What role did guilds play in the economic development of Europe? Why do bad institutions persist throughout history? Join us for this conversation between Mark Pennington (King’s College London) and Sheilagh Ogilvie (University of Cambridge) for a discussion of her new 900-year history and economic analysis of the European Guilds.
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The Guest
Sheilagh Ogilvie is Professor of Economic History in Cambridge and a Fellow of the British Academy. She holds degrees from the University of St Andrews (1979), Cambridge (1985), and Chicago (1992). She has been successively Lecturer (1989), Reader (2000), and Professor of Economic History (2004) in the Faculty of Economics at the University of Cambridge.She is the author of State Corporatism and Proto-Industry (Cambridge, 1997), Women, Markets and Social Capital in Early Modern Germany (Oxford, 2003), Institutions and European Trade: Merchant Guilds, 1000-1800 (Cambridge, 2011) and the editor of European Proto-Industrialization (Cambridge, 1996), Germany: A New Social and Economic History (3 vols, London, 1996/2003), and Revolution des Fleißes, Revolution des Konsums? (Ostfildern, 2015). She has published journal articles on institutions and economic development, the economics of guilds, merchants, rural communities, serfdom, consumption, retailing, occupational structure, demography, proto-industry, banking, female labour force participation, regulation, the growth of the state, and social capital.
She is the winner of the Gyorgy Ranki Prize (1999), the Anton Gindeley Prize (2004), the René Kuczynski Prize (2004), and the Stanley Z. Pech Prize (2008). She has been the director of research projects on “Social Structure in Bohemia, 1500-1750” (British Academy, 2001-03), “Economy, Gender, and Social Capital in the German Demographic Transition” (Leverhulme Trust, 2005-07), and “Human Well-Being and the ‘Industrious Revolution’: Consumption, Gender and Social Capital in a German Developing Economy, 1600-1900” (ESRC, 2008-12). She held a British Academy/Wolfson Research Professorship (2013-16), during which she explored the relationship between human capital and long-term economic growth. Her book on the economics of guilds was published with Princeton University Press in March 2019.
Skip Ahead
1:03: Sheilagh, why have you decided to bring your work together in a volume of this kind?
4:13: How would you define a guild? What are the key features of such an organisation?
8:40: The title of the book is The European Guilds: An Economic Analysis. Economists often disagree about things. One of the things they disagree about is the efficiency properties of these guilds. Some would argue that these guilds played an important function – they were efficiency enhancing, they might have been necessary for growth. I know that’s not a view that you hold. But could you give us an indication of what those arguments are?
14:22: These are basically arguments which are suggesting that some kind of market failures arise in these situations, and you have an institutional response to address the market failure. In this instance the guild is seen as the institutional mechanism to solve it.
15:32: Your view as I understand it is very much that guilds should be seen as rent seeking institutions which were actually seeking exclusive privileges for the members – and rather than solving a market failure, they essentially create a different sort of failure, which is that certain people are excluded from markets, there’s a lack of competition, you actually don’t get the quality control or professional certification that you might have gotten from an alternative institution. Is that a fair summary of your view?
20:14: So this is saying that guilds are about distributional matters; they’re institutions that are quite conflictual in terms of grappling with a part of the pie rather than increasing the size of the overall pie.
20:56: Can you say a bit more about the role of the state in your particular theory? Some of the work in this area that’s focused on guilds from a rosier viewpoint often depicts them as a kind of bottom-up private order institution that arises spontaneously to solve an efficiency problem. Whereas your view suggests that these institutions were embedded in political structures of power and authority which were used for these distributional purposes. Why do some people hold that rosier view?
26:45: I think in your first book you used the term ‘state corporatism.’ Would you describe guilds as corporatist institutions? They’re a kind of negotiation between a semi private organization and the state?
27:49: Given that you subscribe more to this view of guilds as rent-seeking or privilege-seeking organisations as opposed to efficiency enhancing ones, could you describe the ways in which guilds reduced efficiency?
36:02: Reading your account, this is quite a damning indictment of these institutions. There really is evidence of rent seeking—the scale of these markups is at a level where… how could anybody think that they have any beneficial properties? I guess the contrary view is that, OK, from today’s point of view, these were inefficient practices. But if you look at the context at the time, what was the alternative to providing the kind of mechanisms that would address market failures?
43:39: So in your view, you didn’t need guilds to address the kind of training market failures. What about asymmetrical information and quality controls? Did you find evidence of alternative mechanisms to deal with those?
49:41: This reminds me of a conversation I had with Barry Weingast – his argument is, yes, many of these kind of restrictions, when looked at through today’s lens, we would see them as inefficient and would want to get rid of them. But you have a slightly different take on them if you realize that the alternative might not be a free market type situation—it might actually be one where… you don’t have a market at all because you have societies embroiled in violence. And the various restrictions and privileges at least provide some rudiments of peace and order in a context where the alternative would be something worse than that… do you see cases where states seem to be able to avoid violence without having guild privileges or some of these distributional deals?
58:00: Why did guild institutions decline? As I understand your argument about why they persisted for so long, it’s basically a kind of public choice, rent seeking argument, which says that you’ve got relatively small organised groups…facilitated by public authorities through these corporatist deals, they gain privileges which are inefficient, but the reason why you don’t have …people challenging that is either because they’re politically disenfranchised or they face a huge collective action problem… If you take that kind of explanation, it implies that those privileges would be hard to break down.
01:06: I understand it’s a difficult question, but …I understand the explanation you’re giving there is a kind of accidental one. That is, by accident some factors come together and then we’re able to break free of guilds. I guess that’s not an unsatisfactory explanation in some ways, but I was wondering if you’ve thought of more positive explanations… I’m thinking of Deirdre McCloskey’s work on why we have the industrial revolution, and that’s a more ideas-based explanation…. Do you have any sympathy with that kind of view?
01:12: I want to ask you about a theme closely related with our research centre, and that’s thinking about the relationship between informal and formal institutions and how that can sometimes go wrong… there’s a tendency to see community as providing certain kinds of services in a singularly romantic view rather than seeing it as double edged, where you can recognize that there’s a positive side to traders getting together but at the same time recognize the dark side- the exclusion as the flipside of community.
Full Transcript
Mark Pennington: Welcome to The Governance Podcast from the Centre of the study of Governance in Society.
My name is Mark Pennington the Director of the Centre and also the head of Department of Political economy in which the centre is housed.
Today we have we with us professor Sheilagh Ogilvie. Sheilagh is Professor of Economic History at Cambridge University and the author of several important books on history and political economy, including State Corporatism and Proto-Industry, A Bitter Living and Institutions and European Trade.
She’ll have a new book out, “European Guilds, An Economic Analysis”, which were going to be discussing in the context of her broader body of work.
So Sheilagh it’s great to have you with us today at the centre.
Sheilagh Ogilvie: It’s great to be here.
Mark Pennington: You’re welcome. So later on today we’re going to be hosting a book launch on a new volume on the European economic guilds. This is the latest in the number of Publications that you produced on the role of guilds. I wonder if you could start the conversation by giving us a brief statement of why you’ve decided to bring together you’re work in a volume of this kind.
Sheilagh Ogilvie: Well several decades ago when I was a graduate student, I was doing my PhD work on a remote Valley in the Black Forest in Württemberg in Southwest Germany and I didn’t really know what I was going to do research on and I came across a series of annual Guild account books for a rural Guild in this Valley, which organized these Rural and small-town Proto industrial Weaver’s.
So they were worstead weavers, they were weaving for export markets, according to prevailing theories at the time they weren’t supposed to have guilds and none the less I stumbled across these little booklets which recorded for 165 years what these guilds did in detail every year.
No one had looked at these booklets since they have first being written, so the sand that have been used to dry the ink was still stuck to the handwriting when I opened these documents.
So I immediately saw that I had a great PhD dissertation and I wrote it not just about the activities of the guilds but how all of the institutions worked in this stagnating society in which none the less ordinary people wear very entrepreneurial, very market-oriented, but there were these institutions that kind of imposed a glass wall around what they could do.
And so that was a few decades ago and ever since then I found I was coming back again and again to these institutions which exist over very long periods and have what appear to be quite harmful it’s for many people, including – another interest of mine was the economic position of women, female entrepreneurship, ordinary people sort of trying to fight their way out of poverty – and asking the question, how is it possible for institutions that harm so many people to exist so widely? To exist for centuries? Is there some way that we can use history and economics to explain the survival of these institutions and ultimately why they break down?
Because in the 19th century, in 1862, finally these guilds were abolished in this part of Germany, long time after they were abolished in other parts of Europe.
So that was a big question kept on returning. I kept asking it not just to do with guilds but to do with serfdom, which I did a certain amount of work on the economic history of serfdom in Eastern Europe, why do Village communities have both with a dark side in a bright side , various traditional institutions, why do they exist for so long, what effects do they have why do they finally break down, so guilds fit into this wider intellectual agenda for me.
Mark Pennington: So could you say a little bit about how you would define what you mean by a guild? Obviously this is a very specific type of institution that existed, and as you say for very long periods, but what are the key features of an organisations for it to be called a guild bas you understand the term.
Sheilagh Ogilvie: So that’s a really good question because I think nowadays when we say the word “Guild” we tend to think of something kind of cuddly, something craft like, you know, we have quilting guilds, and knitting guilds and artists guilds and, you know, I get called up by artist sort of websites saying “we want to set up a guild here in London, tell us something about the history of guilds.”
So I think nowadays we think it has to do with art and craftsmanship and community, but these institutions, these organizations that were called guilds for so long were occupational associations, they mainly existed in the secondary and tertiary sectors, so you have craft guilds which covered if you like industrial occupations, but also a lot of service-sector occupations, so you have a shopkeepers guilds, you to have chimney sweep guilds, you have florists guilds, you have all sorts of service-sector, you know, you even you also in fact have some primary sector guilds, so there are guilds of fishermen and day laborers and gardeners and sailors and so on.
So they’re occupational associations and analytically, as far as economists are concerned or economic historians are concerned, there are two main types of occupational guild. One are Guilds of long-distance merchants, wholesale merchants, so they’re not selling directly to consumers, they’re engaged professionally in long-distance trade, and they are supposed to have had certain benefits as well as certain costs for the growth of long-distance trade during the commercial revolution in Europe from the 11th century onwards.
And in 2011 I wrote a book called Institutions and European Trade, where I looked at the effects of those guilds of long-distance merchants.
But there was still this much larger group of when I called craft guilds, which really weren’t just for crafts, but also for the service sector occupations that directly sold to customers and even primary sector occupations that directly sold to customers.
So this new book, on European Guilds, that just came out a couple of months ago, is about those guilds, those locally oriented guilds that are that I think one can summarize by saying they are craft Guild.
So was it was an association of all the producers of certain goods and services in a particular geographical area, so typically a town, although they often tried to include the suburbs of the town or the rural hinterland and you do especially in Central Europe and southern Europe you actually get regional guilds that combine the rural and urban producers in a particular region.
So they’re not all completely urban but typically it would be a town and its hinterland, and the guild had the exclusive right for its members to engage in certain economic activities and then it had the exclusive right to decide who could become a member of the guild and then a further set of legal privileges it had, usually from the local authorities, was to regulate the business activities of its members and often to regulate the activities of people outside the Guild in the markets and what it produced and the input it used to produce it.
So it had certain wider capacities too to regulate the adjacent market.
So with those four privileges a guild basically sought to control its own occupation and the markets involving it in such a way as to serve the best interests of its members.
Mark Pennington: Well that’s leading into the next question to be, so the title of the book is European Guilds, An Economic Analysis. Economists often disagree about things and one of the questions that they disagree about is really related to the efficiency properties of these guilds. so there are some economists that argue that these guilendes performed an important function, that was efficiency enhancing, that might have been necessary for growth in certain circumstances, I know that’s not a view you hold, but can you give us an indication of what those arguments are that are put forward that might suggest that these institutions, why do some economists believe that the guilds were efficient?
Sheilagh Ogilvie: This view of that guild might have actually being efficient institutions is actually a specific manifestation of a wider and extremely beneficial development that’s really started economics in the sixties and seventies, which involved trying not just to accept institutions as a given, that economists just had to say well they come out of somewhere and other social sciences explain them, but to try to apply economic analysis to explain why institutions such as the state of the market and voluntary organizations and other institutions, maybe we could explain why these institutions exist and then our analytical framework would be so much more powerful rather than simply accepting these exargent things that come out and relying on other social sciences.
So maybe a bit of economic imperialism and the first attempt or the first attempts to explain institutions in economic terms were these efficiency theories.
So the idea was if something exists vary widely for a very long period, there must be some economic problem it was solving.
Mark Pennington: Otherwise people would change it.
Sheilagh Ogilvie: Otherwise people would change it. Otherwise it would spontaneously breakdown or where would be some reason why we would move to a better set of institutions, and maybe these efficiency theories reflected the optimism of the 1960s, the idea that you know everything is for the best of the best of all possible worlds, as you know enlightenment high-growth era.
And it was, I think that the view that maybe craft guilds or guilds in general are efficient grew out of this wider tendency to try to explain everything in terms of you know the simplest propositions in economics.
And there were three reasons why it was so you know maybe these guilds even though they looked as if they might be doing some bad things, actually their benefits outweigh their costs.
And there were three sets of benefits that guilds were thought possibly to have created.
One of them was to do with the quality of goods and services. So the idea is that there’s the potential for an information asymmetry between producers and consumers, so I know much more about the quality of the economics and economic history services I’m creating then my students do and so I can actually defraud them by giving them something that isn’t very high quality and there’s something about the certification that I get, if I had a guild, that enables them to trust that if they come to the university of Cambridge that they’d be getting proper economic history services. So the idea is that you have too much of an information asymmetry between producers and consumers, the whole market would collapse.
So that’s the first thing that it was thought maybe guilds did.
The second was kind of related, which was that it was thought that perhaps guilds were necessary to make sure that produces engaged in the right amount of training. So it was thought maybe their imperfections in markets for what economists called human capital investment or investing in your own capacities, maybe people wouldn’t do enough of it, maybe when they tried to do it there might be some sort of opportunistic behavior between trainers and trainees which would cause the training relationship to break down and maybe guilds were necessary to regulate that training relationship to make sure it works.
So that was the second reason and the third thing and I think this was maybe a slightly more challenging thing for efficiency theories of guilds to do was to try to make sense of the relationship between guilds and innovation, because we know that innovation is really important for economic growth and we also know that guilds often tried to oppose innovations that threatened their members’ market power.
And so you know any efficiency theory of guilds has to kind of grapple with that and the idea was well yes occasionally you see guilds opposing innovation, but actually they are doing a bunch of other things which the efficiency theories aw were good for innovation.
So on balance the benefits outweigh the costs, so they might have disseminated knowledge through their training systems, they might have created knowledge clusters in some way, they might have because they often require a journeyman to go out traveling, maybe they disseminated knowledge that way.
So there was this sort of idea that unintentionally guilds might be doing things that were good for innovation, even if on the face of it it looked as if they were doing things that were bad. So that was, those were the efficiency theories.
Mark Pennington: Would it be far to say that these are basically arguments to suggest that there is some kind of market failures that arise in certain situations, you then have an institutional response to address the market failure and in this instance the guild is seen as the institutional mechanism to solve the market failure.
Sheilagh Ogilvie: Exactly. So if you’ve got a market failure then in principle an institution other than the market can do better and the idea is well you know in the past, there you know you don’t really have, it was thought, you know, public institutions or generalized universal institutions, so you had to rely on these professional associations to do it because you needed something to solve the market failure.
And this was kind of basis for the efficiency theories and it’s only really I think in the last 10 years or so that economists have begun to move on from efficiency theories and to recognize that you can still remain within economics but explain inefficient institutions.
Mark Pennington: Let’s move on to that. So you’re view, where as we have the efficiency view saying we have these market failures which the institution of the guild arises to correct. Your view is very much that guilds should be seen as something closer to rent seeking institutions which were actually seeking privileges for the members, that were exclusive and that rather than solving a market failure in essence since they create a different sort of market failure, which is not certain people excluded from markets, there was a lack of market competition, that you don’t get the quality control or professional certification that you might otherwise have got from perhaps some alternative kind of institution. Is that a fair summary of your view?
Sheilagh Ogilvie: Yes, that’s a wonderful summary of my view. But if I could go in a little further to explain how this helps us to explain why these on balance probably harmful institutions existed so widely for so long. I think what you have to bring into this is the way in which politics and the state worked in medieval and early modern Europe and indeed in many other parts of the world.
I think once we know more about Chinese guilds or Indian Guilds, there are interesting hints already in that literature that the relationship between occupational associations and the political authorities was not just similar to that which we observe in Europe.
So it’s a it’s a two-way, it’s a two-way flow of services because states, the emergent stats of the medieval, late medieval period and the early modern period in Europe faced a lot of challenges: they needed to raise funds, they often needed to engage in increasingly expensive wars and they sought either tax revenues or loans to enable them to overcome the crises that they were always facing.
And we know now looking in retrospect that you can solve these problems for the political authorities by having a generalized tax system which basically taxes everyone but doesn’t grant privileges to special interest groups or doesn’t do it too much. And that in crises the government can turn to the private capital market and borrow money and issue government bonds.
But that was a solution which only began to emerge in really after about 1600 in certain parts of Europe and most of Europe in the medieval period, all of Europe in the medieval period and much of Europe even after 1600, the other solution was a much more particularized corporatist solution where by the state hadn’t developed a good fiscal system, the private capital markets were underdeveloped and so when the crown or the local government faced a crisis they turned to the local groups of businessman, i.e. organized into guilds and said we’ll grant you a set of privileges to regulate your market or will reconfirm your privileges or will maintain the force in them, in exchange for which you will either give us direct cash payments or you’ll share your revenues with us, or you will pass a tax every year, or you’ll provide conscripts for the army, or you’ll make “loans” in quotation marks which basically meant favorable loans, i.e. ones you don’t have to pay back.
And so you know in many parts of german-speaking central Europe, in Iberia in eastern central Europe and Scandinavia, you’ve got this increasingly malignant cooperation between occupational association such as both merchant guilds and crafts guild and the political authorities, and it’s that which keeps guilds in place for as long as they are.
So it’s in a way it’s it’s part of a class of theories of institutions which has increasingly emerged in the last 10 years among economists and economic historians, which focuses on the distributional power a certain institutions rather than their efficiency.
So guilds existed not because they were efficient for the whole economy, for everyone, but they were very effective ways of channeling more rents to small businessman and the political authorities at the expense of everyone else.
Mark Pennington: So this is about saying that guilds are about the distributional matters, or that are potentially institutions that are quite conflictual in terms of grappling over a part of the pie, rather than not necessarily thinking about how you increase the overall size of the pie.
Sheilagh Ogilvie: Exactly, so an efficiency theory would say this institution makes the pie bigger. A distributional conflict theory of institution would say that this institution enables couple of powerful groups to get bigger slices for themselves, even if it involves the pie either staying the same size or even being smaller.
Mark Pennington: Before we go into the specific mechanisms through which guilds perhaps brought about that kind of outcome, I wonder if you can say a little bit more about the role of the State in your particular theory or the role of political authorities, because some of the work in this area that’s focused on guilds from a more a rosier viewpoint often depicts them as some kind of bottom-up private order institutions that arise spontaneously to solve an inefficiency problem in a market, whereas your view is suggesting that these institutions were embedded in political structures of power and authority, which were used for these distributional purposes. Can you say a little bit about the debate you’re engaging with there? Why do some people hold to the view they are these kind of bottom up institutions, whereas you have a rather more, a rather different take on what these organizations were actually doing?
Sheilagh Ogilvie: So I think, there is a sort of romantic, sort of optimistic rosy view of guilds, because nowadays of course guilds are voluntary associations.
And because in the English-speaking world, well in North America there’s never been guilds, and in England the guilds had sufficiently weekend by the time that Britain had got his colonies that it didn’t export them, unlike Spain which exported them massively, it’s consulados, overseas, so I think in English we almost don’t have an association in our minds with the old course of guilds, we just think of them as being spontaneous, voluntary institutions.
What is true that there is a sort of romantic view of guilds which is that it just involved a bunch of producers voluntarily getting together and voluntarily acting in certain ways.
And it’s not until you try to trace the origins of guilds back as far as the documents take you that you realize that there’s actually as good as zero evidence of the guilds as being voluntary.
The first time you see any guild it’s because it has applied, has petitioned for government recognition, so I think there is a sort of pre-guild where, in fact I observe this in this remote valley in the northern black forest in the 16th century, where this new industry had come to this forested hilly area, all of a sudden peasants and women and people of other crafts were all you know engaged in these new activities. And then a bunch of the existing weaver’s who’d also moved into area said “this is a free-for-all, this is completely unacceptable”, so they actually went from door-to-door in the villages collecting money from the existing weavers, so that they could then go to the capital city, Stuttgart, and lobby and they spent six years lobbying the princely chancellery so that they would get an ordinance saying “you’re not allowed to do this if your female, if you’re a peasant. You can only do it if you are either an existing weaver or you go through a three year apprenticeship.”
So you actually see the formation of the guild is a sort of pre-guild, which has a bunch of guys going from door-to-door trying to get enough money, but it takes six years to lobby the state and I mean transfer bribes – they called them “honoraria” – and they wrote them down in their account book which is why I know about them.
So I think if you look back into the 12th or 13th century in the Italian cities or in the South Netherlands, the Flemish cities, where you also see guilds emerging, you also get hints that there is a maybe a pre-guild or proto guild, where a bunch of guys – it is usually guys, there relatively few females in guilds about 99.6% of the world’s did not let women in – so I mean there were a few women’s guilds, I counted 55 in the entire history of Europe in over 900 years, so they did exist. They were really interesting organizations, but they were so incredibly exceptional that when I say a bunch of guys get together, it usually is a bunch of guys.
So that’s what you see in Genoa or in some of those south, in the Flemish cities in the 13th century. You see hints that the existing producers are getting together, or in 13th Century Paris, existing producers are getting together and often in their first petition they will say, you know, a lot of unregulated people have been trying to produce whatever it is, you know, and this is being very damaging to the public well-being and even women have been doing it and even Jews and you know everyone knows it’s bad that women and jews should be allowed to do honorable occupations,
And so you know we are petitioning for the state to recognize that we have formed a guild and we will decide who is allowed to participate in this occupation and that’s the first time you see virtually all guilds and that’s why I think, you know, you go in and you think they are portrayed as being voluntary associations, but when the first time you see them they’re already embedding themselves into public order institutions.
Mark Pennington: And that creates the power in effect.
Sheilagh Ogilvie: Yes exactly. Then you know I don’t think they’re public order institutions, because they’re not run by the State, but they’re kind of hybrid between private and public order in the sense.
Mark Pennington: I think that in your first book you use the term State Corporatism, so would you describe them as corporatists institutions, they’re some kind of negotiation between a semi private organization and the state. Is that the sort of organization that you see them as?
Sheilagh Ogilvie: By the time we can observe what they are doing they are a manifestation of State corporatism. Perhaps corporate group you might say was a completely voluntary, informal one but as I say we seldom see those, they are very very a minority thing and you know the most famous social scientist who ever wrote about corporate groups, Otto Von Gierke, in nineteenth-century Germany, he did have a romantic view of guilds but a lot of when you read his book, it’s very clear that guilds and communities and these other associations they are integrated into public order institutions in the way that we’ve been talking about.
Mark Pennington: Ok, so I wonder given that you subscribe more to effectively this view guilds which is seeing them as rent-seeking organizations or as privilege-seeking organisations as opposed to efficiency enhancing organisations. Could you give a bit of a brief description in the ways you see guilds reducing efficiency? So what were the kind of mechanisms or processes that meant that you actually had less economic growth or less efficient outcomes than would otherwise have been the case.
Sheilagh Ogilvie: So there are two main groups of things that guilds did, each of which has effects on economic efficiency and economic growth.
The first one is simply imposing and enforcing entry barriers, so restricting the number of producers in a particular occupation and sometimes guilds actually, a guild would actually say that it had numerous clauses, so there was a maximum number for producers beyond which it wouldn’t let anyone in.
You still see that from the very earliest guilds and that are observable in the 12th and 13th century right up to the 19th century, but what guilds wanted to do was not to have a strict maximum number, but rather to be able to decide who could become a member and who couldn’t partly because a lot of guilds’ revenues came from selling admission.
So you had to pay, even if you qualified under all headings, so you were male, you were not a Jew, if it was a Catholic area of Europe you were Catholic and if it was Protestant you were a Protestant, you didn’t have the wrong color of skin because most guilds in ethnically-mixed areas of Europe had very clear definitions that you know, I mean if you were in Iberia, Spain or Portugal you know 7 to 10% of the population of most Spanish and Portuguese cities was of either African or Moorish i.e. Arabic extraction, they and all their descendants were excluded from guilds.
And you have these very detailed descriptions that said anyone whose skin is of the color quince marmalade or darker will not be allowed into the Seville Cobblers Guild.
So you have skin color in Central and Eastern Europe whether a lot of Slavs or Mughals living side-by-side with Germans, the German guilds basically all the guilds exclude them. All over Europe guilds excluded jews, so there were all of these identity-based forms of exclusions.
You had to have local citizenship rights and citizenship in those days was not like it is now where mostly if you live in a country you have national citizenship, it was community-based and on average, I calculated from a big sample of medieval and early modern European cities, on average only about 37% of the inhabitants of any European city on average held these citizenship rights, so the other 73% on principal could not get into guilds.
So there were you know, they were precursor privileges that you had to get in order to join a guild, and then there were the entry fees and so you know, you had to pay often minimum apprenticeship fees that could amount to on average 300 days earnings for an ordinary worker.
Then you have to pay mastership admission fees, which on average from a sample that I had about 1,100 of observations for different European guilds, amounted to on average about 276 days earnings.
Mark Pennington: So these are actually quite extracting institutions.
Sheilagh Ogilvie: Very expensive to get into, but you shouldn’t think of guilds as being like labor unions, they were from like reasonably well-off middle-class boys, in a way, so they were in effect organizations of small business owners and one of the things they did as I’ll describe in a moment, was of course they used their power, their market power to exploit their own employees, so they were the exact opposite unions, they were more like employer’s organizations.
Anyway these entry barriers which were based partly on identity and partly on the ability to pay to get in, were ways of restricting the number of people who could become a member of the guild and hence produce those particular things in a particular place. That in itself tends to push up prices and reduce supplies and we know that when you reduce supplies the price will tend to rise.
And then on top of that quite apart from the entry barriers, guilds then regulated the business activities with their members. So they often engaged in either very open price-fixing or tacit price-fixing, because even in those days it was not a good look, wasn’t great PR to be seen to be fixing bread prices, so often they would engage in quasi secret price-fixing. They would meet him some London church.
Mark Pennington: Part of a network almost, that might have been operating?
Sheilagh Ogilvie: They were like a little cartel. They tended to place a ceiling on the amount of output that each master could produce, so each master was restricted to one workshop or one shop, he had a certain amount maximum amount of equipment so like one loom, you could employ one journeyman and one apprentice. Often a weaver’sfGuild would have a particular quota of cloths that a weaver could produce every year, so my weaver’s in this Valley in the Black Forest we’re technically capable of producing 200 cloths a year, but by 1611 they were being restricted to 50 cloths a year, so a quarter of what they were technically able to produce.
One of the things that I did for the book was I actually put together a big database of about 17,000 observations of guilds in 23 European societies over 900 years and that enabled me to assemble the findings on the output restrictions on price-fixing that many different guilds engaged in, so that I could kind of estimate how much on average guilds restricted output.
When you can observe output quotas it looks as if the average output quarter of a guild was about 44% of the technically feasible level of production. So by restricting output you can push prices up.
I also analyzed all the examples where you’ve got a guild price alongside the price of a non-guilded competitor producing the same goods and services. The median price increase of the guild over the guild over the non-guilded competitors with about 27%, which interestingly is very very close to that which emerges from modern cartels.
So in the twentieth and twenty-first Century, there are various cartels that are different from guilds in the sense that they’re usually illegal, but most cartels managed to increase prices over the competitor level and the median price increase was about 25%. So I don’t know if that’s coincidental, but that was another way in which guilds made the economy smaller than it otherwise would have, was by charging prices above the competitive level.
Mark Pennington: Let me follow up on this a little bit and go back to one of the earlier questions that I raised. I mean reading the book and also listening to your account just now, this is really quite in many ways a damning indictment of these institutions, you know that they really are, there is evidence of rent seeking and the scale of these markups in effect is at a level where how could anybody, certainly looking through today’s lense, think that they might have any beneficial properties, given the nature of this sort of extraction.
I guess the contrary view is going to be from the kind of people who make the efficiency argument would be, okay, looked at from today’s point of view, these would be inefficient practices, but if you look in the context at the time, what was the alternative to providing the kind of mechanisms that might address the market failures that we were referring to, so the price – the 25% markup – might be what you had to pay to overcome the inefficiency.
And that really raises the question of here there any alternatives to guilfs at the time that might credibally have addressed those kind of market and efficiencies or problems that the guilds were supposed to be addressing. You hinted at that there that you looked at but you non-guilded trades. Have you got in the books of comparative evidence whether there were alternatives to guild that were crowded out by the actions of the guilds with the political authorities?
Sheilagh Ogilvie: That’s a really, really key question, a key consideration when you’re evaluating institutions is what’s the available alternative? Because maybe despite all the bad things guilds did, they were none the less the only thing that was available to even, maybe we wouldn’t have had markets at all, maybe you had to have all of these market distortions but at least you had some markets and maybe markets would have collapsed completely without these guilds.
And so that’s something which I look at really in detail in each of the chapters where I try to evaluate what guilds did with respect to quality control, what they did with respect human capital investment, what they did with respect to technological innovations, because it’s really important to know what else was available at the time and actually for me that was a learning experience because I discovered all sorts of very lively and quite strong institutions in medieval and early modern European society that I had no idea existed.
So for instance, one of the things that I think we think of with guilds is that guilds are almost synonymous with apprenticeship. If you think of apprenticeship, you think oh yes it took place within guilds.
Mark Pennington: That’s what I would think.
Sheilagh Ogilvie: And that’s what I thought and I had studied guilfs, Bu once I had started assembling these observations of these different guilds all over Europe, I realized that there were a lot of very very large number of apprenticeships taking place outside the guild framework. And there were lots of guilds that didn’t require apprenticeship, so there’s a lot of apprenticeships without guilds and there’s a lot of guilds without apprenticeship.
This suggested to me that an efficiency theory of guilds which focused on guilds being necessary for apprenticeship, they were neither necessary nor sufficient, so what you see is you know you might say well maybe this only happened in the later era in modern economies like England and the Netherlands which where the miracle economies of early modern Europe, so maybe you could get away from having guilds to regulate apprenticeships in those advanced economies, but maybe you needed to have it in more backward economies or in the medieval period.
What amazed me was that again these wonderful studies that have been done of the earliest surviving apprenticeship contracts in Genoa or in the Flemish cities in the 13th and 14th centuries, what you have are notarial contracts, so private people took their contract to a notary, so the notarial system was a way of like registering, publicly registering an agreement in front of a trained literate Legal Professional. He would draw up the contract, he would store that contract and he would certify that it had been involuntarily signed by all signatories, in a court of law if needed.
And so that was what you did if you were in Genoa or in the Flemish cities in the 13th century, you were a parent and you took your daughter or son to a master and agreed with a master that the master would train your child or your teenager usually and you would lay down all sorts of very very clear prescriptions that the master would provide appropriate training or he would have to post a bond and he’d lose the bond if he didn’t provide appropriate training.
And similarly the apprentice would have to learn and work and serve in an obedient white and not abscond once he or she had learned the skills, which is the other kind of opportunism that we think might plague a master-apprentice relationship.
So you’ve got a very clear recognition that opportunism is possible where everybody’s going to write a contract, you go to a notary and you sign it and you say anyone who breaks this forfeits their bond and the contract gets taken to the town court or the princely court to have it enforced.
So as early as the 13th century, the earliest surviving apprenticeship contracts actually predate the existence of guilds in the occupations in which the young people are being trained and you’ve got all of these very clever contractual mechanisms being written into contracts in front of nataris.
In Northern Europe it was more often in front of municipal offices so the notarial system is more of a south European thing and Northern Europe tended to have sort of town offices that did the same thing.
You’ve got city-states like Venice saying that all apprenticeship contracts whether guild ones are non-guild ones have to be registered in front of a court called the justice de vecchia, which basically you know anyone who violates these private or apprenticeship contracts gets hauled before this court.
The Lord Mayor’s Court in London does the same thing and there’s some amazing work which Patrick Wallace here in London has done on guilds suggesting that 6-8% of London apprentices are bringing their masters before the Lord Mayor’s Court in the 17th century.
So these public courts were really being used to deal with this market failure, potential market failure. You have quasi-private business legal mechanisms, the notario system, you’ve got municipal offices, you’ve got these sort of public courts, you’ve actually a multiplicity of alternative solutions.
Mark Pennington: So you didn’t need guilds to address the kind of training type dimension. What about information asymmetries? The kind of quality control information asymmetry type of argument. Did you find evidence of alternative mechanisms to deal with that aspect?
Sheilagh Ogilvie: That as also kind of fascinating to me because I had no idea how far back, especially town municipal organized mechanisms went for dealing with the problem of… it’s only particular goods and services where there’s a real information asymmetry problem. A lot of goods and services you can kind of just tell by looking at our feeling something whether it’s good or not.
But there are some things were the consumer can’t know and interestingly it’s actually 13th century Spain where you begin to see municipal or in some cases princely court being setup to deal with quality issues and they actually say because it is well known that a guild or an occupational association have the wrong incentives. They’re always going to find in favor of their own producers. We need to take quality control away from the guild and put it in the safe hands of the public organizations.
Now I’m not sure that the municipal quality inspections… you know there was room for corruption there as well, you know we shouldn’t romanticize the public authorities any more than we should romanticize the guilds.
But on the other hand an association of producers really does have some bad incentives when it comes to dealing with a complaint against, like you’re a guild inspector, someone accuses one of your fellow masters of having done something wrong, he might be a really powerful fellow master, even if he isn’t you’re going to worry about finding against him, and it fact again to go back to my little Guild in the northern Black Forest, I actually have the guild cloth inspectors asking to be released from the inspectorship because, you know, if you find against your fellow masters you incur much resentment.
So they themselves recognise it’s actually quite difficult to not decide a little bit in favor of you know the other Masters against customers.
The other thing that intrigued me was that you observe some really successful, high quality export industries in Europe that function virtually without any quality control.
So there’s a wonderful study by a very good young economic historian in Padua called Andrea Caracausi looking at the wool and worstead guild in Padua in the 16th through to the 18th Century. The Padua wool industry was fantastically high-quality, was fantastically successful, it sold all over the Mediterranean and into the near East.
It did have a guild that was a fairly inactive guild that didn’t even have her apprenticeship requirements, certainly didn’t have any Quality Inspection done, but never the less it was a very successful. It was dealing with customers in the Eastern Mediterranean that really would have been the potential for an information asymmetry. And I remember asking Andrea, well how did they do it without guild quality control? And I think his answer was they knew they would lose customers if they produced, you know, if they exported even one shipment of really bad cloth.
Mark Pennington: So the reputation mechanism?
Sheilagh Ogilvie: So the reputation mechanism. And the other thing was I think they marked, he said you know the other thing about guild cloth seals is that they were very easily counterfeited. So in that sense if you could counterfeit a guild seal, then it’s almost worse than having no guild seal at all because the customers will believe the counterfeit seal and and really be defrauded.
So apparently there were certainly very many examples like the Padua wool industry where you have extremely successful export industries that functioned purely on the basis of reputation, which is kind of amazing because we do think that there is this potential for a market to break down without some sort of quality certification, but apparently there were some where it was possible for the producers to actually sustain on the basis of the reputation of a particular firm, a particular producer.
The other thing I think that one notices is that long-distance merchants did their own quality inspections at the point of purchase and so you often get merchants saying we don’t pay any attention to guild quality seals because they’re completely inadequate for our purposes, we inspect again when we buy it because we know that if we sell in a distant market and we’ve sold something really bad our business will suffer.
So I think this idea of a merchant firm’s reputation seems to have played a big role on export markets.
Mark Pennington: Those examples you’re giving of non-guild mechanisms for tackling market failures, I find them quite convincing and they come across very well in the book. Where I’m less sure and this relates to a conversation I had with Barry Weingast, before Christmas he did a podcast with us, is about understanding the options that might have been available for states. So his argument is that yes many of these restrictions looked through today’s lense, we would see them as inefficient and we would want to get rid of them.
But you have a slightly different take on them if you recognize that the alternative might not be a free market type situation it might actually be one where, I have to go back to a phrase think you used earlier yourself, you don’t have a market at all because you have societies that in many circumstances are basically embroiled in violence in various kinds and the various restrictions and privileges are a way to at least provide some kind of rudiments of peace and order in a context where the alternative would be something worse than that.
So that once you factor in this kind of pacifying role at a certain level, so you have some kind of efficiency explanation for why some of these structures might exist. Does your analysis have any relevance to that? Do you see cases where states seem to be able to avoid violence without necessarily having guild privileges or these kind of distributional deals done with these kind of associations? Or is that the wrong eroid to be looking at these kind of things?
Sheilagh Ogilvie: I think that that’s a really important question, but it’s much more relevant to guilds of long-distance Merchants than it is to these you know small business guilds that are looked in this book, in the sense that where violence still seems to be a problem is in when a trader is trying to trade in the realm of a state which is not his own state.
So how do you as a long-distance trader persuade a distant prince, you know someone in Constantinople or somewhere in Northern Africa or someone in Novgorad, to guarantee your property rights over your wares, not just to take them, and to enforce your contact with the people you’re trying to buy and sell with.
And that is one of the arguments for why guilds of long-distance traders might have been needed at the very beginning of the commercial revolution which you know the growth of trade after the end of the Dark Ages, and various economists have put forward models of hw guilds of long-distance played a role in negotiating with foreign monarchs or foreign rulers in such a way as to guarantee more peaceful interactions.
And certainly when you see the first set of merchants turning up in a foreign trading centre, they are often negotiating for safe conduct and privileges. The interesting thing is you see that even if they turn up as a single merchant, so the very first thing you do as a merchant is that you go to the most powerful guy and you say please give me a safe conduct and I’ll pay you something, so that was certainly something which long-distance merchants did as individuals as well as a guilds.
There is an argument that maybe it was easier for a group of merchants to negotiate for safe conduct with foreign rulers. There you really have to look at the balance of violence that’s going on because merchant guilds never stopped at just asking for safe conduct. They also asked for monopolistic privileges, so they went far beyond simply asking for their things not to be confiscated. they immediately try to tilt the playing field in their own direction and when they couldn’t get it they use their guild organizations to attack other merchants.
And so you know even and you know 12th or 13th Century Constantinople, you’ve got thousands of members of Italian merchants, of the different Italian merchants guilds, fighting each other in the streets of continent Constantinople, killing each other, confiscating each other’s wares, causing violence. They were a source of violence as well.
You know merchant guilds either employed corsairs, you know, there was often a fluid line between a peaceful merchant and a corsair, you know, you’re you’re sailing along and you are a merchant but you know you see you see a ship belonging to a rival city and you roll up the cannon as it were.
So you again you need to do a cost-benefit analysis and figure out whether you’re getting a lot of violence being produced by merchants guilds, are they also managing to suppress some violence that might otherwise have happened.
Obviously you’re looking back at a very early time, so you’re having to piece together little bits of evidence. In my 2011 book I came to the conclusion that merchants guilds were producing at least as much violence as they were they were they were addressing.
I think a really nice test case is the champagne fairs. So the fairs of champagne were a set of International Trade Fairs that took place in the county of champagne in France, but it was an independent principality and in the 13th century it was the undisputed fulcrum of trade in Europe.
That was where the Mediterranean Merchants met the North Sea merchants and the Hanseatic Merchants. You get goods from the Mediterranean being traded with primary products from the Baltic and wool from England and so on.
And the interesting thing is that merchant guilds are very, very invisible and inactive at those fairs and the reason is that the counts of champagne, i.e. the ruler, guarantees the property rights and the contracts of all the merchants who come to my fairs and anyone who attacks a merchant travelling to the champagne fairs, the count of champagne sends out his soldiers to hunt them down and, you know, rescue the merchants or rescue the goods of the merchants.
So as early as the 13th century, you at least have some rulers in Europe that perceived that they can become very rich and indeed the counts did by providing generalized property rights and contract enforcement to everyone and not just, you know, not selling privileges to particular guilds.
The reason the counts of champagne could do that was that the four towns in which they took place didn’t really have important merchants in them, so there wasn’t a domestic lobbying group asking for special privileges. The counts of champagne could be soy of Olympian about him and say all foreign merchants can come, we’re not going to oppose or you know grant any privileges, and the interesting thing is that the fairs of champagne decline in the 1290s when they get when champagne region gets taken over by the King of France who immediately start granting privileges to some groups and confiscating the wares of other groups like the Flemish Merchants, because he’s at war with Flanders.
So you know if it’s already possible to offer generalized peace in the 13th century then it wasn’t it wasn’t technically impossible to do that at that era.
Mark Pennington: I wonder if we can move on to think about why guild institutions declined? As I understand your argument for why they persisted for so long, it’s basically something like a kind of public choice rent-seeking argument, which is saying that you’ve got a relatively small organized groups, their organization in a sense is being facilitated by public authority through these corporatist deals, they gain privileges which are inefficient from a broader perspective, but the reason why you don’t have the people who would be the beneficiaries of efficiency gains sort of challenging that is either because they are people who are politically disenfranchised, they don’t have access to the state authorities, or it’s also because perhaps they face a huge collective action problem, that the losses are dispersed across hundreds of thousands of people who are the consumers of these products and they don’t organize effectively because there are so many of them.
If you take that kind of explanation, it kind of implies that those privileges would be very hard to break down, because you’ve got very strong groups that want to keep them in place and the people who would benefit from getting rid of them are not in a position to do so.
That begs the question of how do you get out of this inefficient equilibrium situation. So what is your explanation of how that process arises?
Sheilgah Ogilvie: That’s a really key question and I think economists and economic historians and other social scientists are kind of grappling with it now, because you see it, the question posed in the framework of nineteenth-century American economic history Naomi Lamoreaux for instance, who’s visiting Cambridge this year. How do you get from the bad equilibrium to the good on? You see it in developing economies as well. Some developing economies have managed to make the transition, others are still locked in the old corporatist, state corporatist ecolibrium.
I think that that’s the sort of frontier of research at the moment. At the end of the book I tried to identify some descriptive characteristics of those countries that did manage to break free earlier in Europe, so I mentioned earlier that first the Southern Netherlands, then in the late 15th and early 16th centuries, then the Northern Netherlands, what is now the Netherlands, in the Dutch golden age from 1560 to about 1670 or 1700, and then England were the miracle economies of pre-industrial Europe, so long before the Industrial Revolution started you begin to see sustained economic growth in these societies.
And you also see guilds either breaking down or at least becoming a lot less coercive, they stop enforcing their entry barriers or they only exist in certain places, like England, basically London in the old Borough towns, there were lots of towns and rural areas with industries that meant the new towns of the Industrial Revolution, Birmingham Sheffield and so on, didn’t have guilds, and in the northern Netherlands you have a lot of towns that didn’t have guilds, or you have whole Industries like the textile industry of Leiden that was basically unguilded.
London had this unique guild system where once you became a member of any London guild, you are allowed to practice any occupation. So this was this was just taken for granted in London by probably 1500. Guildds everywhere else in Europe would look at it and think what kind of system is this? But that fluidity, getting access to any sort of guild and then become an instrument maker or anything you want. That would not be possible under other guild systems.
So the question is why did these North Sea economies, why England, Belgium, the Netherlands, why did they break away from this state corporatist equilibrium?
Whereas German-speaking central Europe Iberia, Scandinavia, Eastern Central Europe – even France until the revolution, maintains this malignant equilibrium.
And there are a bunch of things that happened in the northwest corner of Europe and didn’t happen in the others, the underlying causes of that are I think you know the avenues for future research.
So you’ve got stronger parliament, stronger representative institutions in the Netherlands and England – that’s one component – but of course parliaments can do bad things as well as good ones.
So you know the Polish Parliament was really strong, but what it did was to enforce serfdom. The Vattenburg parliament of the area of Germany I studied was really strong, what it did was to enforce guilds privileges. So you know it isn’t enough to say you’ve got a strong Parliament that can, you know place restrictions on what the crown can do, you also have to have what are the mechanisms by which you get into parliament, why does parliament take good decisions rather than bad ones?
Having a very competitive urban system, so towns that did not collude with one another to try to maintain guild privileges, but instead competed with one another. England has this very long coastline, it’s very competitive urban system, the Netherlands you have all these towns side by side that are not separate city-states so there’s always like intersecting rural hinterlands where stuff can happen that neither set of guilds like, so the towns competing with one another is really important.
Having quite a very gated social structure, so you’ve got entrepreneurial rural people who want to engage in craft, proto Industries, cottage industry, export Industries, you’be got rural traders, you’ve got the members of the gentry and aristocracy who want to engage in trade and don’t want to have to join these guilds.
So having that sort of very very gated social structure where being entrepreneurial in industry and trade is not dishonorable for a member of the aristocracy and it;’s open to people in the countryside puts a lot of pressure on guilds.
Having institutional enclaves inside cities, the so-called “liberties of London”, where guild regulation did not run. You had them in some parts of your of Europe, these sort of little enclaves, these liberties, where people could behave in a real entrepreneur way and the guild’s couldn’t stop them. So most of the English textile machinery in France in the 18th century were actually located in these little institutional enclaves.
I don’t think any of these things individually would have worked and then the final thing is a transition to a tax system in which there are relatively few exempt groups, like the aristocracy has to pay taxes, so you’ve got a very very broad tax base. You don’t have to sell privileges because you’re taking a lot of taxes from the whole population, and the other thing that the Netherlands and England develop is a very sophisticated financial system, so the state that can borrow from private capital markets doesn’t have to rely on guilds.
So having all these things descriptively seems to be a good thing, but why you get them in some parts of Europe and not in others is the big open question?
Mark Pennington: Let me ask you a little bit about that. I understand it’s already a difficult question but I would describe and maybe this is unfair in some ways, the explanation you give there, given all these variegated factors, as some kind of accidental explanation, that by accident certain factors come together and then we’re able to break free of guilds and I guess that’s not an unsatisfactory explanation some ways, but I was wondering whether you can think about all there any more positive explanations?
So as an alternative type of view, I’m thinking about the kind of argument that Deirdre McCloskey of why we have the Industrial Revolution when we do, and it’s an argument which is more than ideas based explanation really saying that at a certain point in time you have a change in ideas where people embrace in a broader intellectual sense some notion of openness of innovation and of wanting that to be open to a broader set of people rather than something that is more class-based if you like, or in this case guild-based.
She has a more ideological interpretation of the factors that can bring about these changes, rather than one that focuses on particular sorts of institutional accidents. I wonder whether you have any sympathy with that kind of view, or is just one of the other factors that might come in with all the other institutional views that you’ve just listed.
Sheilagh Ogilvie: I think and what you just said there are two really interesting components and one is the accidental competent and the other is the cultural component and in fact those are two other really powerful approaches to try to explain institutions.
In some ways institutions can change simply because of historical accident, so you can get the accident that North America was basically discovered or occupied or turned into part of an English-speaking world Empire and didn’t get guilds and central and southern Europe was, the Imperial power was either Spain or Portugal, and they imported their institutions. So the accident of who invades you is Imperial power.
You can get the violent accidents like the French Revolution. Had the French Revolution not happened, I don’t think that France would have lost its guilds in 1791. in fact, even the French Revolutionary government agonised for two years before managing to abolish the guilds.
But once it had abolished its guilds, it then exported this institutional change to all the countries in Europe it invaded and occupied, so Western Germany, the Netherlands, Northern Italy, you see guilds being broken down by the accident of being invaded by France.
Prussia gets defeated by France in 1808 and begins to rethink all sorts of old institutions, including guilds and serfdom, abolishes guilds and serfdom because we need to beat the French next time.
So clearly there is an important role for accident and then historical path dependency in how you get institutional change and I think you know that’s one reason why economists and all social scientists are paying way more attention to history.
If accident matters and then you get a whole set of events after that, you really need to know what happened in history.
So that’s one way I think that is a component of how we explained in institutional transition and as you can tell I think it’s quite important.
On the culture side, I have to admit to a stubborn old Marxist feeling that you know culture and ideas they’re super structural and what really matters is the material basis.
That’s overstating my view but because most of what I do in my research is that I analyze the behavior of ordinary people, I look at you know entrepreneurship among the weak and powerless often the illiterate, the women, the peasants, you know, people who are struggling, who have no idea what’s going on in elite culture, and none the less you see so much sense of entrepreneurship, so much sense that you know, you’ve got reading the petitions of ordinary people in medieval and early modern Europe against guilds, women’s petitions, illiterate women, they’ve got a very strong vision that they should be entitled to participate in markets and guilds are bad.
If literate figures affect the decisions of elites and deals are being kept in place because of some sense that the elites think they’re okay, you know, there might be a sense of legitimacy that comes from these ideas and maybe it’s possible that there’s some undermining of the sense of legitimacy, but you know when I see guilds being broken down I see it happening for very hard headed political and institutional reasons.
But you know I think Deirdre’s analysis of many aspects of this transition is incredibly illuminating and just super fun to read, but I think ultimately I would say its institutions and politics and force and conflict and you can find dignity and entrepreneurship everywhere, as long as you take those institutions away, whereas I think she would ascribe much more autonomous power to the ideas. And you know respect where the scholars can differ about things and I’m happy about that.
Mark Pennington: I’d like to close if I may just by asking you about a theme that is quite closely related to some of the issues concerned with you in this research center, and that’s thinking about the relationship between informal and formal institutions and how that can sometimes go wrong.
So just going back to the beginning of the conversation where you were mentioning about the kind of rosy view that people sometimes have of certain kinds of communal organisation or guild-type structures and I this is very relevant to when people, I know you discuss this yourself when you have discussions about social capital, there’s a tendency to see community that we all value in many ways as providing certain kinds of services in a singularly romantic view, rather than seeing community as something that can very double edged, where you can recognize it there’s a positive side to traders or other people getting together and all the network effects that that generates, but at the same time recognize that can be a dark side to it, that exclusion is often the flip side of community.
I wonder whether you could just reflect on that because it seems to me that this is a constant tension that face, that we want people to from voluntary groups or associations, we want a rich associational life, but the danger is always there but those associations can move from being these rosy-type institutions to flipping over into the dark side.
And what do we learn institutionally? Are there any institutional lessons do you think about how we can get the good out of community without getting this dark side rearing its head?
Sheilagh Ogilvie: I think that is something one does learn from looking at this 900 year history of European guilds which is that not everything that guilds did was bad and certainly not everything that guilds did was good, and that networks and organizations, especially the problem with social networks, is that they can produce much more powerful social capital if the do know who are members and who aren’t.
And so you can look at communities and not work so you could say they’re doing all of these great things, states and markets are not perfect, we know there are market failures, we know there are state failures, romanticising state capacity, romanticising spontaneous order in markets is also wrong and I think what we can learn from looking at real functioning communities and in groups like guilds is that eternal vigilance is necessary you need to have networks and communities if only to keep markets and states under control, to have a variegated social structure, to have ways in which ordinary people can organize to call out abuses in the market and to call out abuses in the state.
But that we can’t romanticize these communities or associations or networks either. We need to recognize anything which human being, any organization or institution that human beings create can also can be used for good or it can be used for ill.
And I think if you recognize the capacity of guilds and communities and networks to be used for bad purposes, that’s the first step to putting checks and balances in place so that the communities of networks you get are ones that do as many good things as possible in it as few bad ones as possible.
So I think you know finding out what really happened with communities is the first step to embedding communities within a wider framework of open-access institutions.
Which I think is something to end this podcast on us and optimistic note. With all the things to worried about in modern Western democracies, actually they may have problems but they’re the best probably the best way of organizing society that has ever been developed by human beings, which doesn’t mean we can’t make it better.
But I think we have learned how to embed associations and networks and communities in a wider framework of generalized markets and open access states and eternal vigilance will be necessary, but I think how we got from, you know, the state corporatism dynamic equilibrium to what we have now does have lessons, which is watch out for the dark side of any human Institution.
Mark Pennington: On that note I;d like to thank you very much Sheilagh for really a great conversation and an absolutely fantastic book, so I thoroughly recommend this book to all of our listents, it’s called the “European Guilds, An Economic Analysis” and it’s out with Princeton University press. So please check out Sheilagh’s book.
Sheilagh Ogilvie: Thanks for inviting me.
