Contract Enforcement, Institutions and Social Capital: The Maghribi Traders Reappraised
University of Cambridge - Faculty of Economics and Politics; CESifo (Center for Economic Studies and Ifo Institute)
University of Cambridge - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)
CESifo Working Paper Series No. 2254
Economists draw important lessons for modern development from the medieval Maghribi traders who, according to Greif, enforced contracts multilaterally through a closed, private-order 'coalition'. We show that this view is untenable. The Maghribis used formal legal mechanisms and entered business associations with non-Maghribis. Not a single empirical example adduced by Greif shows that any 'coalition' actually existed. The Maghribis cannot be used to argue that the social capital of exclusive networks will facilitate exchange in developing economies. Nor do they provide any support for the cultural theories of economic development and institutional change for which they have been mobilised.
Number of Pages in PDF File: 54
Keywords: contract enforcement, reputation, legal system, social network
JEL Classification: O17
Date posted: March 19, 2008
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