[qsmi]

Are there any economists out there? How is it possible that inflation was basically 0 for more than 100 years? Does this imply that productivity and the money supply grew at exactly the rate (Which could imply neither grew at all, which seems implausible to me, but I also have no idea what I'm talking about.)

Edit: I just remembered they also mentioned the textile industry grew so it seems that there must be some productivity gains to be had over the period.

[second--shift]

I'm not an economist, but I think that the net zero inflation figure came from:

- gold/silver standards of the time (disinflationary)

- currency in bullion or coinage of a relatively fixed qty (disinflationary)

- low credit supply & banking industry (not inflationary) - labor supply growth (deflationary)

- productivity growth (deflationary)

- war/crises (often deflationary)

There was probably some significant debasement and other funny tricks by the rulers of the day to intentionally inflate (state) purchasing power, and obviously there was some inflation via gold/silver mining and trade from the East. These combined with the above probably netted out of the long time-span.

It's not like they had bitcoin or central banking policy. The West didn't even have paper currency during this era; they didn't have access to inflationary levers to pull.

[katabasis]

Not an economist either, but lately I've been enjoying Piketty's "Capital in the 21st Century", and he describes how England and France saw very little inflation for most of the 18th and 19th centuries. This monetary regime allowed a "society of rentiers" to prosper – wealthy individuals could live off the income from assets like government bonds indefinitely without needing to really work (lack of inflation meant that income wouldn't devalue over time).

The story changes in the 20th century of course – governments racked up huge debts from world wars and related crises but instead of paying them down gradually over a long time (as England did after the Napoleonic wars in the previous century), they inflated their way out ("euthanizing" much of the idle rentier class in the process).

Historical economics is pretty fascinating – studying the past in this way really makes it clear how exceptional of a time we are living in now.

[rmah]

Multiple reasons. Along with reasons given by other replies...

During that era, they did not have a monetary economy. It's hard for us to imagine, but most of the things produced by the economy were simply traded (bought/sold). Most food was produced and consumed by the farmers. Most buildings were erected/maintained by the inhabitants. Etc.

Most people were peasants and lived near subsistence level and a large fraction of their surplus was confiscated as rent (i.e. taxes) by the nobility. Most rent was "in-kind". That is, paid for in grain, pigs, and labor. Not to say that peasants didn't buy/sell things for coin, they most certainly did. But that was a minority of their economic activity.

Only the nobility and towns/cities had a monetary economy. But those were a small fraction of the total economy.

Second, there was very little per-capita economic growth during these eras. Barring notable exceptions like the plague and its aftermath. But what you do see is high volatility in prices. How is this possible in conjunction with the fact that most production was not even traded? Simple: prices are set at the margins.

Inflation as a concept didn't really mean much to most people of that era since most people were peasant farmers who didn't participate much in the monetary economy. And even in the cities, monetary wages were only a fraction of total compensation. For example, most servants got room & board as well. Apprentices too.

Long story short, the european middle ages was a very very different economy and many modern economic concepts are only very roughly analogous. Even legal concepts of ownership was sort of different back then.

[mywittyname]

> Does this imply that productivity and the money supply grew at exactly the rate

Yes, and that rate of growth was probably 0.

England wasn't yet a massive trading empire. And being a small island pretty far removed from the rest of Europe, it probably didn't have a lot of wealth flowing in or out of it. And there was a functional limit to the amount of land a contingent of people could work by hand. Being a small island, all of the workable land was already being worked, so there isn't going to be a long term growth in crop yield without mechanization.

It seems the economy reached an equilibrium and remained there for a century.