Poland was wildly antisemitic. From 1648 to 1658, more than 700 Jewish settlements were destroyed; perhaps 100,000 Jews were killed. 

Beyond doubt, a long- term improvement had taken place during the intervening years in productivity, production and per capita income. Markets had become larger and more tightly integrated. Even the worst miseries of this dark era were measures of material progress. During the crisis of the fourteenth century, high medieval civilization had collapsed. In the crisis of the seventeenth century, the civilization of early modern Europe was shaken to its deepest foundations. But it survived.

The Equilibrium of the Enlightenment

At the same time that wages rose, rents came down. France’s pioneering price historian the Vicomte d’ Avenel calculated that the rent of one hectare of farmland fell from the equivalent of 12.8 francs in 1651– 75 to 7.5 francs by 1701– 25. Subsequent research by academic specialists has confirmed his general findings in France, England, Italy, Germany and most parts of Europe. Interest rates also declined in this period. The maximum lawful rate of interest in England fell from 10 to 6 percent in the seventeenth century. Further, economic historian H. J. Habakkuk discovered that interest actually charged by moneylenders declined even more sharply than the legal maximum. During the general crisis of the seventeenth century, English creditors had tended to charge the highest allowable rate. By the century’s end, actual rates had fallen below the statutory limit. French rentes declined from 10 to 4 percent. In England by the year 1735, the yield on long annuities sank as low of 3 percent. Dutch commercial loans drifted downward to 2 percent or even less in this period.

What was the “secret of stability” in this age of equilibrium? A simple monetarist model, that seeks an explanation of price movements primarily in terms of the quantity of money in circulation, works no better for this period than for any other. New research by Michel Morineau finds evidence that American treasure flowed abundantly into Europe during the period 1660–1730, in quantities almost (but not quite) equal to the price- revolution that preceded it. But this time there was no long- term inflation. In France, a large increase occurred in the supply of silver and gold in circulation during this period. Voltaire estimated that the quantity of silver money increased from five hundred million livres in 1683 to twelve hundred millions in 1730. Modern economic and social historians generally agree that the quantity of gold and silver doubled or trebled in France during this period. But the cost of living did not go up. Further, the French monetary system in particular also suffered many debasements between 1660 and 1730. One scholar writes that “recoinage after recoinage so altered the value of the real money of France that it caused serious economic difficulties at home and abroad. . . . Only with the great monetary reform and consolidations of 1726 did this era end.” But prices did not rise. Other monetary systems were more stable than that of France. Dutch guilders and rixdollars remained perfectly stable from 1691 to the nineteenth century. British guineas, Venetian ducats and Portuguese crusados also preserved their value. In Europe as a whole, however, price stability in this period was achieved not because of monetary factors but in spite of them.

The great cities, as always the barometers a civilization’s health, prospered throughout Europe in this period. London was rebuilt to the taste of Christopher Wren and Inigo Jones, and took on the neoclassical character that it preserves to this day. Paris became the metropolis of Europe— its beautiful squares and broad boulevards began to be laid out in this period. Berlin as late as 1654 had been a small river settlement of about 5,000 inhabitants; by 1740 it had become a stately city with nearly 100,000 people. Vienna was transformed from a grim medieval fortress town into an imperial capital of great beauty. The Schönbrunn palace was begun in 1695 and the Belvedere in 1717. The city’s great baroque churches and state buildings date from this period.

The turbulence of the early and mid-seventeenth centuries came to an end in many European states during the period from 1660 to 1740English historian J. H. Plumb observes that “political stability, when it comes, often happens to a society . . . as suddenly as water becomes ice.”

“In the seventeenth century men killed, tortured and executed each other for political beliefs; they sacked towns and brutalized the countryside. They were subjected to conspiracy, plot and invasion. This uncertain political world lasted until 1715, and then rapidly began to vanish. By comparison, the political structure of eighteenth century England possesses adamantine strength and profound inertia.”

Many rulers were called “great” in this era: Louis Le Grand, Frederick the Great Elector, Frederick the Great, Peter the Great, Catherine the Great. These leaders were no more able than many of the failed monarchs who preceded them in the seventeenth century. The enlightened despots of Europe were consumed by vanity and greed. They quarreled incessantly with other princes, and squandered both the wealth of their nations and lives of their subjects on petty and destructive rivalries. But an age of equilibrium is kind to reigning kings. A reputation for greatness in a monarch often owes more to circumstance than to character.

The man who personified this era better than any other was Francois Marie Arouet (1694– 1778), better known by his pen name, Voltaire.


The Price Revolution of the Twentieth Century

Wages chase prices, prices chase wages, and both chase their past history. —Clyde Farnsworth, 1977

The institutionalization of inflation in the twentieth century was not limited to price and wage regulation itself. Systemic restraints were placed also upon supply. Many nations imposed limits on production: farm products in the United States, oil in Saudi Arabia, coffee in Colombia, gold in South Africa, and many other commodities throughout the world. International cartels pursued the same policy where they were able to do so. The classic example was the price of diamonds, which the De Beers syndicate inflated to many times their market value by restrictions on supply and other methods.

The Troubles of Our Time

This policy of using high interest rates to control high inflation had many economic and social effects. It increased inequality, discouraged investment, diminished productivity, reduced demand, and drove up unemployment. Ironically, in some ways it also promoted inflation. The cost of housing, for example, rose sharply in part because home construction was inflated by builders’ capital costs, which increased with the rate of interest. Interest-rate manipulation was a very powerful instrument of economic policy. Its impact was much broader than it was meant to be.

As the pace of population-growth diminished, rates of inflation also fell in the 1990s, with a speed that took experts by surprise. Inflation forecasts were repeatedly revised downward, but not fast enough to keep pace with the new trends. In 1994, economic forecasters around the world swallowed hard and predicted that prices would rise only 3.5 percent the next year. In fact, they rose 2.6 percentA journalist who studied the accuracy of economic forecasts observed in 1995, “Over the past couple of years, inflation has been consistently lower than expected in Britain and America.”

All that was happening in the Spring of 1996, when this book went to press. The end of the story has not been written. It could end in many different ways. So fragile were the major trends that contingencies of various kinds threatened to disrupt them. A major war in the Middle East or eastern Europe or some other trouble spot could reignite inflation. A collapse of overvalued security markets could cause panic, depression and deep deflation.


WORKS ON THIS subject often end with a book of Revelations, or at least a chapter of Jeremiah, in which the reader is warned that we are heading for disaster— unless the author’s ideas are speedily enacted. These dark prophecies find a growing market with modern readers, who appear to have an insatiable appetite for predictions of their own impending doom. Even when prophecies fail, they are merely updated and sell briskly once againThey call to mind the career of the Reverend Samuel Miller, a Baptist minister in nineteenth century New England, who predicted that the world would end no later than December 31, 1843. When the fatal day approached, the Prophet discovered an error in his computations. He announced that the last trump had been rescheduled to March 21, 1844His followers grew to many hundreds. They donned special “resurrection robes” and gathered to await the day of judgment. But Samuel Miller found another mistake in his arithmetic, and postponed the end of the world once again, this time to October 22, 1844. The faithful were undeterred. Their numbers rose so high that on the appointed day, business came to a halt in parts of New England. But Samuel Miller revised his numbers yet again and went on prophesying until his end arrived— without warning— in 1849. Those who believe that the economic future has been revealed to them should remember the story of Samuel Miller.

The first stage was one of silent beginnings and slow advances. Prices rose slowly in a period of prolonged prosperity. Magnitudes of increase remained within the range of previous fluctuations. At first the long wave appeared to be merely another short-run event. Only later did it emerge as a new secular tendency. … Food and fuel led the upward movement. Manufactured goods and services lagged behind. These patterns indicated that the prime mover was excess aggregate demand, generated by an acceleration of population growth, or by rising living standards, or both.

The first stage of every price-revolution was marked by material progress, cultural confidence, and optimism for the futureThe second stage was very different. It began when prices broke through the boundaries of the previous equilibrium. This tended to happen when other events intervened — commonly wars of ambition that arose from the hubris of the preceding period. Examples included the rivalry between emperors and popes in the thirteenth century; the state- building conflicts of the late fifteenth and early sixteenth centuries; the dynastic and imperial struggles of the mid-eighteenth century; and the world wars of the twentieth century. These events sent prices surging up and down again, in a pattern that was both a symptom and a cause of instability. The consequences included political disorder, social disruption, and a growing mood of cultural anxiety. The third stage began when people discovered the fact of price inflation as a long-term trend, and began to think of it as an inexorable condition. They responded to this discovery by making choices that drove prices still higher. Governments and individuals expanded the supply of money and increased the velocity of its circulation. In each successive wave, price- inflation became more elaborately institutionalized. A fourth stage began as this new institutionalized inflation took hold. Prices went higher, and became highly unstable. They began to surge and decline in movements of increasing volatility. Severe price shocks were felt in commodity movements. The money supply was alternately expanded and contracted. Financial markets became unstable. Government spending grew faster than revenue, and public debt increased at a rapid rate. In every price-revolution, the strongest nation-states suffered severely from fiscal stresses: Spain in the sixteenth century, France in the eighteenth century, and the United States in the twentieth century. Other imbalances were even more dangerous. Wages, which had at first kept up with prices, now lagged behind. Returns to labor declined while returns to land and capital increased. The rich grew richer. People of middling estates lost ground. The poor suffered terribly. Inequalities of wealth and income increased. So also did hunger, homelessness, crime, violence, drink, drugs, and family disruption. These material events had cultural consequences. In literature and the arts, the penultimate stage of every price-revolution was an era of dark visions and restless dreams. This was a time of lost faith in institutions. It was also a period of desperate search for spiritual values. Sects and cults, often very angry and irrational, multiplied rapidly. Intellectuals turned furiously against their environing societies. Young people, uncertain of both the future and the past, gave way to alienation and cultural anomie. Finally, the great wave crested and broke with shattering force, in a cultural crisis that included demographic contraction, economic collapse, political revolution, international war and social violence. These events relieved the pressures that had set the price-revolution in motion.

Sequential Differences: Even as all price- revolutions shared a common wave-structure, they differed from one another in duration, magnitude, and range. These differences were not random variations. They comprised a coherent process of historical development from one great wave to the next. Since the twelfth century, price- revolutions have succeeded one another in a continuous sequence of historical change. Several sequential patterns of this sort can be identified. The most obvious was a change in rates of change. From one wave to the next, average annual rates of price- inflation tended to increase geometrically: 0.5 percent in the price- revolution of the thirteenth century; a little above I percent in the very long wave of the sixteenth century; nearly 2 percent in the shorter wave of the eighteenth century; and at least 4 percent in the price- revolution of the twentieth century. This acceleration was caused by the expansion of markets, and by the institutionalization of price- increases. Second, as rates of change increased, a larger proportion of total price gains became concentrated in the later stages of each price- revolution. In the medieval price- revolution, absolute magnitudes of gain were comparatively even in their distribution through time. In the price- revolution of the twentieth century, more than half of the total increase in prices from 1896 to 1996 happened after 1970. Nine- tenths of it came after 1945. This pattern was caused by acceleration in rates of price- change from one price- revolution to another. Third, the range of annual fluctuations diminished from one wave to the next. In the medieval price- revolution, these gyrations were very violent and dangerous, mainly as a consequence of changing harvest conditions. Food prices tended also to be less stable when people lived closer to the margin of subsistence. In each subsequent price- revolution, those movements became less extreme, and fluctuations were damped down. The growth of production created surpluses, which functioned as price- cushions. The expansion of markets and the improvement of communications also diminished the disruptive effect of local scarcities and seasonal oscillations. Fourth, from one wave to another, the final stage of cultural crisis became progressively less catastrophic. The medieval price- revolution ended in the massive famines and epidemics of the fourteenth century. The second wave culminated in the general crisis of the seventeenth century. This was the only period after the Black Death when the population of Europe declined, but not as much as in the fourteenth century. The third wave had its climax in an age of world revolutions (1776– 1815), a time of many troubles, but population continued to increase. The price- revolution of the twentieth century has yet to reach its climax. Fifth, as each successive crisis grew less severe in demographic terms, it became more sweeping in its social consequences. Every general crisis caused a social revolution, and the radicalism of these events increased through time. The crisis of the fourteenth century did much to end villeinage in western Europe, and to transform societies based on conquest and subjugation into customary systems of orders and estates. The general crisis of the seventeenth century transformed political systems and expanded the rule of law in Britain, America and Europe. The revolutionary crisis of the eighteenth and early nineteenth centuries (1776– 1815) made public institutions in America and Europe more responsive to the will of the people, and more protective of their individual rights. It also transformed systems of social orders into classes. The great wave of the twentieth century has not yet reached its end, but it has already caused the collapse of totalitarian systems of the left (eastern Europe) and the right (Latin America), as well as sweeping social and economic reforms in many nations. Every general crisis in modern history has improved the condition of ordinary people. It has also enlarged ideas of human dignity, freedom, and the rule of law. This tendency has become more powerful in each successive wave. To summarize, each price- revolution developed through five stages: slow beginnings in a period of high prosperity; a period of surge and decline; a time of discovery and institutionalization; an era of growing imbalances and increasing instability; and finally a general crisis. The climax was followed by a fall of prices, recovery of stability, and a long period of comparative price equilibrium. The social and cultural impact of these movements changed from one great wave to another. Velocity increased and variability declined. Each successive price- revolution became less catastrophic in its demographic consequences, but more sweeping in its social impact.

The most simple and straight- forward explanation of price- revolutions is the monetarist model, which holds that price levels are determined by the quantity and velocity of money in circulation. This explanation has major strengths, and has made an important contribution to knowledge. Much research has established beyond doubt that monetary factors make a major difference in price levels. But when monetarist models are introduced as the first cause of price-revolutions, difficulties appear. The timing is never quite right. The price- revolution of the sixteenth century, for example, began as early as 1475, thirty years before the first American treasure reached Europe, and fifty years before it began to flow in quantity. Further, a monetarist model cannot account for many aspects of a price-revolution. It alone cannot explain the movement of price- relatives, or the disparity between prices and wage movements, or the difference in returns to labor and capital. It does not help us to understand why prices and interest rates tend to rise together in long inflations — the Gibson paradox, which is a major problem for monetarists. A monetary explanation cannot tell us why people choose to expand the money supply in the first place, or why they do so in some periods more than others. Increases in the supply of money are not suddenly visited upon history as Zeus came to Danae, in a shower of gold. People deliberately decide to change the size of the money supply, for one reason or another. In the history of these events there is always a prior cause. Moreover, the monetarist model works better for some periods than others. It does well for middle and later stages of price revolutions, but badly for early stages, and for periods of price equilibrium. Its explanatory power increases when it is used as an historical variable rather than a theoretical constant. In some periods, monetary forces are strong and overriding. In others they are weak and secondary. Altogether, Wilhelm Abel observes from long and careful study that “Long- term trends in the price of grain . . . cannot be explained adequately by fluctuations in the circulation of money, though that has been attempted since the time of Jean Bodin (1568). Even when improved forms of the simple quantity theory are summoned to the rescue, the discrepancies of time apparent in the course of the price movements remain inexplicable.”  In short, a monetary model is a necessary and important part of any causal explanation of price- revolutions, but it is not a sufficient explanation. Monetarism alone won’t do.

Still the hardest questions remain. Where are we heading? What does the future hold for us? The study of history does not give us the answers to these questions. It cannot reveal the future. But it helps us to understand the present and very recent past. The evidence of this inquiry tells us that we are living in the late stages of a very long price- revolution, perhaps in the critical stage.

In economic history, equilibrium is the exception rather than the rule. A free market restores equilibrium only to break it down again, and to set in motion a new sequence of imbalances and instabilities with all the troubles that follow in their train. In the full span of modern history, most free markets have been in profound disequilibrium most of the time— often dangerous and destructive disequilibrium. A third fact is also frequently forgotten. In our complex and highly integrated modern economies, there are no truly free markets any more. The free market in the twentieth century is an economic fiction, much like the state of nature in the political theory of the eighteenth century. Markets today are highly regulated and actively manipulated by both public and private instruments. The real question is not whether we should interfere with the market, but what sort of interference we should make, and who will make it, and what its extent will be.

The historical record of the past eight hundred years shows that ordinary people are right to fear inflation, for they have been its victims— more so then elites. … Price-revolutions and the long-term inflation that they engendered have caused major social problems in the past eight centuries. But there is another difficulty. Recent anti-inflationary policies have also done major damage in other ways, and sometimes even in the same ways.

If both inflation and anti-inflationary policies have caused trouble, what should we do?

Many heads of government, leaders of corporations, business managers, economic theorists, and private investors have very little historical understanding of economic processes which they confront. Ideas and solutions are drawn from one set of historical circumstances (often very recent) and applied to others where they do not fit. The corrective is not merely historical knowledge. It is also historical thinking.

Important progress has been made in the use of interest rates as a way of regulating an economic system. This method was first applied on a large scale by the Federal Reserve Board as recently as 1966. In three decades it has become an indispensable instrument of economic policy throughout the world.


The people of ancient Rome experienced repeated price-revolutions, which closely coincided with the rhythm of Roman political history. One great wave reached its climax in a major time of troubles for the early republic, circa 240–210 B.C. Another coincided with the collapse of the republican institutions. In between, there was an intervening period of comparative price stability.

Cycles and Waves Frank Manuel once remarked that every idea of history comes down to either the circle or the line.

A very different institutional model comes from economic historian Peter Lindert, who has framed the counterhypothesis called the “Robin Hood Paradox,” which holds that “across time and jurisdictions, redistribution toward the poor is least given when most needed . . . Robin Hood shows up least when needed most.” (“Toward a Comparative History of Income and Wealth Inequality,” in Brenner, Kaelbe and Thomas, eds., Income Distribution in Historical Perspective,” 226–29

The reason of a thing is not to be enquired after, till you are sure the thing itself be so. We commonly are at what’s the reason of it? before we are sure of the thing. —John Selden, Table Talk, 1689


Daniel J. Boorstin, “Enlarging the Historian’s Vocabulary,” in R. W. Fogel and S. L. Engerman, eds., The Reinterpretation of American Economic History (New York, 1971), xi–xiv.

Homer, History of Interest Rates, 160.


Every early American historian with whom I discussed this work expressed entire ignorance of the fact that prices were rising in the eighteenth centuryAll American economists whom I consulted believed that inflation in the twentieth century began with Lyndon Johnson and the war in VietnamMost scholars in both disciplines were aware of the price-revolution in the sixteenth century, but nearly all believed that it was a simple reflex of the supply of American treasure in EuropeNone remembered the medieval price revolution. Even medievalists expressed surprise and even skepticism, until they were invited to examine the data, which was largely unknown to them.


This book began nearly forty years ago at The Johns Hopkins University, where I studied economic history with Frederic Chapin Lane. Fred, as I later came to know him, was a scholar of the old school. His special field was the Venetian economy during the late Middle Ages and the Renaissance. Mine was (and is) American history, but I took a graduate course with him and found myself deeply drawn to the example of his scholarship. One course led to another, and then to a doctoral field under his direction on the economic and social history of Florence and Venice in the fifteenth century.

While I was teaching at Oxford, I got to know Henry Phelps-Brown whose work revolutionized price history by centering it on the experience of ordinary people, and correcting the elitist bias that had dominated earlier scholarship.

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