Sheilagh Ogilvie

'Whatever is, is Right'? Economic Institutions in Pre-Industrial Europe

Institutions – the structures of rules and norms governing economic transactions – are widely assigned a central role in economic development. Yet economic history is still dominated by the belief that institutions arise and survive because they are economically efficient. This paper shows that alternative explanations of institutions – particularly those incorporating distributional effects – are consistent with economic theory and supported by empirical findings. Distributional conflicts provide a better explanation than efficiency for the core economic institutions of pre-industrial Europe – serfdom, the community, the craft guild, and the merchant guild. The paper concludes by proposing four desiderata for any future economic theory of institutions.

Contract Enforcement, Institutions and Social Capital: The Maghribi Traders Reappraised

Economists draw important lessons for modern development from the medieval Maghribi traders who, it has been argued, enforced contracts collectively through a closed, private-order coalition. We show that this view is untenable. Not a single empirical example adduced as evidence of the putative coalition shows that any coalition actually existed. Furthermore, the Maghribis entered business associations with non-Maghribis and used formal enforcement mechanisms. The Maghribi traders cannot be used to argue that the social capital of exclusive, private-order networks will facilitate exchange in developing economies. Nor do they provide any support for the cultural theories of economic development and institutional change for which they have been mobilised.

The Use and Abuse of Trust: Social Capital and its Deployment by Early Modern Guilds

Guilds are social scientists’ favoured historical example of institutions generating a ‘social capital’ of trust that benefited entire economies. This article considers this view in the light of empirical findings for early modern Europe. It draws the distinction between a ‘particularized’ trust in persons of known attributes and a ‘generalized’ trust that applies even to strangers. This is paralleled by the distinction between a ‘differential’ trust in institutions that enforce the rights of certain groups and a ‘uniform’ trust in impartial institutions that enforce the rights of all. Guilds had the potential to generate the particularized and differential trust to solve market failures relating to product quality, training, and innovation, although the empirical findings suggest that they often failed to fulfil this potential. Guilds also had the potential to abuse their trust, and the empirical findings show that they indeed manipulated their social capital of shared norms, common information, mutual sanctions, and collective political action to benefit their members at others’ expense, blocking the spread of generalized and uniform trust. Counter to the assumptions of social capital theory, the example of pre-industrial guilds suggests that the particularized and differential trust fostered by associative institutions do not favour but hinder the generalized and uniform trust fostered by impartial institutions.

Does the European Marriage Pattern Explain Economic Growth

This paper scrutinizes the recently postulated link between the European Marriage Pattern (EMP) and economic success. A metastudy of the historical demography literature shows that the EMP did not prevail throughout Europe, its three key components did not always coincide, and its more extreme manifestations were associated with economic stagnation rather than growth. There is no evidence that the EMP improved economic performance by empowering women, increasing human capital investment, adjusting population to economic trends, or sustaining beneficial cultural norms. European economic success was not caused by the EMP and its sources must therefore be sought in other factors.

Consumption, Social Capital, and the “Industrious Revolution” in Early Modern Germany

This paper uses evidence from German-speaking central Europe to address open questions about the Consumer and Industrious Revolutions. Did they happen outside the early-developing, North Atlantic economies? Were they shaped by the “social capital” of traditional institutions? How were they affected by social constraints on women? It finds that people in central Europe did desire to increase market work and consumption. But elites used the “social capital” of traditional institutions to oppose new work and consumption practices, especially by women, migrants, and the poor. Although they seldom blocked new practices wholly, they delayed them, limited them socially, and increased their costs.

Social Capital and Collusion: The Case of Merchant Guilds

Merchant guilds have been portrayed as ‘social networks’ that generated beneficial ‘social capital’ by sustaining shared norms, effectively transmitting information, and successfully undertaking collective action. This social capital, it is claimed, benefited society as a whole by enabling rulers to commit to providing a secure trading environment for alien merchants. But was this really the case? We develop a new model of the emergence, rise and eventual decline of European merchant guilds which explores the collusive relationship between rulers and guilds, and calls into question the prevailing positive view of merchant guilds. We then confront the model’s predictions with the available historical data. The empirical evidence strongly support our model and refutes existing theories. Our findings show that merchant guilds used their social capital for socially harmful as well as beneficial ends.

Institutions and Economic Growth in Historical Perspective

This chapter surveys the historical evidence on the role of institutions in economic growth and points out weaknesses in a number of stylized facts widely accepted in the growth literature. It shows that private-order institutions have not historically substituted for public-order ones in enabling markets to function; that parliaments representing wealth holders have not invariably been favorable for growth; and that the Glorious Revolution of 1688 in England did not mark the sudden emergence of either secure property rights or economic growth. Economic history has been used to support both the centrality and the irrelevance of secure property rights to growth, but the reason for this is conceptual vagueness. Secure property rights require much more careful analysis, distinguishing between rights of ownership, use, and transfer, and between generalized and particularized variants. Similar careful analysis would, we argue, clarify the growth effects of other institutions, including contract-enforcement mechanisms, guilds, communities, serfdom, and the family. Greater precision concerning institutional effects on growth can be achieved by developing sharper criteria of application for conventional institutional labels, endowing institutions with a scale of intensity or degree, and recognizing that the effects of each institution depend on its relationship with other components of the wider institutional system.

Household Debt in Early Modern Germany: Evidence from Personal Inventories

The “less-developed” interior of early modern Europe, especially the rural economy, is often regarded as financially comatose. This article investigates this view using a rich data set of marriage and death inventories for seventeenth-century Germany. It first analyzes the characteristics of debts, examining borrowing purposes, familial links, communal ties, and documentary instruments. It then explores how borrowing varied with gender, age, marital status, occupation, date, and asset portfolio. It finds that ordinary people, even in a “less-developed” economy in rural central Europe, sought to invest profitably, smooth consumption, bridge low liquidity, and hold savings in financial form.

Germany and the Seventeenth-Century Crisis *

This article surveys the debate on the ‘General Crisis’ of the seventeenth century in the light of hitherto neglected research. Firstly, most theories of the crisis fail to combine its economic and socio-political aspects. Secondly, few explanations of the crisis take account of evidence from the local and regional levels. Thirdly and most seriously, theories of the crisis have ignored Germany, while historians of Germany have ignored the crisis debate. This article seeks to Jill these gaps. It puts Germany at the centre of a comprehensive theory of the crisis that takes existing crisis theories as its starting point, but also shows how the Thirty Tears War, largely caused by the peculiar institutional structure of the Holy Roman Empire, in turn wrought significant institutional change, not just in Germany, but throughout Europe.

Can We Rehabilitate the Guilds? A Sceptical Re-Appraisal

This paper examines recent attempts to rehabilitate pre-modern craft guilds as efficient economic institutions. Contrary to rehabilitation views, craft guilds adversely affected quality, skills, and innovation. Guild rent-seeking imposed deadweight losses on the economy and generated no demonstrable positive externalities. Industry flourished where guilds decayed. Despite impairing efficiency, guilds persisted because they redistributed resources to powerful groups. The ‘rehabilitation’ view of guilds, it concludes, is theoretically contradictory and empirically untenable.