Money and prices in the 19th century: Was Thomas Tooke right?

Abstract

Two broad explanations of long-term sustained movements of the price level have coexisted since the earliest evolution of economic ideas. Nineteenth-century price history is no exception to this generalization. In recent work dealing with the issue, W. W. Rostow and W. A. Lewis’ have forcefully argued that real, not monetary, forces explain major periods of inflation and deflation in both the United States and Great Britain from 1797 to 1914. For them, changes in the relative growth rates of agricultural output’ induce changes in the relative prices of major commodities and in the overall price level. They regard monetary forces as passive, with money supply determined by demand and velocity a will o’ the wisp.3 Their argument, essentially a restatement of the views of Thomas Tooke in A History of Prices (1857): emphasizes the role of changing costs as the determinant of price level movements.’ Accordingly, their