I was working on my thesis and a weird idea struck me. More specifically, I was working on market integration between Quebec City and Montreal from 1688 to 1840. Generally, I used the coefficient of variation (standard deviation of observations over average). However, trends in market integration could be measured by the extent of serial correlation.
Normally, serial correlation (the past values of the dependent variable explain the present values) is a pain in the neck. But serial correlation could also be a sign of a violation of the efficient market hypothesis. The efficient market hypothesis were absent since this hypothesis states (in its strictest form) that all price changes should only come from new information as current prices reflect all the information available. Its like looking forward when you drive. If past values have large predictive power, this means that you drive forward by looking in the rearview mirror only.
However, if the predictive power of past prices evaporates progressively, this means that markets would have been working more efficiently (a necessary condition for market integration). So, does it work?
Between 1760 and 1840, the regression model shows that the log of wheat prices in Quebec follows this function:
Log Qc Price (1760 to 1840) = 0.42 * MtlLogPrice + 0.15 * QcLogPricePreviousYear + 0.38 *MtlLogPricePReviousYear + 0.08
All the variables, except the price of wheat in Quebec the year before, are statistically significant at the 99% level. The R2 is 0.74. So what about the period of french rule for which I have prices from 1688 to 1760?
Log Qc Price (1688 to 1760) = 0.31 * MtlLogPrice + 0.30* QcLogPricePreviousYear + 0.43*MtlLogPricePReviousYear – 0.03
This time, all the variables are statistically significant at the 99% level and the R2 is higher (0.84). The changes in the predictive power of past values of wheat prices in the Quebec area would indicate that markets for grain grew more efficient in the era of British rule relative to the era of French rule.
In the course of writing my thesis, I have collected important quantities of price quotations for roughly one hundred and fifty items that were traded in the colony of Quebec from 1688 to 1760 and I am pursuing this up to 1860. However, there was already a price index produced by Gilles Paquet and Jean-Pierre Wallot for the period after 1760 which was not meant as a measure of the cost of living than as a measure of changes in the general price level (I am trying to do the former, which is more complicated). My index for New France is complete up to 1763 and it means that I can link it up with the index produced by Paquet and Wallot to get an idea of the general price movement. What does it look like? Well, here it is.
This is still preliminary work, but one can see how prices evolved in the colonial economy of Quebec prior to Confederation.
Au cours de mes recherches aux Archives du Séminaire de Québec, je découvre souvent des faits inusités sur l’histoire du Québec. J’ai notamment retrouvé un Jean Chrétien qui travaillait aux fermes du Séminaire de Québec en 1736. Il était payé 25 sols pour chaque de travail “aux récoltes” et 25 sols par jour de travail “aux foins”. Son salaire quotidien comme travailleur journalier sans spécialisation était suffisant pour acheter 0.67 minot de blé – soit 64 807 calories.
Considérant environ 200 jours de travail à la ferme (période des semences et de la récolte), il s’agit d’un revenu annuel de 250 livres (il y avait 20 sols par livre).Le panier du travailleur anglais de l’époque (le plus riche de l’Occident à l’époque) coûtait 301 livres au Canadien-Français. Cependant, en essayant de créer un panier de consommation plus proche de celui actuellement consommé par les habitants de la Nouvelle-France, Jean Chrétien aurait du dépensé 241 livres pour obtenir un niveau de vie décent et 181 livres pour se hisser au delà du seuil de pauvreté.
Voilà comment vivait cet individu qui était probablement l’un des ancêtres du Jean Chrétien qui fut premier ministre du Canada.
Source: SME 4, LIVRE C8
My colleauge Mathieu Bédard and myself submitted one of our working paper as a conference paper on the issue of free banking in the Lower Canada (Quebec before confederation). Here is the abstract :
Generally, the historical literature presents the period from 1817 to
1851 in Lower Canada (modern day Quebec) as one of negative economic
growth. This period also coincides with the rise of free banking in the
colony. In this paper we propose to study the effects of free banking on
economic growth using theoretical and empirical validations to study the
issue of whether or not economic growth was negative. First of all, using
monetary identities, we propose that given the increase in the stock of
money and the reduction in the general price level, there must have been
a positive rate of economic growth during the period. We also provide
complementary evidence drawn from wages that living standards were
increasing. It was hence impossible for growth to have been negative.
Secondly, we propose that the rise of privately issued paper money under
free banking in the colony had the effect of mitigating the problem of the
abundance of poor quality coins in circulation which resulted from legal
tender legislation. It also had the effect of facilitating credit networks and
exchange. We link this conclusion to the emergence of free banking which
must have been an important contributing factor. Although we cannot
perfectly quantity the effect of free banking on economic growth in Lower
Canada, we can be certain that its effect on growth was clearly positive.
During the work on my thesis, I managed to compute the number of ships lost and seized at sea as a percentage of total ships headed from France to Quebec. I used the work of John F. Bosher who compiled the list of ships lost, seized or sunk at sea which were headed to Quebec. I then plotted these relative to the number of ships that entered the Quebec harbor which is available in James Pritchard’s 1976 article in the Revue d’histoire française d’Outre-mer. It is quite interesting to see how high the rate jumps in times of war and how high it remains overall in years of peace.