Long-run patterns in market efficiency and the genesis of the market economy: Markets around the Mediterranean from Nebuchadnez

Jan Luiten van Zanden, Földvári, Péter and Bas van Leeuwen
Authors registered in the RePEc Author Service: Péter Földvári

No 8521, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Market performance; Market prices; Mediterranean; Economic history (search for similar items in EconPapers)
JEL-codes: D40 E30 N13 N15 O13 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-his
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