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Grain Markets in Europe, 1500-1900: Integration and Deregulation

Author(s):Persson, Karl Gunnar
Reviewer(s):Rosenthal, Jean-Laurent

Published by EH.NET (May 2001)

Karl Gunnar Persson, Grain Markets in Europe, 1500-1900: Integration and

Deregulation. Cambridge: Cambridge University Press, 2000. xx + 173 pp.

$59.95 (cloth), ISBN: 0-521-65096-8.

Reviewed for EH.NET by Jean-Laurent Rosenthal, Department of Economics, UCLA.

Over the past four centuries the character of grain markets in Europe has

been the subject of intense political and scholarly debate. K. G. Persson’s

short book seeks to summarize, refresh, and advance this debate. The volume’s

six chapters address three topics, (1) political and theoretical debates about

grain markets; (2) the trade-off between interregional flows plus storage and

government intervention to regulate prices (either through public storage or

by driving wedges between the price of bread and that of grain); and (3) the

quantitative evidence of market integration. The volume’s strength is its

brevity. It offers a very clear introduction into the economics of the grain

trade, as well as a brief discussion of some of the technical problems that

beset scholars trying to quantify different aspects of the functioning of

grain markets. In keeping to this short length Persson has had to make some

important sacrifices, which, to the mind of this reviewer, have weakened the

reach of his book.

For instance, the first chapter covers ground abundantly researched by Steven

L. Kaplan, but it has only one single citation to Kaplan. Neither the

reference nor the text particularly inform the reader about how Persson’s

analysis either differs from or builds upon Kaplan’s numerous tomes. This is a

shame for Kaplan is not an economist while Person is and it would be

worthwhile to highlight the insights, if any, gained from applying economic

theory to a problem so carefully analyzed by an historian.

Chapters two and three cover question relating to the demand elasticity for

grain. In chapter two Persson addresses the linkages among grain markets,

harvest failures and mortality from a theoretical perspective. Persson

emphasizes the critical importance of estimates of the elasticity of demand

for grain in Robert Fogel’s work on the issue of mortality decline. In Fogel’s

work the world of grain meets the world of demography — he makes us care

about the demand elasticity of grain because it mattered to survival. Fogel

and others argue that given abundantly available prices and a reliable

estimate of the elasticity of demand for grain, one can recover the magnitude

of the supply shifts from year to year. Indeed there is no reason to believe

that demand shifts were significant, hence all changes in prices reflect

changes in supply. If the elasticity of demand for grain is very small then

small changes in supply could cause crisis mortality because the massive

consequent rise in the price of grain makes food unaffordable for the poor —

leaving room for government intervention to redistribute grain to the poor.

If, by contrast, the elasticity of demand is large then a big change in price

from one year to the next implies a large drop in the size of the harvest.

Persson argues, contra Fogel, that we should reconsider the connection between

grain prices and mortality because the relationship between survival and food

intake is less strait forward than Fogel might have led us to believe. Hence

we expect him to revisit the empirical connection between grain prices and

mortality. However, this expectation is disappointed for demography does not

reappear in the volume. Second, heargues that we need far more accurate

estimates of the demand elasticity for grain.

In chapter 3 Persson estimates the demand elasticity of grain directly.

Relying on French statistics that provide detailed evidence on the size of the

harvest from 1825 to 1913, he finds that Fogel’s estimated elasticity of

demand is the smallest of all. Given that the elasticity of demand may be as

much as five times greater than Fogel’s estimate, Persson resuscitates the

existence of significant short falls in grain output. Yet the high elasticity

of demand for grain that Persson finds poses rather than resolves a conundrum.

Thanks to historical demographers we know that high prices are a poor

predictor of aggregate mortality. But then just how did Europeans deal with

the large grain shortfalls they must have faced with regularity in the

seventeenth and early eighteenth centuries? The attendant discussion of

storage, not surprisingly, concludes that inter-annual storage was limited.

This finding eliminates one possible avenue for Europeans to escape crisis

mortality. Alternative hypotheses associated with the long-term rise in yields

documented by Robert C. Allen and others or Europe’s increasing integration

into world grain markets occur too late to explain the escape.

Chapter 4 examines two issues — the extent to which an intra-harvest price

increase compensated for the costs of storage and the extent to which price

volatility was related to government intervention. Examining evidence from

Pisa and Siena in the sixteenth and seventeenth centuries, Persson concludes

that although one can detect an intra-harvest price increase, it is

extraordinarily unstable and holding grain from harvest to spring would have

been as likely to bring a merchant to ruin as to fortune. The discussion of

price volatility and government intervention, however, is less clear, for

nowhere are there comparisons of average prices. If stability was brought

about by always maintaining prices at a relatively high level then its value

is limited. If it was brought about by maintaining prices at a relatively low

level, then the distributional questions that the regulation poses need to be

answered but they are neglected. We cannot simply assume that prices were

stabilized without some change in the mean price relative to an unregulated

market.

Chapters 5 documents the increasing integration of grain markets in Europe as

trade restrictions were lifted. While the process of increasing integration is

well known and has been documented, Persson’s chapter offers a clear way of

approaching the issue. On the other hand, one wonders why Persson has not

related his result to the work of others such as Jean-Michel Chevet. What is

harder to decipher is why Persson has chosen these particular series, since

there are so many other series available. For example, a complete set of

monthly departmental level prices for France was published thirty years ago,

but Persson ignores these to favor a much smaller number without telling us

why.

Chapter 6 recounts the history of grain trade liberalization and it is the

weakest of all because its explanation of the process is exceedingly limited.

The narrative of different episodes of liberalization is followed by a simple

conclusion. Despotic or authoritarian governments were more likely to opt for

reform of the grain trade. A different reading of the evidence would argue

that most European countries went from interfering with internal and external

trade to freer trade and then to protection of agricultural commodities

between 1780 and 1890. Nevertheless, once gained, the free transit of grain

within a country was never lost.

In conclusion Grain Markets in Europe would be strengthened by

confronting more technical issues explicitly and by integrating the previous

literature more fully, but its readable prose and the important questions it

confronts may make it a worthwhile introduction to the subject.

Jean-Laurent Rosenthal is the author (with Philip T. Hoffman and Gilles

Postel-Vinay) of Priceless Markets: The Political Economy of Credit in

Paris, 1660-1870 (University of Chicago Press, 2000).

Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):19th Century