Who suffers from price instability?

In chapter 1 we met les économistes within and outside France who reflected on the prevailing policy-induced uncertainty and its alleged discouraging effect on cultivators' effort. They believed that profitability could be increased in the agrarian sector by price-stabilising market integration through free trade. This chapter examines the welfare implications of price instability for the main classes in pre-industrial economies. The social disruptions caused by price instability made its welfare impact a central issue in contemporary political discourse.

The most appropriate analytical framework for the analysis of welfare effects of price instability in pre-industrial economies is provided by modern inquiries into famines and poverty, which assert that price volatility destabilises food consumption and therefore has adverse effects on human capabilities. That approach also demonstrates that stabilisation of consumption over time and redistribution from rich to poor will enhance welfare. The welfare improvements generated by price stability are expressed in terms of human capabilities and functionings. More precisely, it is asserted that price stability will enhance the survival chances of a population and increase the steady-state proportion of a population in a capability condition that permits normal ‘doings and beings’. It is argued that the quest for and defence of customary living standards, at a level which permitted normal ‘doings and beings’, were expressed in the ‘moral economy of the crowd’.