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Markets and Growth in Early Modern Europe

Author(s):Bateman, Victoria N.
Reviewer(s):Persson, Karl Gunnar

Published by EH.Net (June 2013)

Victoria N. Bateman, Markets and Growth in Early Modern Europe. London: Pickering & Chatto, 2012. xiii + 252 pp. $99 (hardcover), ISBN: 978-1-84893-258-6.

Reviewed for EH.Net by Karl Gunnar Persson, Department of Economics, University of Copenhagen.

This book is a much extended Ph.D. dissertation which aims at approaching a wider audience with some big questions regarding the relationship between the level of market integration and economic growth. The major question is whether a high level of market integration is a necessary and also sufficient condition for economic growth to escalate.

The first chapter, ?Markets in History: A Survey,? traces the long history of market integration and would be suitable as a text for undergraduate students of European market development. The specialist reader will have to wait for the more substantial results in the ensuing chapters.

Bateman follows the tradition in market integration studies by looking at price convergence, price volatility and the speed of price adjustments back to some equilibrium price differential between markets. Her focus both on ?within country? and ?between country? integration and like many researchers before her she is mainly, but not exclusively, looking at grain market integration. The results are not all that surprising or new. After all there has been a considerable interest in market integration over the last fifteen years or so. The recent survey article by Giovanni Federico (?How Much Do We Know about Market Integration in Europe?? Economic History Review, 2012) lists over hundred items of which most have been published the last twenty years.? What is new and laudable is the width of the coverage and the nuanced discussion of the differences in historical experience in the various economies of Europe. Bateman makes an effort not only to present the statistical results but to discuss them country by country and period by period. Thereby the abstract numbers get some historical context and flavor.

Throughout the book the language and presentation are accessible and largely non-technical. However, at times the reader is left wondering exactly how the measurements are executed. A little more precision in the accompanying appendices would help the ambitious reader to replicate the results.

The purpose of the market integration estimates is to use them in an assessment of the causal link to economic growth. Her verdict is that markets were reasonably well integrated both within and between nations well before the Industrial Revolution.? In Chapter 6 there is a formal test to investigate measures of market integration and various estimates of economic development such as growth, real wage and urbanization. There are, of course, formidable methodological problems involved in that sort of test due to endogeneity. Furthermore the estimates we have across nations of the growth-related variables are very shaky before the Industrial Revolution. It is, in other words, a high risk project with little chance to give strong and conclusive results. Bateman tries to address the endogeneity problem by adopting an instrumental variable approach, but it is not discussed or explored in depth.

The conclusion is, however, both plausible and reassuring. Economic growth needs a critical level of market integration but it is not enough to generate modern economic growth. The usual suspects in the promotion of the growth process are then invoked: Industrial enlightenment (Mokyr), industrious revolution (de Vries)? and, more controversially, a strong state.

In much writing on early modern and pre-industrial economies a strong state has wrongly been assumed necessarily to be a predatory state. However, the state can be strong and constitutionally constrained.? If so it can be essential in the establishment of predictable rules of the game which help trade, market integration and investment.

In a final chapter entitled ?Conclusions and Implications for Economic Policy and the Modern Day,? the author is tempted to draw, at times too far-reaching, recommendations for developing economies. Some of these recommendations are not at all controversial, but others are really not based on results demonstrated by Bateman?s study.? She suggests that ?free trade is not guaranteed to be good for growth.? The question is: what?s the counterfactual? In fact no one has, to my knowledge, really undertaken a study of the consequences for growth and distribution of mercantilist trade policies before 1800. It is true that moderate tariffs were practiced by many European economies in the nineteenth century without traceable negative effects on growth. However, the problem arises when tariffs become general and prohibitively high.

Victoria Bateman has made an effort to transform and popularize a Ph.D. dissertation into an easily accessible text. Parts the book are of interest to market integration researchers and would had been even more interesting if the appendices were a little more specific and detailed. Several of the narrative chapters could be used in undergraduate teaching.

Karl Gunnar Persson is the author of An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present, Cambridge University Press 2010. An extended and revised edition will be out in 2014.

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
International and Domestic Trade and Relations
Markets and Institutions
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century
18th Century