Midwest Academy of Management Conference 2017 20th …prateekr.weebly.com/uploads/6/4/5/3/64539813/ppt.pdfRaj: Origins of Impersonal Markets October, 2017 The entrepôt of Antwerp

Prateek RajMidwest Academy of Management Conference 2017

20th October 2017

Origins of Impersonal Markets in Information and Commercial Revolutions of Europe

Raj: Origins of Impersonal Markets October, 2017

The Great Enrichment

1

Motivation Theory Data Results Conclusion

Political Institutions (North, AJR)

Economic Institutions

(Ogilvie)

Popular Culture

(Weber, McCloskey)

Intellectual Culture

(McCloskey, Mokyr)

Expanding circle of

commerce

Why did North Western Europe prosper?

Why did North Western Europe develop these characteristics?

1000150016001700


This paper: The Big Picture


Information Revolution

(E.g. Printing, Internet)Organization of Business?

2

Opportunity(E.g. Atlantic trade,

Globalization)


This Paper: What?


3

• Study the decline of merchant guilds in 16th c. Europe

• Answer two basic questions• Why 16th century?• Why Northwestern Europe?


This Paper: How?


4

• Codify how business was done in largest European cities during 14th-16th c.

• Develop proxies for• 15th c. access to information (printing), • lucrativeness of long distance trade (distance to sea)• economic development and competition (urban clustering)

• Study the effect of printing X distance to sea on economic institutions, using Distance from Mainz as an IV.


This Paper: Why?


5

• Merchant guilds declined in 16th c. in cities that were• closer to Mainz, that had higher rates of printing in 15th c. and• also close to sea especially Atlantic, enabling long distance trade.

• The paper provides• technological, geographic explanation of the decline of merchant guilds.• insights into the persistence and decline of networked institutions• business history perspective on what lead to the great enrichment


“the guild-dominated societies of Italy, Iberia and German-speaking centralEurope were unable to adjust to rapid institutional, commercial and demographicchanges of the sixteenth century. They lost out to the market-oriented civicculture of the Low Countries and England with their increasingly impersonalmarkets and impartial states, which encouraged forms of generalized trust thatfavoured adaptation and growth. The weakening of the particularized trustgenerated by associative institutions such as merchant guilds created intersticesin English and Dutch society within which people could experiment withgeneralized trust in strangers mediated by impersonal markets and impartialstates. This cannot be regarded as an accident.”

- Ogilvie (2011)

“the guild-dominated societies of Italy, Iberia and German-speaking centralEurope were unable to adjust to rapid institutional, commercial and demographicchanges of the sixteenth century. They lost out to the market-oriented civicculture of the Low Countries and England with their increasingly impersonalmarkets and impartial states, which encouraged forms of generalized trustthat favoured adaptation and growth. The weakening of the particularized trustgenerated by associative institutions such as merchant guilds created intersticesin English and Dutch society within which people could experiment withgeneralized trust in strangers mediated by impersonal markets and impartialstates. This cannot be regarded as an accident.”

- Ogilvie (2011)

Expanding circle of commerce

Why were Merchant Guilds powerful?

6



What are Merchant Guilds?

7

Privileged corporate associations of wholesale traders (Ogilvie, 2011)

+ Multiplex: - Information networks (Greif et. al., 1994)

- Opportunity networks (Gelderblom & Grafe, 2010, Ogilvie, 2011)

- High barriers to entry


1.5

22.5

3Average

010

2030

Total

1250 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800Year

Total Average

Source: Gelderblom and Grafe (2010). Cities include Antwerp, Amsterdam, Bruges & Bilbao

5 = Power to discipline4 = Internal Discipline3 = Political representation2 = Informal constraints1 = Individual traders


What are Merchant Guilds?


1.5

22.5

3Average

010

2030

Total

1250 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800Year

Total Average

Source: Gelderblom and Grafe (2010). Cities include Antwerp, Amsterdam, Bruges & Bilbao

5 = Power to discipline4 = Internal Discipline3 = Political representation2 = Informal constraints1 = Individual traders

Authorities stopped granting privileges in Northwestern Europe in 16th century.• Why 16th Century?• Why Northwestern Europe?

7


Atlantic Ocean(North Sea)

Baltic Sea

Hamburg

LubeckImpersonal Markets

Monopoly privileges

Opportunity: Commercial Revolution


8

Traditional land trade

Rising sea trade in 15th c.


Cologne

Strasbourg RomeEsslingen Basel

Bruges

LouvainBrusselsAntwerp

Zwolle LyonGouda

Paris

Provins

VeniceLondon

PaviaBologna

Wroclaw

Prague

Ingolstadt

NürnbergMainz

LübeckLeipzigLeidenDeventer

MagdeburgAugsburg

Pforzheim Haarlem Siena

OppenheimTroyes

Arnhem FirenzeWorms Rostock

HaguenauCaenCambrai

's-HertogenboschErfurt Wittenberg

ZwickauFrankfurt an der Oder KaliningradTübingen Modena

1460

1480

1500

1520

Year

of fi

rst '

Econ

omics

' boo

k

0 200 400 600 800 1000Distance from Mainz

Information: Printing Revolution


Source: USTC Catalogue, University of St. Andrews

9

First printed book on “Economics” (USTC catalog), De contractibus mercatorum or “On the contracts of Merchants”, printed in Cologne in 1468.

LucaPacioli’s Summadearithmetica printed in1494inVenice.Hindu-Arabicnumber systempopularized viaItaly(byFibonacci’s LiberAbaci,Pisa)

Local language

Only 13% “Economics” books (until 1550), were printed in Latin (mostly in Italy and France). > 50% “Religious” books in Latin

Many books were printed in German, French, Dutch, and English.

E.g. Nieuwe instructie, Nouvelle instructie, A notable and very excellente woorke (byJan Ympyn Christoffels, 1540s)

Germany

LowCountries

France

ItalyandEngland


The entrepôt of Antwerp

9a


“Sixteenth-century Antwerp served as a training ground and test site forcommercial techniques and know-how as a result of the concentration ofrepresentatives of all European traders in one city. Low Countries merchantsshowed themselves eager students: they were trained by foreign merchants inAntwerp and abroad (either Low Countries expats or citizens of particular cities)and Antwerp’s printing presses - Antwerp was one of the most important bookproduction centres in sixteenth-century Europe - produced so-called ArsMercatoria guides or ‘Doing business for dummies’. Hence, Low Countriesmerchants could easily pick up information on Italian-style accounting, letterwriting, mathematics, business techniques such as the bill of exchange andlanguages. This training allowed them to catch up with the most recenttechniques but it did not give them an advantage over their competitors who werefamiliar with the same techniques.” - Puttevils (2015)

“Sixteenth-century Antwerp served as a training ground and test site forcommercial techniques and know-how as a result of the concentration ofrepresentatives of all European traders in one city. Low Countries merchantsshowed themselves eager students: they were trained by foreign merchants inAntwerp and abroad (either Low Countries expats or citizens of particular cities)and Antwerp’s printing presses - Antwerp was one of the most importantbook production centres in sixteenth-century Europe - produced so-calledArs Mercatoria guides or ‘Doing business for dummies’. Hence, LowCountries merchants could easily pick up information on Italian-styleaccounting, letter writing, mathematics, business techniques such as thebill of exchange and languages. This training allowed them to catch up with themost recent techniques but it did not give them an advantage over theircompetitors who were familiar with the same techniques.” - Puttevils (2015)


Relationship Based (RB)

Markets

Mainz

Hypothesis

Impersonal Markets

Relationship based Markets

Reforming Markets

50 Largest cities of Europe in 14th, 15th

or 16th century with nature of institutions

10

Sea coasts, especially Atlantic, attracted unfamiliar traders

1. COMMERCIAL REVOLUTION

Printed books diffused trade information and business practices like accounting

2. INFORMATION REVOLUTION

Regions closer to Mainz, city of Gutenberg, adopted printing early in 15th c. (Dittmar, 2011)



!"#$%&'((: Nature of 16th c. Economic Institutions15th c. Printing

Penetration as a proxy for access to

information ()*+"$),"$*%)

Sea distance as a proxy of impersonal opportunity (c) (/,0)1*$231#,",##% )

Empirical Approach

Hypothesis predicts β3 to be positively significant and β1 and β2 to be not significant

11



Nature of Economic Institutions

Question: What was the nature of institution in 16th century?Sample: 50 largest European cities in 14th – 16th century (81 cities)

50 Largest cities of Europe in 14th, 15th

or 16th century

!"#$%&'((=2,ifguildmonopoliesremovedin16th c.=1,ifcityundergoingreformin16th c.=0,ifcitymaintainsrestrictivemonopolyprivilegesin16th c.

Impersonal Markets

Relationship based Markets

Reforming Markets

12



Sea distance (SeaPortClosenessa)

/,0)1*$R+#$%=

/,0)1*$231#,",##% = S − /,0)1*$R+#$% (.U

Distance from 166 Atlantic and Mediterranean Ports (Acemoglu et. al., 2005) or Baltic Sea

Atlantic and Mediterranean Ports of Early Modern Europe

(Acemoglu et. al., 2005)

13



Considered 121 printing cities that printed Bj >10 books in 15th century (GW)

Printing Penetration (YZ[\]Y^\]Z_)

daj

dij BjPopi

Popa

)*+"$!"a,b% = cde

afeg ∑ )1i1500fafeg

k&fl&

&g&

el&

)*+"$),"$*% = S + l n()*+"$!"a,b%)

Cities that printed more than 10 books in 15th

century in GW catalogue

14



Printing and Distance from Mainz


ALMERIA

AMSTERDAM

ANGERS

ANTWERPEN

AQUILA

ATHINAI

AUGSBURG

AVIGNON

BARCELONA

BELGRADE

BOLOGNA

BORDEAUX

BOURGES

BRESCIA

BRUGGE

BRUXELLES

BURGOS

CAEN

CORDOBA

CREMONA

ERFURT

FERRARA

FIRENZE

GDANSK

GENOVA

GENT

GRANADA

HAARLEM

HAMBURG

JEREZ-DE-LA-FRONTERA

KOBENHAVN

KOELN

LEIDEN

LIEGE

LILLE

LISBOA

LONDON

LUCCA

LUEBECK

LYON

MADRID

MAGDEBURG

MALAGA

MANTUA

MARSEILLE

MECHELEN

MESSINA

METZ

MILANO

MURCIA

NAPOLI

NUERNBERG

ORLEANS

PADOVA

PALERMO

PARIS

PIACENZA PISA

PLASENCIA

PLOVDIV

POZNAN

PRAHA

RENNES

ROMA

ROUEN

SALONIKA

SARAJEVO

SEVILLA

SKOPJETIRGOVISTE

TOLEDO, Spain

TOULOUSE

TOURNAI

TOURS

VALENCIAVALENCIENNES VALLADOLID

VENEZIA

VERONA

WIEN

WROCLAW

02

46

Prin

ting

Pene

tratio

n

5 5.5 6 6.5 7 7.5Log(Distance from Mainz)

14a


Institutions, printing and sea

Figure 4: The two way plot of cities between printing penetration and closeness to sea for different types of economic institutions

Utility Condition:

Rel

iabi

lity C

ondi

tion:

15


Cities>150kmfromsea




Institutional Condition:

Cul

tura

l Con

ditio

n:

15


Cities>150kmfromsea

Cities<2.5books per10,000population (bptp)





Cul

tura

l Con

ditio

n:

15


Cities>2.5bptp&<150kmfromsea





Cul

tura

l Con

ditio

n:

15


Antwerp (24.92 bptp). Amsterdam (14.29 bptp)London (9.33 bptp)Rouen (8.11 bptp)Seville (4.57 bptp)Hamburg (3.69 bptp)Bordeaux (1.44 bptp)Lisbon (0.81 bptp)


Urban clustering caused competition and institutional innovation? (Gelderblom, 2013)

Ø Considered 335 largest cities with population > 10,000 in 14th-16th century for clustering

Urban Clustering?

23n#$% = ln(#p+$+,#+"p+$q0r#p3n#$,*)

Cities with population greater than 10,000 in

14th, 15th or 16th

century

16



Horizontal Clustering

Cities with population greater than 10,000 in 14th, 15th or 16th century

16a



Population:• Growing or economically dominant (larger) cities of 15th century better at

transitions?

Medieval Fairs:• Cities hosting medieval fairs (from University of Iowa Atlas of Printing),

institutionally prepared to transition?

Elevation: • Cities at higher altitude inaccessible to traders?

Other 15th century factors?

17



Summary Statistics

18



Instrumented Results • Distance from Mainz used as an Instrument Variable

19



Instrumented Results

19a



Cities closer to sea

20


• Distance from Mainz used as an Instrument Variable


Cities closer to sea

20a



What was being printed?9 trade friendly categories identified (USTC catalogue):

• )*+"$!"a,b%st measure developed

• u*0a,20$/ℎ0*,% =wxfyz{y|}~�ÄÅ

wxfyz{y|}~�

Dissertations, Science & Math, Philosophy & Morals, Economics & News, Education, Dictionaries, Etiquette & Courtesy and Travel

21



Numbers and Alphabets

21a

Notice4,5and7inGerman

AlphabetizationofIndianscript(Konkani)

KonkaniinAbugida scriptDevnagari



OLS regressions with:• Number of printing cities within 50km from a city as a proxy for printing• Different thresholds for distance from port and level of clustering• Limited sample of 50 largest cities in 15th century• Limited sample of cities with direct reference regarding 16th century institutionsMlogit regression treating Insta as Categorical variable

Robustness Checks

22

Results principally unchanged



Conclusion

1. Interaction beyond familiar contacts emerges if:

Impersonal interaction is very profitable

1: UTILITY CONDITION

There is access to information and diffusion of

business practices

2: RELIABILITY CONDITION

2. 16th century impersonal markets emerged in Europe because:

Sea coasts, especially Atlantic, attracted unfamiliar traders

1. COMMERCIAL REVOLUTION

Printed books diffused trade information and business practices like

accounting

2. INFORMATION REVOLUTION

23


Documents

Midwest Academy of Management Conference 2017 20th …prateekr.weebly.com/uploads/6/4/5/3/64539813/ppt.pdfRaj: Origins of Impersonal Markets October, 2017 The entrepôt of Antwerp