Medieval Universities, Legal Institutions, and the Commercial Revolution

We present new data documenting medieval Europe’s Commercial Revolution” using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany’s first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity

Medieval universities, legal institutions, and the commercial revolution

We present new data documenting medieval Europe’s Commercial Revolution using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany’s first universities after 1386 following the papal schism. We find that the trend rate of market establishment breaks upward in 1386 and this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are robust to estimating a variety of specifications that address concerns about the endogeneity of university location. Universities provided training in newly rediscovered Roman and canon law; students with legal training served in positions that reduced the uncertainty of trade in the Middle Ages. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity in medieval Germany

Educational Content, Educational Institutions and Economic Development: Lessons from History

Individuals’ choices of educational content are often shaped by the political economy of government policies that determine the incentives to acquire various skills. We first present a model to show how differences in educational content emerge as an equilibrium outcome of private decisions and government policy choices. We then illustrate these dynamics in two historical circumstances. In medieval Europe, states and the Church found individuals trained in Roman law valuable, and eventually supported investments in this new form of human capital. This had positive effects on Europe’s commercial and institutional development. In late 19th-century China, elites were afraid of the introduction of Western science and engineering and continued to select civil servants - who enjoyed substantial rents—based on their knowledge of Confucian classics. As a result, China lacked skills useful in modern industry. Finally, we present a variety of other contemporary and historical applications of this theory.Educational Content; Educational Institutions; Political Economy; Development

Economic Growth Related to Mutually Interdependent Institutions and Technology

The following propositions are argued. Technological advance is a necessary condition for sustained economic growth. It can be sustained by more then one set of institutions. Technology and institutions co-evolve. Although some institutions inhibit growth while others encourage it, no single institution is either necessary or sufficient to produce either sustained or zero growth. Sustained growth began with the two Industrial Revolutions and was solidified by the 'invention of how to invent'. Explaining these events requires studying several trajectories that were established in the medieval period and evolved slowly through the early modern period and were unique to the West.Sustained growth, institutions, technological change, technological trajectories, the Industrial Revolutions, early modern science, medieval universities.

Educational Content, Educational Institutions and Economic Development: Lessons from History

Individuals’ choices of educational content are often shaped by the political economy of government policies that determine the incentives to acquire various skills. We first present a model to show how differences in educational content emerge as an equilibrium outcome of private decisions and government policy choices. We then illustrate these dynamics in two historical circumstances. In medieval Europe, states and the Church found individuals trained in Roman law valuable, and eventually supported investments in this new form of human capital. This had positive effects on Europe’s commercial and institutional development. In late 19th-century China, elites were afraid of the introduction of Western science and engineering and continued to select civil servants - who enjoyed substantial rents—based on their knowledge of Confucian classics. As a result, China lacked skills useful in modern industry. Finally, we present a variety of other contemporary and historical applications of this theory

Usury, Calvinism, and Credit in Protestant England: from the Sixteenth Century to the Industrial Revolution

This study analyses the impact of Protestantism on interest rates in England from the 16th century to the Industrial Revolution. One of many myths about the usury doctrine - the prohibition against demanding anything above the principal in a loan (mutuum) - is that it ceased to be observed in Reformation Europe. As several authors have demonstrated, however, early Protestant Reformers, beginning with Luther, had essentially endorsed the long established Scholastic usury doctrines. The one major exception was Jean Calvin. Though retaining a strong hostility against usury, he permitted interest on commercial loans, while forbidding usury on charitable loans to the needy. That view may have been partly responsible for a crucially important breach in civil support of the usury doctrine. The first, in 1540, was an imperial ordinance for the Habsburg Netherlands permitting interest payments up to 12%, but only for commercial loans. In England, Henry VIII's Parliament of 1545 enacted a statute permitting interest payments up to 10% (on all loans); any higher rates constituted usury. But, in 1552, a hostile Parliament, with radical Protestants, revoked that statute, and revived it only under Elizabeth, in 1571. Since the maximum rate was also taken to be the minimum, subsequent Parliaments, seeking to foster trade, reduced that rate: to 8% in 1624, to 6% in 1651 (ratified 1660-61), and to 5% in 1713: a rate maintained until the abolition of the usury laws in 1854. The consequences of legalizing interest payments, but with ever lower maximum rates, had a far-reaching impact on the English economy, from the 16th century to the Industrial Revolution. The first lay in finally permitting the discounting of commercial bills. Even if medieval bills of exchange had permitted merchants to disguise interest payments in exchange rates, the usury doctrine nevertheless required that they be non-negotiable, held until maturity, since discounting would have revealed the implicit interest. Evidence for the Low Countries and England demonstrates that discounting, with legal transfers either by bearer bills or by endorsement, with full negotiability, began and became widespread only after the legalization of interest payments in both countries. The importance for Great Britain can be seen in the primary role of its banks during the Industrial Revolution: in discounting commercial bills, foreign and domestic, in order to finance most of the working capital needs for both industry and commerce. The second is known as the Financial Revolution; and its late introduction into England, from 1693, was in part due to the limits imposed on interest rates. In its final form (1757), it meant the establishment of permanent, funded, national debt based not on the sale of interest-bearing bonds but on perpetual annuities or rentes. The origins can be found in 13th-century northern France and the Low Countries in reaction to the vigorous intensification of the anti-usury campaign by the new mendicant orders, the Franciscans and Dominicans. Fearing for their mortal souls, many merchants refused to make loans and chose to finance town governments instead by purchasing municipal rentes (annuities). In 1250, Pope Innocent IV ruled that no usury was involved, because those buying rentes could never demand redemptions. Instead, they were licitly purchasing future streams of income. Continuing debates were not finally resolved until the issue of three 15th-century papal bulls (supporting Innocent IV). By the 16th century, the finances of most western Europe states had become largely dependent on selling both life and perpetual annuities. England was thus a late-comer, in importing this system of public finance. Fully immune to the usury laws, this Financial Revolution permitted the English/British governments to reduce borrowing costs from 14% in 1693 to just 3% in 1757, so that the British economy could finance both 'guns and butter', without crowding out private investments. Furthermore, since these annuities (Consols) were traded internationally on both the London and Amsterdam stock exchanges, they were a popular form of secure investments, which became, with land, the most widely-used collateral in borrowing for the fixed capital needs of the Industrial Revolution.usury, interest, annuities, bonds, public finance, bills of exchange, discounting, Scholastics, Old and New Testaments, Calvin, Luther, Protestant Reformers, Dissenters, Financial Revolution, England

On the Evolution of Collective Enforcement Institutions: Communities and Courts

Impersonal exchange has been a major driver of economic development. But transactors with no stake in maintaining an ongoing relationship have little incentive to honor deals. Therefore, all economies have developed institutions to support honest trade and realize the gains of impersonal exchange. We analyze the relative capacities of communities (or social networks) and courts to secure cooperation among heterogeneous, impersonal transactors. We find that communities and courts are complementary in the sense that they tend to support cooperation for different sets of transactions but that the existence of courts weakens the effectiveness of community enforcement. By relating the effectiveness of enforcement institutions to changes in the cost and risks of long-distance trade, driven in part by improvement in shipbuilding methods, our analysis also provides an explanation for the emergence of the medieval Law Merchant and its subsequent supersession by state courts.Institutions;Contract Enforcement;Communities;Courts;Social Networks;Law Merchant;Lex Mercatoria;Commercial Revolution

The Dynamics of Knowledge Accumulation, Regulation and Appropriability in the Pharma-Biotech Sector: Policy Issues

Discussion of reasons for regulation in the pharmaceutical industr

Sector firm and management performance in The Netherlands : the role of national governance and institutions

Paper presented to the fourth EMOT-workshop, theme 1, Economic performance outco- 1 mes in Europe, Berlin, January 30-February 1, 1997 This paper discusses performance characteristics and differences at three levels: at sector, firm and top management level. First, it explores the extent to which the particularities of the Dutch business system history influence the economic performance of different types of firms and sectors in the Netherlands. Elaborating on earlier work on the Dutch business system (Iterson and Olie, 1992; van Dijk and Punch, 1993: Sorge and Iterson, 1995, Iterson, 1997), it will be hypothesised which sectors and types of firms will prosper in the socio-institutional context and which sectors and types of firms will not. For instance, it will be brought forward that the agricultural sector, the mineral fuels and chemicals sector, the foods and detergents sector, the transport and transshipment sector and the financial services sector have emerged in a favourable socio-institutional context whereas the steel and the car sector have not. As to different types of firms, it will be brought forward that family-owned and state-owned companies are much less dominant in the Netherlands than public limited liability companies. At firm level, special attention will be given to the large multinational corporations, such as the Royal Dutch Shell Group, Unilever, AKZO, DSM and Philips. Secondly, the socially constructed managerial capabilities and discretion - again, related to economic performance - will be explored in this paper. They are to be understood as an outcome of the idiosyncratic formation of social groups in the Netherlands and the related emergent governance principles (Cf. Kristensen, 1995), which is known as `pillarisation''.management and organization theory ;