Coercion and Exchange: How Did Markets Evolve?

37 Pages Posted: 24 Nov 2008

See all articles by Avner Greif

Avner Greif

Stanford University - Department of Economics; Canadian Institute for Advanced Research (CIFAR)

Date Written: November 19, 2008


What causes distinct trajectories of market development? Why did the modern market economy, characterized by impersonal exchange, first emerge in the West? This paper presents a theory of market development and evaluates it based on the histories of England, China, and Japan. The analysis focuses on how distinct coercion-constraining institutions that secure property rights differentially interact with contract enforcement institutions. Although different combinations of coercion-constraining and contract-enforcement institutions can support markets, only some coercion-constraining institutions and institutions enforcing impersonal exchange can be an equilibrium. Among the analysis' insights are the relations between the internal organization of the state and legal development, and why impersonal exchange and political representation historically co-emerged.

Suggested Citation

Greif, Avner, Coercion and Exchange: How Did Markets Evolve? (November 19, 2008). Available at SSRN: or

Avner Greif (Contact Author)

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
United States
650-725-8936 (Phone)

Canadian Institute for Advanced Research (CIFAR) ( email )

180 Dundas Street West, Suite 1400
Toronto, Ontario

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