754 JOURNAL OF POLITICAL ECONOMY goods,that they negotiated trading arrangements that often included a role for formal organizations,that these organizations served an important coordination and enforcement role,and that trade ex- panded in cities that negotiated these agreements.Notice that this pattern of facts is inconsistent with at least the simplest cartel theories of guilds,which predict that guilds would form only after trade rela- tions were already established and would limit entry and price compe- tition,leading to the trading of smaller quantities. That medieval rulers and merchants recognized the need to secure alien merchants'property rights before trade expansion could occur is borne out repeatedly in the historical record.Christians traders, for example,did not dare to trade in the Muslim world unless they received appropriate securities.Similarly,throughout Europe itself, merchants did not trade in locations in which they did not have secu- rity agreements.The Italians began traveling to other European cities and to the Champagne fairs,and the Germans began traveling to Flanders,England,and the Slavic East only after negotiating appro- priate safety agreements(see,e.g.,De Roover 1948,p.13;De Roover 1965;Dollinger 1970). Safety agreements allowing the merchants some measure of inter- nal organization appear crucial to trade expansion.The Genoese trade with North Africa provides an instructive illustration.Prior to 1160,the Genoese trade with North Africa never exceeded 500 lire. In 1161,the Genoese legate,Otobonus d'Albericis,and the local ruler of North Africa,Abd alMumin,signed a 15-year agreement securing the property rights of the Genoese.Genoese trade more than doubled to 1,057 lire and remained at this higher level in later years.More- over,the agreement focused on security issues.Though it specified a 2 percent reduction in the 10 percent custom,it was hardly con- cerned with the distribution of gains from trade.Given that the ex- pected gains from goods that reached North Africa were,on average, more than 26 percent during this period,it is highly unlikely that the custom reduction accounts for the expansion of trade that followed (Krueger1932,pp.81-82;Krueger1933,pp.379-80). Merchants from other trading cities had similar experiences.For example,the Catalan merchants'trade expanded"within only a few months"after they received,in 1286,privileges and the right to have a consul in Sicily (Abulafia 1985,pp.226-27).The trade of the Ger- man merchants in Bruges expanded after they received privileges and the right to have a Kontor (establishment or office)(Dollinger 1970,p.41).The Italians'trade with Flanders flourished only after they were allowed to establish local organizations,called nations(De Roover 1948,p.13). There also exists indirect evidence that the parties recognized the
754 JOURNAL OF POLITICAL ECONOMY goods, that they negotiated trading arrangements that often included a role for formal organizations, that these organizations served an important coordination and enforcement role, and that trade expanded in cities that negotiated these agreements. Notice that this pattern of facts is inconsistent with at least the simplest cartel theories of guilds, which predict that guilds would form only after trade relations were already established and would limit entry and price competition, leading to the trading of smaller quantities. That medieval rulers and merchants recognized the need to secure alien merchants' property rights before trade expansion could occur is borne out repeatedly in the historical record. Christians traders, for example, did not dare to trade in the Muslim world unless they received appropriate securities. Similarly, throughout Europe itself, merchants did not trade in locations in which they did not have security agreements. The Italians began traveling to other European cities and to the Champagne fairs, and the Germans began traveling to Flanders, England, and the Slavic East only after negotiating appropriate safety agreements (see, e.g., De Roover 1948, p. 13; De Roover 1965; Dollinger 1970). Safety agreements allowing the merchants some measure of internal organization appear crucial to trade expansion. The Genoese trade with North Africa provides an instructive illustration. Prior to 1160, the Genoese trade with North Africa never exceeded 500 lire. In 1161, the Genoese legate, Otobonus d'Albericis, and the local ruler of North Africa, Abd alMumin, signed a 15-year agreement securing the property rights of the Genoese. Genoese trade more than doubled to 1,057 lire and remained at this higher level in later years. Moreover, the agreement focused on security issues. Though it specified a 2 percent reduction in the 10 percent custom, it was hardly concerned with the distribution of gains from trade. Given that the expected gains from goods that reached North Africa were, on average, more than 26 percent during this period, it is highly unlikely that the custom reduction accounts for the expansion of trade that followed (Krueger 1932, pp. 81-82; Krueger 1933, pp. 379-80). Merchants from other trading cities had similar experiences. For example, the Catalan merchants' trade expanded "within only a few months" after they received, in 1286, privileges and the right to have a consul in Sicily (Abulafia 1985, pp. 226-27). The trade of the German merchants in Bruges expanded after they received privileges and the right to have a Kontor (establishment or office) (Dollinger 1970, p. 41). The Italians' trade with Flanders flourished only after they were allowed to establish local organizations, called nations (De Roover 1948, p. 13). There also exists indirect evidence that the parties recognized the
MERCHANT GUILD 755 importance of an institutionalized commitment to security rather than mere promises.Muslim rulers provided European traders with aman, a religious obligation to secure the merchants'rights.Some cities in England went so far as to elect an alien merchant as mayor.Yet it seems that a specific institution-the merchant guild-was the most common successful institution.The core of a merchant guild was an administrative body that supervised the overseas operation of mer- chant residents of a specific territorial area and held certain regula- tory powers within that territorial area.In England,for example,the merchants of a town were granted the right to establish a society of merchants that retained specific commercial privileges in the internal and external trade of the town and usually had representation in the trade centers in which its members traded.On the European conti- nent,many towns were controlled by the mercantile elite who orga- nized a merchant guild to advance their interests.In some Italian and German towns the merchant guilds were virtually identical with the town's government itself,and in some Italian cities the merchants operations were supervised by the city (Gross 1890;Rashdall 1936, pp.150-53;Rorig1967).8 Guilds provided merchants with the leadership and the informa- tion transmission mechanisms required for coordinated action.In the examples we have studied,it was the guild that decided when to impose a trade embargo and when to cancel it.3 The trade center usually provided the guild with the right to obtain information about disputes between its members and that center's authorities or between its members and other traders.The guild's regulations facilitated the collection and transmission of information among its members.10 Though the term"merchant guild"was not used in Italy,the Italian cities served the same functions on behalf of their resident merchants. The city's role in coordinating embargo decisions is well reflected in the relationships between Genoa and Tabriz,a vital city on the trade route to the Persian Gulf and the Far East.In 1340 Tabriz's ruler confiscated the goods of many Genoese traders.Genoa responded by declaring a devetum(a commercial embargo)against Tabriz.In 1344, however,Tabriz's ruler sent ambassadors to Genoa promising an in- demnity for everything that had been taken from the Genoese and For a general discussion of the concept of corporation in medieval English law,see Pollock and Maitland (1968,1:486 ff.). 9 An exception is the case of the Maghribi traders.That case,however,seems to reflect the situation in the Muslim world rather than in Europe(see Greif 1994). 10 Guild members were required to travel together,to live and store their goods throughout their stay in quarters that belonged to the guild,to examine the quality of each other's goods,and to witness each other's sales (see,e.g.,Moore 1985,p.63 ff.). As De Roover(1948,p.20)noted,the "main purpose of the consular organization [of the Italians in Bruges]was...to facilitate the exchange of information
MERCHANT GUILD 755 importance of an institutionalized commitment to security rather than mere promises. Muslim rulers provided European traders with aman, a religious obligation to secure the merchants' rights. Some cities in England went so far as to elect an alien merchant as mayor. Yet it seems that a specific institution-the merchant guild-was the most common successful institution. The core of a merchant guild was an administrative body that supervised the overseas operation of merchant residents of a specific territorial area and held certain regulatory powers within that territorial area. In England, for example, the merchants of a town were granted the right to establish a society of merchants that retained specific commercial privileges in the internal and external trade of the town and usually had representation in the trade centers in which its members traded. On the European continent, many towns were controlled by the mercantile elite who organized a merchant guild to advance their interests. In some Italian and German towns the merchant guilds were virtually identical with the town's government itself, and in some Italian cities the merchants' operations were supervised by the city (Gross 1890; Rashdall 1936, pp. 150-53; Rorig 1967).8 Guilds provided merchants with the leadership and the information transmission mechanisms required for coordinated action. In the examples we have studied, it was the guild that decided when to impose a trade embargo and when to cancel it.9 The trade center usually provided the guild with the right to obtain information about disputes between its members and that center's authorities or between its members and other traders. The guild's regulations facilitated the collection and transmission of information among its members.'0 Though the term "merchant guild" was not used in Italy, the Italian cities served the same functions on behalf of their resident merchants. The city's role in coordinating embargo decisions is well reflected in the relationships between Genoa and Tabriz, a vital city on the trade route to the Persian Gulf and the Far East. In 1340 Tabriz's ruler confiscated the goods of many Genoese traders. Genoa responded by declaring a devetum (a commercial embargo) against Tabriz. In 1344, however, Tabriz's ruler sent ambassadors to Genoa promising an indemnity for everything that had been taken from the Genoese and 8 For a general discussion of the concept of corporation in medieval English law, see Pollock and Maitland (1968, 1:486 ff.). 9An exception is the case of the Maghribi traders. That case, however, seems to reflect the situation in the Muslim world rather than in Europe (see Greif 1994). 10 Guild members were required to travel together, to live and store their goods throughout their stay in quarters that belonged to the guild, to examine the quality of each other's goods, and to witness each other's sales (see, e.g., Moore 1985, p. 63 ff.). As De Roover (1948, p. 20) noted, the "main purpose of the consular organization [of the Italians in Bruges] was . . . to facilitate the exchange of information