What i mean by this, is when was when people, and more specifically governments realized that printing more money, does not equal more value, but instead devalues the currency/goods in circulation.
I have asked two of my history teachers on this topic, but they have told me that inflation as a phenomenon was first recognized around the late 19th century or something.
I have a hard time believing this, as inflation, although i admit may seem somewhat counterintuitive at first, seems like ultimately a rather simple concept. (if i have 5 coins, i value 1 coin more than if i have 1000 coins)
The crux of the question is, did empires such as Rome with its devaluation of coins, or Spain with the import of tons of gold from the americas realize what the effects may be, or were they completely oblivious, thinking that more money would always equal more value.
(if they didn’t know about inflation, how did they not know or realize this basic economic fact?)
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(1/2) This is a really, really, really complicated question to answer. The first reason is that you framed it in terms of when inflation was “recognized by governments” instead of simply when theorists first understood the phenomenon. The second reason is that there are, to say the least, a multitude of ways in which a person can understand this particular concept, many of which do not map on well to modern understandings of price dynamics. I do first, however, need to note that the relationship you outline between monetary quantities (let’s elide the distinction between intrinsic and nominal values here) and price levels doesn’t always hold up. As first properly theorized by John Law (the same one mentioned below) and theorized extensively by Keynes, amongst others, it’s perfectly possible for there to be useful transactions that could take place in such a way as to produce more that simply cannot take place due to lack of money, thanks to the so-called “cash in advance constraint.” This meant that the practical evidence on the relationship between growth in the money supply and prosperity was in practice very mixed, since it is perfectly possible for increases in the money supply, especially in open economies, to not lead to substantial increases in the price level and instead to greater prosperity.
Much ink has been spilled on outlining the history of the so-called quantity theory of money, which posits a relationship between prices and nominal quantity of money, partially because many of those who espoused it are vital figures in intellectual history. In reality, the QTM is formulated in such a way that changes in the money supply can lead to either changes in the price level or changes in GDP, but it’s often simplified into a proportional relationship between money supply and the price level. Wikipedia says that Copernicus was the first to describe it, but the more commonly cited figures are John Locke and Jean Bodin. Bodin, in addition to being a crucial political theorist, characterized the recent Europe-wide rise in prices we now call the “Price Revolution” as being a direct function of the volume of silver shipped in from the Americas in the mid-1500s, not that long after the revolution had itself begun. However, the oft-cited medieval monetary theorist Nicola de Oresme, writing in the 1300s, said:
>”Suppose, for example, that there are three kinds of coins, the first worth a penny, the second a shilling and the third a pound. Then if the description of one is altered but not that of any other, that will change their proportionate value. So, if anyone were to call or fix the value of the first kind at two pence without altering the others to match, the proportionate value would be changed, a thing which is not lawful (as appears in the preceding chapter), except in very rare cases with which I am not concerned at present. It is necessary, then, that if the proportion is to remain unchanged, and one coin changes its denomination, the others should be changed in proportion, so that if the first coin is called two pence, the second shall be two shillings and the third two pounds. And if no other change were made, it would be necessary for goods to be bought or priced at proportionately higher rates. But such a change would be to no purpose, and must not be made, because it would be scandalous and a false denomination. For that would be called a pound which really was not a pound, which is, as we have said, improper. But no other impropriety would ensue, except where pensions or rents were appointed in terms of money. For in that case it is immediately apparent that besides the impropriety which we have named, such rents by this change would either be reduced or would increase unreasonably and unjustly and to the damage of many people. […] Therefore this change of denomination should never be made; least of all should the prince attempt to make it.”