Questioning Carlo Cipolla
Thomas J. Sargent
New York University and Hoover Institution
Massachusetts Institute of Technology
May 31, 2009
List of Figures
List of Tables
2 Before coins
3 Price levels
4 Fiscal causes of inflation
5 The Parthians
6 Exchange rates and banks
7 Inflows of precious metals
8 After Rome
9 Credit and remonitization
10 Trading blocs
12 Shortages of coins
List of Figures
List of Tables
We were intrigued by Carlo Cipolla’s fascinating books on monetary events
in 13th, 14th, and 15th century Florence and wanted to know more. So in the
fall of 1985, we spend two days at the University of California Berkeley asking
Carlo Cipolla about topics in economic history. This transcript records Carlo
Cipolla’s answers to our questions.
Carlo Cipolla passed away in September 2000 and has not edited or
ratified this document. We suspect that he might be reluctant to have us
make it public because of the number of times he begins his answer by
asserting that he is not an expert and that we should ask someone else. But
we think it would be a shame not to share some of the teachings that Carlo
Cipolla gave us those two days long ago in Berkeley.
The authors wish to thank
Sargent: This is an interview that Rob Townsend, and myself (Tom Sargent), are conducting with Professor Carlo Cipolla. We are curious about
a number of things to do with credit markets, and money and banking and
have some questions we want to ask you.
Cipolla: Very good.
Sargent: So we’re going to just interrupt each other and see where things
Cipolla: And I can also interrupt you or move aside from the questions
if I feel that there is some historical material which might be of interest to
Sargent: Yes, please! I’d like to start by asking you when the first coins
Cipolla: The first coins were introduced in Asia Minor in the 6th, 7th century B.C. And they were metals. And it’s not very clear whether they were
used for commercial purposes. One of the theories of the archeologists and
anthropologists is that the first coins were actually used to pay mercenaries.
Instead of dealing in a piece of gold, they started dealing with a piece of gold
with a certain mark, that assured the weight of the coin. The area where
CHAPTER 1. COINS
they first came, as I say, was Asia Minor, in an area we call Lydia. One of
the interesting things is that the first coins were made of silver and then of
a mixture of silver and gold called electrum, which is a natural mixture of
gold and silver.
Sargent: Is it a fixed proportion?
Cipolla: No, the interesting thing is that they come out in diﬀerent proportions! And the first coins of electrum had the same value independently
of the proportion of gold to silver. Apparently, they were unable to distinguish coins with diﬀerent proportions, because they had not yet developed
the technique of assessing the alloy.
Sargent: So, you said these were used by Lydian kings?
Cipolla: Lydian kings, to pay the mercenaries.
Sargent: Were the mercenaries from distinct countries?
Cipolla: I don’t know exactly which country the mercenary would come
from. I suppose there were mercenaries coming from inner Asia. And the
mercenaries spent their coins, obviously. And this is how probably the coins
started to be used in trade, in common trade, as means of payment. Then
the coin became also a unit of account and from the very beginning they
must have been used as store of value. Then you have the great flourishing of
coinage at the time of Greece. And the “dollar” of Athens was the beautiful
drachma. It was a beautiful silver coin which had very large circulation in
the Mediterranean. And incidentally...
Sargent: The coins of Greece were produced by which city states, all of
Cipolla: By the city states, practically all of the city states. And also by
some of the kings of Asia Minor.
Sargent: So each...
Cipolla: Each city would have its own coin.
Sargent: Ephesus would have its coins?
Cipolla: I don’t know if Ephesus would have its own coin. But the island
of Egina, for instance, had beautiful coins. I have some in my collection,
beautiful coins. They were actually works of art, these coins.
Sargent: The Lydian were more or less full-bodied?
Cipolla: Yes, as far as we know they were full-bodied. That is, their
nominal value was their intrinsic value.
Sargent: What about the Greek coins? Were they full-bodied?
Cipolla: As far as we know they were full-bodied.
Townsend: You mentioned earlier that Lydian coins that consisted of different combinations of gold and silver nevertheless had the same value, or
so it might have seemed?
Cipolla: I don’t know what we assumed to be the intrinsic value. But
that would be the price they would pay for the metal, if it were not the
coin. We don’t know exactly what was the situation. We start to know the
situation well in the European Middle Ages. Even for Rome we have no
idea whatsoever of what determined the volume of issue of coinage. In the
Middle Ages we know the mechanism. People brought metal to the mint.
The mint would determine the cost of production and seignorage, and the
person who brought the metal would return with the coin. How the Greeks
operated, and how the Romans operated, and how the Parthians (the great
enemies of Rome, which would be the Persians of today) how they operated
we don’t know. For instance, for Rome the prevailing theory is that the coins
were issued only by the state for the state. That is, when the state needed
currency, to pay debts, it issued coins, getting the metal from the mines that
it owned. While in the Middle Ages it was so to speak the market, those
people bringing bullion to the mint. . . .
Sargent: You say the prevailing theory. One doesn’t know for a fact?
CHAPTER 1. COINS
Cipolla: We don’t know for a fact. We don’t have documents to tell us
what regulated the currency system, the issuance of currency in Rome.
Sargent: One doesn’t know who operated the mints?
Cipolla: We know that the mints were operated by the state in Rome.
Sargent: What about in Greece?
Cipolla: By the city states.
Sargent: Were the Greek coins all of one metal, like gold or silver, were
they both or . . .?
Cipolla: Mostly silver, not necessarily all of them. There were gold coins,
but Athens had mostly silver coins. But my expertise of Greek coinage is
very limited. You mention the city state but don’t forget there were also
the Persians with their monetary system. Then the monetary system was
brought into India by the conquests of Alexander the Great. . .
Sargent: So the Persians issued coins?
Cipolla: The Parthians issued coins, and the Persians to some degree before the Parthians. There were no coins in ancient Egypt, classical Egypt; the
Ptolemies, the general Alexander the Great, brought the coins into Egypt.
But the Egyptian economy before that functioned on barter, and probably
on exchange of pieces of metal. We don’t know. But there was no coinage.
The Pharaohs did not have coinage.
Sargent: So how were exchanges eﬀected and kept track of in Egypt?
Cipolla: I am not an expert. You have to ask an Egyptologist. I think
they had some kind of exchange rate, among goods; it was mostly barter
and probably exchange with some pieces of metal, but not coin. It was not
coin in the sense that we mean coin. But the whole thing is mysterious, very
mysterious. Most of the studies that have been done on the coinage up to
the Middle Ages are numismatic. The only evidence you have are the coins
themselves. We don’t know anything about what determined how the mints
were operated or what determined the quantity of issue, what determined
the recoinages, or what determined the withdrawal of worn out coins from
circulation. We don’t know. So it is a big mystery. And unfortunately now,
the sources are such that even if you were to ask these kinds of questions
of a Roman numismatist or a Greek numismatist, he would not be able to
answer; it is ahistorical, because the sources (the physical coins themselves)
don’t contain any answer. There is no point in asking a question for which
there is no answer.
Townsend: Are there nevertheless theories about why some of these economies
were using coins and others not?
CHAPTER 2. BEFORE COINS
Cipolla: No. The ancient Egyptians simply had not invented them. They
went on for a while not using them, doing things in their own traditional
way, without coins, because that was a Greek tradition. Then there is the
question of China for which I don’t know anything, except for medieval
Sargent: But you say there are some people who think that pieces of metal
were actually exchanged in Egypt.
Cipolla: Probably gold, or pieces of gold. I remember seeing various agreements with gold in exchange. But you don’t know if it was used as a means
of payment or if it was just a transaction form, to use gold for industrial
Sargent: Was it similar in Sumeria?
Cipolla: I don’t think Sumerians had coins. That was before the invention
Townsend: I guess we’re interested in what kinds of exchanges might have
taken place in either Egypt or Sumeria or other places in the absence of
coins. What kind of primary documents, you were mentioning Egypt, for
example, what documents are available to historians that indicate the nature
of an exchange relationship?
Cipolla: Well, there are lots of hieroglyphs on the coins, and on the papyrus
leaves, mostly contracts of agreement or revenues of government taxes. Most
of the taxes were paid in kind.
Townsend: So if one were just looking at government tax receipts, I suppose one would conjure up a picture of a centralized and directed economy.
Cipolla: Oh, yes. It was a centrally planned, very centralized economy.
Also in theory all the land was owned by the central authority. You had
this hierarchical structure in which you had the Pharaoh and then you had
the priests, who represented a great bureaucracy of the old Empire. But for
these questions you have to ask an Egyptologist. My expertise starts with
the fall of the Roman Empire.
Sargent: You said the taxes were paid in kind. Were there many kinds of
goods in which taxes were acceptable, or just a few?
Cipolla: I don’t know. I know that they were paid in kind. You really
must be an Egyptologist. You can inquire with an Egyptologist about this.
Townsend: I should ask about coins in the beginning of the Medieval era.
Sargent: I’d like to ask a couple more questions about Greece and Rome.
We do want to ask most of our questions about Medieval times. But first
could you tell us a little about the history of price levels in Rome.
Cipolla: Oh yes. The one thing that, for instance, numismatists looking
at the coins have noted is the progressive debasement of the denarios, the
silver coin of Rome between the last few centuries of the republic and 3rd/4th
century A.D. But for all practical purposes we can say that the monetary
history of the Roman Empire in the first two centuries between, say, the
time of Augustus, year one, and the death of Marcus Aurelius, which was
about 150-60 years A.D., was an age of remarkable stability.
Sargent: We know this from studies of the metal content of the coin?
Cipolla: Yes, the metal content in terms both of the fineness of the silver
and the weight of the silver coin hardly diminished. The numismatists point
out that there was a diminution of a few milligrams or a few centigrams, but
for all practical purposes it was a stable currency for the first 150 years of
the Christian era.
CHAPTER 3. PRICE LEVELS
Sargent: Are there any direct quotations of prices that substantiate the
Cipolla: Practically not. The quotations of prices come mostly from
Egypt, because the papyrus documents survive. So all our knowledge about
the movement of prices in the Roman Empire goes back to the Egyptian
prices, which is a very biased type of information, because it was one region
only in the Empire, and it was one region with some specific and quite unique
characteristics. For instance, they had a tremendous supply, oversupply, of
wheat. Eqypt was an exporter of wheat. It had a very favorable balance
of payment with the rest of the Empire. Then it had sources of gold in the
Sudan. So although some historians take the prices of Egypt as indicative
of those of the entire empire, I would be very cautious.
Townsend: Was there anything on the coin itself that indicated the amount
of metal that was supposed to be in it?
Townsend: So when you say there was only a slight variation and later
there was a deterioration, which means that a given size coin would either
have the same amount of silver or, in the case of later, less and less.
Cipolla: Yes. But this has been determined by the numismatists, just
by weighing the coins. Until about twenty years ago you would melt the
coin and determine the fineness. Today you can do it with x-rays. You can
determine the fineness of the coin without destroying the coin.
Townsend: You’re saying that in the later part of the empire . . .?
Cipolla: Yes, with the end of the 2nd century, during the third century,
there was a remarkable inflation. The coins deteriorated very much. The
deterioration continued until the end of the Empire.
Fiscal causes of inflation
Townsend: Is it obvious why this happened?
Cipolla: No. One guess is the growing expenditure of the Roman government administration in relation to its revenues. The rising expenditures
were essentially due to three things: increasing the army and the cost of
the army; increasing the bureaucracy; and what we would call today the
growth of the welfare state. These were welfare expenditures. We wouldn’t
call them today exactly welfare. For instance, there was the distribution of
free food – the equivalent of free food stamps in cities like Rome, especially
in the City of Rome. So there was what we would call social welfare.
Sargent: Were there programs like that in other cities, outside of Italy?
Cipolla: Mostly it was Rome. In Rome and some other cities – Marseilles,
Lyon, Milan, even outside Italy in Gallia, there was the development of a
rudimentary public school system and medical service system. There were
some teachers and doctors who were paid by the state. These are put in the
category of social welfare.
Sargent: And they came into being later in the Empire?
Cipolla: Yes. At the time of the late Empire. Before schools. Children were typically educated in the family by private teachers, who often
CHAPTER 4. FISCAL CAUSES OF INFLATION
were slaves – Greek slaves. But in the late Empire you had a rudimentary
school system. You had, in the city, two or three teachers paid at public expense, who would teach the people who were incapable of aﬀording a private
teacher. Similarly for doctors. Then there were expenditures that we today
wouldn’t even call social welfare, but in the culture of the time they were;
for instance, the building of circuses, which would be the equivalent of our
parks, and the building of Thermes which were the public baths.
Sargent: Do you know who had access to those baths?
Cipolla: That’s a very good question. I suppose only the middle-upper
class and the upper class. I don’t think the lower part of the population had
access to those baths. But then there was the embellishment of the cities,
public arenas. The circuses were obviously frequented mostly by the lower
classes. So all these expenditures, the bureaucracy, public health services soto-speak, the school teachers that were paid at public expense, the buildings
at public expense, these created expenditures that the state couldn’t cover
with taxes, and so they devalued the currency.
Townsend: What was the mechanism?
Cipolla: That is not clear, how they . . .
Townsend: In eﬀect it’s another tax?
Cipolla: What they had. Probably the government had a given amount
of product from the mines, and from that product of the mines they derived
a greater quantity of coin.
Townsend: They just made coins with less metal?
Cipolla: If it worked in this way, it is very simple. It is much more simply
than the medieval way in which things became much more complicated.
Townsend: So they may have just set the price at the mint for the exchange
rate of . . .
Cipolla: We don’t know. The monetary history starts to be clarified in
the Middle Ages. We know that there was an increase in prices, so much so
that Diocletian, at the beginning of the fourth century, published an edict
in which he tried to fix all prices of all commodities throughout the Empire.
This seems to have ended, as all fixed price schemes have, without success.
But then he made a monetary reform which seemed to have some success.
Townsend: I never understand very well how these things work. If they
were just getting back more coins with less metal in exchange for ore, and
the tax fell entirely on people who brought metal into the mint....
Cipolla: They got less metal.
Townsend: They got less metal?
Cipolla: Yes, but there is a time lag. They pay the mercenaries with more
coins that contain the same amount of metal. Then prices will increase.
They will receive back worse coin. In the meantime they have satisfied the
mercenary, the soldier...
Townsend: So in a way there might have been a little bit of deception.
That is to say, would people be conscious all of the time of the metallic
content of the coin, or would they be led into thinking that they had more
metal than they did?
Cipolla: When they issued the worse coinage in copper they took pains
to wash it in good silver, so the appearance would be silver. It seems that
there was an element of deception. Otherwise they would not have made
the point of washing it in good silver.
Sargent: Did the Romans monopolize the issuing of coins or did they
permit client states to issue coins?
Cipolla: No, they practically monopolized. They had imperial mints.
Sargent: So Greek coins stopped being minted when Rome conquered.
CHAPTER 4. FISCAL CAUSES OF INFLATION
Cipolla: There were colonial issues. There were colonial coins in which
they respected the local tradition. For instance, the Roman coins minted in
Greece were always on the standard of the Drachma. They had the face of
the Roman Emperor, they had the symbol of the Roman Empire, but they
were larger than the coins minted in Rome. There was obviously a rate of
Sargent: In terms of denomination . . .
Cipolla: In terms of denomination. So they practically followed the local
tradition as far as the size of the coin.
Sargent: What about when they started depreciating during this later
Cipolla: They depreciated the whole thing.
Sargent: So the Romans....
Cipolla: So the depreciation went.
Sargent: Were there Parthian coins?
Cipolla: The Parthian coins are very interesting because the first Parthian
coins were made by craftsmen, developed in the Greek tradition. So the first
Parthian coins are actually very beautiful.
Sargent: So what year are we talking about?
Cipolla: This would be the about 100 A.D., 120 A.D. But the Parthian
coins were soon debased much more rapidly than the Roman Coins. There is
a very interesting dichotomy between the Roman monetary tradition and the
Parthian tradition. Incidentally, you have to remember that the Parthians
were the great enemies of Rome and great enemies in the sense that one
couldn’t conquer the other. It was a stalemate, like between Russia and
the United States today. And the reason is that the Roman technique of
fighting war was fighting w ...
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