Author(s): Andrés Calderón-Fernández, Héctor García-Montero, Enrique Llopis-Agelán
Keywords: economic history; standard of living; prices; welfare ratios; consumer baskets; real wages; Europe; Spain; Latin America; Mexico
The history of prices has played a key role in the economic history of the preindustrial world. In this field, Allen’s paper (2001) set a milestone by proposing the calculation of a welfare ratio that would allow a comparison among different areas of the world and different times. Nevertheless, we consider that this method as is has reached its limits and needs major improvements. We therefore propose a change of scope that would allow the establishment of the real consumption-possibility frontier of families—the actual unit of production and consumption in Early Modern times. We also revise the barebone baskets that have been used until now, replacing them with consumer baskets that approach, to a greater degree, the true consumption patterns of different kinds of families. By focusing on two widely documented cases—Madrid and Mexico City—we conclude, first, that consumers had regular access to a wider array of products than previously assumed; second, that in the 18th century prices evolved in Madrid in a relatively similar way to the large cities of Western Europe, even if Madrid constituted an exception in the Castilian context, where inflation was more intense during the second half of the aforementioned century; and, third, that volatility in the consumer price index was around 10% higher for unskilled workers than for skilled workers. However, the volatility deduced from our price indices is significantly lower than the one calculated using the typical barebone method.
Università Bocconi, Dondena Centre for Research on Social Dynamics and Public Policy
Universidad Complutense de Madrid
The paper may be downloaded here.