El 14 de diciembre de 2016 nos preguntamos '¿Por qué sobreviven las malas instituciones?' La profesora de la Universidad de Cambridge Sheilagh Ogilvie ofreció algunas lecciones de la historia europea para dar respuesta a esta cuestión. Fue dentro de la XVI Conferencia Figuerola que organiza la Fundación Ramón Areces con el Instituto Figuerola de Historia y Ciencias Sociales de la Universidad Carlos III de Madrid.

1. How Do Bad Institutions Survive?
Lessons from European History
Figuerola Lecture
Madrid, 14 December 2016
Sheilagh Ogilvie
Faculty of Economics, University of Cambridge

2. Why is this important?
• institutions = “the rules of the game in a society ... the humanly
devised constraints that shape human interaction” (North 1990)
• many economists have argued that institutions are efficient
solutions to economic problems
• but many economies seem to suffer from bad institutions
• address this puzzle using a particular historical institution: guild
• guilds dominated European industry & trade from 11th to 19th c.
• harmed the poor & imposed deadweight costs on whole economy
• but survived for 800 years - economic reasoning can explain why ...

3. A brief history of guilds
• guild = association of people who share certain interests and wish
to pursue common purposes
• most guilds were occupation-based & pursued economic purposes
• guilds existed across Europe for over 8 centuries (c.1000- c.1880)
• but after c. 1500, guilds weakened in Low Countries & England,
strengthened in Germany, Switzerland, Austria, Bohemia, Hungary,
Poland, Scandinavia, Italy, Spain, Portugal ...
• any theory of institutions has to explain this variation in strength of
guilds across different European societies

4. What did guilds do?
• a guild had legal privileges giving its members exclusive right to
practise particular occupation in particular place:
– monopoly over producing specific goods & services
– monopsony over purchasing & using specific inputs
• in order to enforce its monopoly & monopsony privileges, a guild:
– limited entry
– restricted quantity of goods/services produced
– set output prices above competitive level
– set input costs (esp. wages) below competitive level

5. Supply Reductions Imposed by Guilds, 1440 - 1780
(Guild Quota as % of Technically Feasible Output)
Guild Place Date
Supply
reduction
(%)
Tanners Basel & Middle Rhine c. 1440 33.3
Tanners Worms 1539 28.9
Worsted-weavers Württemberg c. 1670 50.0
Hat-makers Paris c. 1780 66.7
Average 44.7

6. Price Rises Imposed by Guilds, 1321 - 1829
(% increase of guild price over market price)
Town Country Date Guild
Price rise
(%)
London England 1321 fishmongers 43 - 67
London England 1364 various 33
London England 1377 goldsmiths 33
Rotterdam Netherlands 17th c. shipbuilders 18
Amsterdam Netherlands 17th c. shipbuilders 4
Rotterdam Netherlands 17th c. shipbuilders 12
Prague Bohemia 1642 butchers 33 - 56
Bologna Italy 1730 tanners 27
Monschau Germany 1762 shearers > 10
Turin Italy 1775 glovers 14
Turin Italy 1780 leather-workers 17 - 19
Basel Switzerland 1829 coopers 33
Basel Switzerland 1829 masons 20
Average 25

7. But maybe guilds were “efficient” because they
guaranteed quality & protected consumers?
• guilds often set minimum standards & prohibited low-quality goods
• in some cases, this protected consumers, but in others, it harmed
consumers by banning nasty-but-cheap goods
• it also harmed industries by making them high-cost & inflexible:
It is not the careful making of a few stockings, but the general making of
many, that is best for the public good, for that sets more people on work ...
and when the stockings are made, there are amongst them some for all
sorts of people, and the buyer is able to judge of them and to give prices
accordingly. If none but fine stockings be made, the poor must go without.
(petition against the guilded stocking-knitters, Leicester, 1673)
• many successful European industries had no guild quality controls

8. Were guilds “efficient” because they fostered
human capital investment?
• many guilds required apprenticeship ... but then restricted access to
it, excluding girls, Jews, bastards, paupers, non-masters’-sons, ...
• many other guilds didn’t even require apprenticeship
– 40% of Italian guilds had no apprenticehip requirement
– many Paris guilds admitted >50% of masters without apprenticeship
• non-guild apprenticeships were widespread (England, Netherlands)
• non-apprenticed “interlopers” (women, Jews) produced well &
attracted consumers (which was why guilds saw them as a threat)
• many entire industries without guild apprenticeship rules flourished

9. Were guilds “efficient” because their monopoly
profits motivated innovators?
• some economic models theorize that monopoly profits provide the
incentives to make producers innovate
• but all these models require free entry – so can’t apply to guilds
• instead, guilds believed innovations destroyed members’ jobs:
If a shoemaker comes along with new tools and makes 70 shoes in a
day, where others make 20, that would be ruin of 100 or 200
shoemakers. (Eiximenis, Catalan philosopher, 14th century)
• they didn’t realise that innovation also increases buying power
• so they lobbied against innovations, forbade members to use them,
boycotted wares & workers from places that adopted inventions

10. So ... guilds provide little support for
“efficiency” theory of institutions
• limited entry & prevented outsiders (women, migrants, Jews,
bastards, gypsies, Moors, Slavs, serfs, ...) from earning a living
• enabled businessmen to limit supply & charge artificially high prices
• enabled employers to depress wages
• let producers impose higher quality/cost than consumers wanted
• limited access to apprenticeship => reduced human capital
• allowed established businesses to block disruptive technologies
• made economic pie smaller for everyone
• harmed consumers, workers, weaker members of society

11. How could such harmful institutions survive
so long in so many places?
• guilds offered benefits to businessmen & political elites
• enabled these two groups to cooperate to capture more resources
for themselves at the expense of the rest of the economy
• a guild provided mechanism for group of businessmen to negotiate
with political elites for privileges giving them monopoly profits
• businessmen then used guild to redirect a share of these profits to
political elites in return for support and enforcement
• neither businessmen nor political elites could have extracted these
profits on their own – guilds provided an organizational device

12. Every successful guild had a government
“ordinance” guaranteeing its monopoly
• as soon as guilds emerged, they asked towns and rulers for
“ordinances” giving them the right to limit entry & enforce monopoly
• without government ordinance, guild couldn’t enforce its privileges
– Paris 1268: barber-surgeons can’t limit entry without royal ordinance
– York c. 1460: guilds can’t enforce their rules without town ordinance
– Palermo 1612: tailors’ guild rules are invalid without town approval
– Madrid 1660: cabinetmakers’ guild claims that the carpenters are not
really carpenters at all, because they are “without ordinances”
• European towns & rulers issued huge numbers of guild ordinances
every year from 1100 to 1883 ... see table ...

13. Guild Ordinances Issued by Governments,
Various Cities and Territories, 1100-1883
Place Period No. Annual
Cities
Venice, Italy 1218-1330 52 0.5
Vienna, Austria 1300-1800 401 0.8
Tallinn (Reval), Estonia 1394-1600 34 0.2
Barcelona, Spain 1395-c.1495 38 0.4
Lübeck, Germany 1400-1599 56 0.3
Stockholm, Sweden 1450-1604 19 0.1
Toledo, Spain 1500-98 48 0.5
Valencia, Spain 1500-1600 24 0.2
Bitola, Bulgaria 1808-1830s 17 0.6
Territories
S. Netherlands 1100-1784 >1,033 >1.5
N. Netherlands 1100-1784 >1,374 >2.0
Castile 1251-1600 253 0.7
Luxembourg 1300-1600 88 0.3
Italy (50 cities) 1220-1800 >1,385 >2.4
Lower Austria, regional 1300-1800 281 0.6
Lower Austria, local 1300-1800 1,266 2.5
Hungary 1600-1883 3,987 14.1
Sweden 1612-1718 40 0.4
France 1715-89 c. 300 4.1

17. What Did Governments Get in Return?
Med- Early Total
ieval modern no. %
Cash payments 20 28 48 6.6
Share of guild revenues 142 63 205 28.0
Ad hoc fiscal assistance 7 37 44 6.0
Regular tax 24 26 50 6.8
Assistance in tax collection 14 44 58 7.9
Loans on favourable terms 20 29 49 6.7
Regulatory co-operation 20 38 58 7.9
Military support 63 135 198 27.0
Political support 20 2 22 3.0
Total no. 330 402 732 100.0
Total % 45.1 54.9 100
Source: 732 observations of guilds in 16 European societies, 1130-1829.

18. Guild Expenditures on Lobbying Governments, 1363-1771
Place Period Guild Days' wages p.a.
Wildberg 1688-9 worsted-weavers 132
Rouen 1762 ribbon-makers 222
Antwerp 1609-10 peat-carriers 258
Rome c. 1700 poulterers 309
Venice 1674 shoemakers 408
London 1551-2 tailors 423
Venice 1679 boxmakers 549
Kirchdorf 1668 scythe-smiths 500
London 1604-5 clothworkers 600
Venice 1635 coppersmiths 641
London 1363 tailors 720
Bologna 1797 ragpickers 753
London 1605-6 clothworkers 827
Toledo 1562 silk-weavers 938
Venice 1670 distillers 1,172
Venice late 1620s smiths 1,244
Rouen 1738 spinners > 1,356
Upper Styria 1720 brewers > 1,500
London 1438 brewers 1,599
London 1503 tailors 2,626
Kirchdorf 1718 scythe-smiths > 4,000
Upper Styria 1720 brewers > 4,000
London 1473 pewterers 6,000
Paris 1771 mercers 12,850

19. The deal was explicit
• 1154: London weavers’ guild gets ordinance from king: “provided always
that for this privilege they pay me 2 gold marks each year”
• 1386: Perpignan drapers’ guild gets a new ordinance restoring its
monopoly & privileges, for which it pays 1,000 gold florins to King Peter III
• 1612: Venice canvas-makers’ guild gets new monopoly because “the
public mind wishes to give each guild the fitting burden of military & other
taxes, in accordance with the benefits and advantages conferred upon it”
• 1736: Calw merchant-dyers’ guild “is a substantial national treasure,
especially during the recent French invasion and levy of military taxes,
when it became apparent that no opportunity should be lost to give it a
helping hand in all just matters as much as possible”

20. In northwest Europe, guilds gradually got weaker
after c. 1500 – 5 key political characteristics
1. parliaments constrained how rulers could raise revenues & grant
privileges to special-interest groups (but not all parliaments did this)
2. taxation became socially generalized (e.g. included nobles) =>
reduced state’s fiscal need to sell privileges to rent-seeking groups
3. government allowed financial market to develop, used it for public
borrowing => also reduced fiscal attractiveness of selling privileges
4. towns competed => limited each other’s privileges
5. political framework included politically & economically powerful
individuals involved in industry & trade who wanted to be free of guilds

21. What can we learn from guilds
about theories of institutions?
• guilds prevented outsiders from earning a living or getting training,
and enabled businessmen to limit supply, over-charge consumers,
keep workers’ wages low, and block disruptive technologies
 economic efficiency cannot explain why guilds survived
• guilds benefited entrenched businessmen and political elites, who
openly collaborated to establish and enforce guild privileges:
 distributional conflicts can explain why guilds survived
 outcome of these economic conflicts depended on the
political system

22. Policy lessons
• entrenched producers can secure entry barriers & market power by
offering favours to political authorities – also happens nowadays
• governments grant such privileges in return for a share of the
profits generated by the market power the privileges make possible
• rent-seeking groups often claim that quality standards, training
requirements & “high-tech” status justify legal monopolies
• total costs of such institutions are high but spread over whole
economy; total benefits are low but concentrated in small groups
• the way they distribute benefits & costs makes it difficult to reform
such institutions – but entire economy can benefit from doing so