This paper re-examines the classic demographic or 'real' model, essentially based on a Malthusian-Ricardian model, that the late Michael Postan (Cambridge) utilized to explain the behaviour of the later-medieval western European economy, and in particular the behaviour of price movements. In essence, Postan had argued that just as population growth, with a relatively static agrarian technology, and thus with the inevitable Law of Diminishing returns, had drive up grain prices during the 'long thirteenth century' (c. 1180- c.1320), so, in reverse fashion, population decline during the fourteenth and fifteenth centuries led to a fall in grain prices. The drastic alteration in the land:labour ratio also led to a rise in real wages and a fall in rents; and in general to rising living standards. This in turn led to a rise in relative prices for non-grain food prices, especially in livestock products, and in industrial prices. In Postan's strongly pronounced views, monetary changes played no role in late-medieval price movements nor in any of the changes that the economy underwent during the late Middle Ages. Utilising new and revised sets of price and wage data for late-medieval England and Flanders, unavailable to Postan, this paper seeks to prove that 'money mattered', and in particular that the oscillations in price levels (as measured by a consumer price index), from inflation to deflation to inflation and then again to deflation have to be explained by monetary changes, both in money stocks and flows. The evidence, in both tables and graphs, will demonstrate that the prices for grains, livestock products, and industrial goods generally rose together during the inflationary periods in later medieval England and Flanders and then fell together, if never precisely in tandem, during the deflationary periods. Analyses of relative price changes and of livestock:grain price and industrial:grain price do not vindicate Postan's predictions of price divergencies, except during a few, rare, and brief periods. Since another recent and lengthy publication is devoted to the question of real-wage changes, this paper provides only a cursory overview of those changes: to demonstrate, first, that real wages, which had been declining before the Black Death, did not rise immediately following the Black Death, did not recover their former levels until the late 1360s, and did not begin their sustained rise, in England, until the late 1370s; and in Flanders, not until the 1390s. The subsequent rise in real wages was fundamentally, if not exclusively, the consequence of nominal wage-stickiness combined with prolonged and deep deflation; and thus real wages also fell during inflationary periods in the fifteenth century, particularly in Flanders, where such inflations were the consequence of much more frequent coinage debasements. Money does indeed matter.
