Origins of Impersonal Markets in Commercial and Communication Revolutions of Europe

Abstract

Business in the medieval ages relied on networks like guilds in Europe and guanxi in China. In the paper, I construct a dataset of medieval and early modern Europe, to understand how impersonal markets, where unfamiliar traders conducted business, emerged in the sixteenth century Europe, and why restrictions on merchants for participation in trade reduced. I argue that in the fifteenth and sixteenth century Europe, closeness to the sea ports, especially the Atlantic ports, motivated traders to pursue partnerships with unfamiliar traders beyond their familiar networks. Also, during the same period, the mass availability of trade related printed books, and development of the within Europe postal system, helped in mass and peer-to-peer diffusion (horizontal communication revolution) of trade related information and business practices. Informative books like merchant manuals improved information access, and adoption of standardized practices like double-entry bookkeeping increased reliability in business exchange. Impersonal markets emerged in regions like the Low Countries and England, that benefited from both trade at the Atlantic coast and revolution in horizontal communication.

Keywords: Europe, Printing, Atlantic, Guilds, Trade, Embeddedness, Arm’s Length Exchange

JEL Classification: N13, N23, N43, N73, N93, Z13