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Long-run patterns in market efficiency and the genesis of the market economy: Markets around the Mediterranean from Nebuchadnezzar to Napoleon (580 BC and 1800AD)

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  • Földvári, Péter
  • van Leeuwen, Bas
  • van Zanden, Jan Luiten

Abstract

Price volatility, reflecting the ability to absorb exogenous supply- or demand shocks, is an important dimension of market performance. In this paper we present a model to study the factors determining the price volatility of markets of basic foodstuffs in pre industrial societies. This model is used to explain the development of price volatility on markets in countries around the Mediterranean between 580 BC and 1800 AD. This is the region for which we have the oldest evidence of functioning markets (from Mesopotamia), so that we can track their development in time over a period of more than 2000 years. We find a break in market performance: medieval markets had a much lower level of volatility than ancient markets--a fact we try to explain within our model. Moreover, we suggest that this reduction in price volatility may have had important consequences for the economic behavior of farmers: price variability had to be reduced to the level that we find for the post-1000 period to induce farmers to specialize.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8521.

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Date of creation: Aug 2011
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Handle: RePEc:cpr:ceprdp:8521

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Keywords: economic history; market performance; market prices; Mediterranean;

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  1. Giovanni Federico & Paolo Malanima, 2004. "Progress, decline, growth: product and productivity in Italian agriculture, 1000-2000," Economic History Review, Economic History Society, vol. 57(3), pages 437-464, 08.
  2. Peter Foldvari & Bas Van Leeuwen, 2012. "Comparing Per Capita Income In The Hellenistic World: The Case Of Mesopotamia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(3), pages 550-568, 09.
  3. David Jacks, 2000. "Market integration in the North and Baltic Seas, 1500-1800," Economic History Working Papers 22383, London School of Economics and Political Science, Department of Economic History.
  4. van Leeuwen, Bas & Földvári, Peter & Pirngruber, Reinhard, 2011. "Markets in pre-industrial societies: storage in Hellenistic Babylonia in the medieval English mirror," Journal of Global History, Cambridge University Press, vol. 6(02), pages 169-193, July.
  5. Péter Földvári & Bas van Leeuwen, 2011. "What can price volatility tell us about market efficiency? Conditional heteroscedasticity in historical commodity price series," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(2), pages 165-186, June.
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