Abstract
This chapter constructs a general equilibrium model to analyze the impact and historical consequences of the Black Death in the mid-fourteenth century. Population, output and the supply of a commodity money, ‘silver’, are all endogenous variables of the model. The Black Death is an exogenous shock that initially reduces population and output while raising the real wage, thus inducing the eventual recovery of population and output to their original levels. The money supply is also shown to initially contract, leading to price deflation and what historians have called the ‘bullion famine of the fifteenth century’, after which both the money supply and the price level also eventually return to their original levels. The Price Revolution of the sixteenth century is analyzed as an exogenous shock to the supply of commodity money as a result of the discovery of America.
We are indebted to Rolf Henriksson for letting us dip into his immense knowledge of Eli Heckscher’s ideas and to André Burgstaller, Stan Engerman, Duncan Foley, Paul Krugman, David Laidler, Lars Magnusson and Alan Taylor for constructive comments. Carin Blomkvist and Lilian Öberg typed the manuscript. The essay has been financed by a SAREC research grant which is gratefully acknowledged.
Revised from ‘Towards a Factor Proportions Approach to Economic History: Population, Precious Metals, and Prices from the Black Death to the Price Revolution’ by Ronald Findlay and Mats Lundahl, in Ronald Findlay, Lars Jonung and Mats Lundahl (eds), Bertil Ohlin: A Centennial Celebration 1899–1999, 2002, The MIT Press, pp. 495–528. With kind permission of The MIT Press.
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Notes
- 1.
We are grateful to David Laidler for drawing our attention to the exposition by Marshall in a volume of his early writings edited by Whitaker (1975), in which the money commodity is the shells of an extinct fish that can be dredged for at increasing marginal cost in terms of goods.
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Findlay, R., Lundahl, M. (2017). Towards a Factor Proportions Approach to Economic History: Population, Precious Metals and Prices from the Black Death to the Price Revolution. In: The Economics of the Frontier. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-60237-4_7
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