A New Methodology for Parts of the Dutch Price History, Based on Analysis of the Paalgeld Portbooks, 1771-1778

In the early thirties of the last century an international group
of economic historians gathered to set standards for the
writing of national price-histories of the participating countries.
In the Netherlands Nicolaas Posthumus started the Herculean
task of gathering the data for the two volumes he would publish:
Nederlandsche Prijsgeschiedenis (Dutch Price-History), which
was published in 1943 and the second volume that was
published in 1964 after his death in 1960. The last volume was
completed by F.Ketner. Both volumes would become
cornerstones of the Dutch economic and social history.
However, the Second World War made contacts between the
historians involved very difficult and most of them decided to
continue their work based on the agreements made earlier.
Posthumus was very strict in sticking to the rules set by the
committee, although the some of the decisions made by the
group would have far reaching effects on the reliability of his
work. Still, since then these price histories have been seen as
the solid foundations for various discussions, a.o. for the
standard of living debate.
A crucial aspect of the price-histories are the price indexes,
which allow us to see developments over longer periods. There
are two critical aspects in creating indexes: the choice of goods
and their weights in the indexes, and the reference period for
the indexes. It now seems that on both accounts the choice were
unlucky.
There is good reason to question the solidity of the work done
by Posthumus. First of all, the manual compilation of all the
data lead to a selection of the data, since not all of the data from
the Price Currents of the Amsterdam exchange could be
processed. I will show that this selection has been carried out
on a misinterpretation of the sources. For quite a number of
goods there are more than one price notations in the Price
Currents: the meaning of the various prices is not yet fully
known. Posthumus just averaged these prices and used the
average. It is quite unlikely that in cases where the lowest price
notation and the highest price notation for the same good can
vary more than 100% that the meaning of these notations is
identical.
Secondly, the methodology used by Posthumus to fill the gaps
in his data is questionable. His sources were lacking and his
treatment of missing data was quite creative if we put it mildly.
His interpolation of missing data is based on averaging the two
closest available data, not taking into account seasonal
fluctuations. Sometimes the real data were years apart and
interpolations were made for all months in between, creating
a very static picure for some prices. Next to that, Posthumus
did not make clear which prices were real and which were
interpolations. Next to that for some years, for which the data
in Dutch were missing, he used Italian versions of the Price
Currents of the Amsterdam Exchange, forgetting however that
they were dated in the Italian style of Venice, which put them
in the wrong year.
Thirdly , most of the goods chosen for the indexes were
imported to the Netherlands. But, because very little large scale
research had been done about the composition of the total of
goods going around, the choice was mainly based on
pre-conceptions. Posthumus published two forms of indexes:
unweighted and weighted indexes. The choice of goods for the
indexes does not seem to be a real reflection of the importance
of the goods that were traded on the exchange. Likewise the
weights attached to the goods in computing the indexes seems
to have been quite arbitrary.
Based on my recent research on the Portbooks of the levy of
the Paalgeld in Amsterdam, a tax register on incoming shipping
from overseas to the port of Amsterdam, which offer a complete
oversight of all the goods imported to Amsterdam at the end
of the 18th century, I will argue that the composition of the
group of goods for the indexes does not reflect the realities of
the trade. Some of the goods that Posthumus used for his
indexes were not imported at all in the 18 year period, for which
the data of the Paalgeld Portbooks were digitized.
I will offer a statistical analysis of the composition of the
imports to Amsterdam, which will show that a different set of
goods as a basis for indexes will allow a much more reliable
view of the economical fluctuations. There have been plans to
make a machine readable version of the Nederlandse
Prijsgeschiedenis (Dutch Price-History), but I suggest that a
complete rethinking of the whole project is necessary.
Bibliography
Posthumus, Nicolaas Wilhelmus. Nederlandsche
Prijsgeschiedenis. Leiden: E.J. Brill, 1943-1964.