ABSTRACT
In pre-industrial economies, inter-annual price volatility was much higher due to the uncertainties of next year’s production (e.g. McCloskey and Nash 1984; Poynder 1999). Therefore, an important strategy to reduce risks of famines might have been storage. Yet even though much evidence exists of all kinds of storage (government or other) the underlying motives for storage remain unclear. For example, Erdkamp (2005), Will et al. (1991) and Claridge and Langdon (2011) stress the role of the government (reducing the chances of unrest, or feeding the army (a similar claim being made by Aperghis (2009) for Babylon)). But the estimates of the size of government storage are generally small and storage turns out to be not commercially profitable. For example Persson (1996: 709) argues that these public granaries were unable to stay solvent for long periods because of the unpredictability of bad harvests. Therefore, McCloskey and Nash (1984), Poynder (1999) and Van Leeuwen et al., (2011) focus on profit maximizing storage of private individuals. They compare the costs of storage (mainly consisting of foregone earnings from alternative investments) and benefits (being equated to the seasonal price increase) and find that the former outweigh the latter. Consequently, they find little evidence of significant levels of storage in such diverse regions as early modern England, France and ancient Babylon.
