Real or Physical Explanations

‘REAL’ explanations, which placed less emphasis on changes in the monetary sphere than they did on other, physical factors operating on prices, have never been entirely absent from discussions of secular changes in the price level. They were present, as has been shown, in contemporary discussion of inflation in. Tudor England, but later such explanations became more characteristic of discussions about inflation in periods other than the sixteenth and seventeenth centuries. Even when the quantity theory was most fashionable there were heretics who were prepared to argue that changes in price levels were only remotely linked, if at all, with changes in the availability of monetary supplies. Irving Fisher felt it necessary, for example, to castigate David A. Wells, author of Recent Economic Changes (1890), who. had argued that the long deflation of the later nineteenth century could be explained almost entirely by shifts in the supply and demand schedules of important commodities, and by falling costs, the most important of which was the dramatic drop in freight rates.l To the quantity theorists this was anathema, for they explained it almost entirely in terms of an increasing demand for precious metals, which was a function of increasing monetary requirements, running ahead of the supply of precious metals.