Monetary and real aspects of the great divergence between europe and asia, 1500-1800


III. BULLION FLOWS AND THE PRICE REVOLUTION IN EUROPE



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III. BULLION FLOWS AND THE PRICE REVOLUTION IN EUROPE


1. The “price revolution” in Europe

The rising silver wages in Table 1 cannot simply be taken as indicative of rising living standards, because prices also increased. Table 2 shows the extent of the increase of the price level in a number of European countries, based on a common basket of goods that includes bread, other food items, cloth and fuel, and with all prices measured in terms of silver (Allen, 2001: 421). A substantial increase in the price level occurred all over Europe between the beginning of the sixteenth century and the middle of the seventeenth century. This is known in the literature as the “price revolution”, and it has been linked widely to the inflow of bullion from the New World, using the quantity theory of money as a theoretical justification (Hamilton, 1934; Braudel and Spooner, 1967).





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