Financing Trade Through Limited Partnerships: Evidence from Silk Firms in Eighteenth-Century Trentino (original) (raw)
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Simon Midddleton et James E. Shaw (éds.), Market Ethics and Practices 1300-1850, Abingdon: Routledge, pp. 166-183, 2018
Research on early modern merchant practices has highlighted their personalized and networked character; it is accepted wisdom that relying on trusted partners provided better quality goods, more reliable credits, better information, and generally some form of comparative advantage. 2 This networked coordination was also supposed to be a specialized trick of the trade, private in nature, if such a word can be used for a period in which the public/private distinction was hardly clear. Overall, most of the richly detailed descriptions of merchant activities and merchant groups published in the past thirty years share a common assumption that networking was only a tool -important, but not transformative for market behavior and strategies. Market limitations; customary attitudes, especially religious and cultural; and other historically specific constraints could help promote its use, and merchant groups relied on family, kinship, or ethnic-religious ties to reinforce reputation-based collective rules of behavior. But the basic ingredients of exchange were assumed to still be more or less what standard economics describes, an offer meeting demand through price signals, with actors trying to maximize profit. In this narrative, therefore, network constructions and the ethical stances which came with them were not a necessary part of market activity, but externally generated as a consequence of the imperfections of early modern markets. The slow and limited diffusion of information as well as a number of technical constraints prevented complete market integration, to which should be added the frequent and unexpected exogenous shocks to the economy with powerful effects on a fragile productive system; for example, extreme weather events, war, failed crops, and so forth. These considerations meant that any attempt at bringing together supply and demand was fraught with uncertainties. 4 Network solidarity reduced these uncertainties, ensured a better circulation of information, and spread the risk over many actors. It would also supply some self-regulation in a context in 8
In nineteenth-century Antwerp, company structures typically associated with small business could be used for activities of manufacturing. Sociétés (general partnerships) and sociétés en nom collectif (ordinary partnerships) were chosen often even when capital was locked in. Sociétés en commandite, typically considered as vehicles for large companies having outside investors, were mainly used to structure family firms, even though they always encompassed invested capital. Moreover, company contracts were to a large extent not used to finance commercial activities, even when they were written down and registered. As a result, the functionalities and intended uses of partnerships were much broader than has often been thought.
Commercial partnerships in late nineteenth and early twentieth century Malta
2009
In today’s commercial partnerships – the limited liability company in its various forms in particular – are considered vehicles for commercial activities but also as efficient ways through which financing could be obtained. Although by the late nineteenth century, commercial association had long been known and practised in Malta, it was generally for other purposes. This is confirmed by the unpopularity of limited liability on the one hand and the recourse to partnership between family members on the other. In both these and other cases, association was viewed within the wider perspective of wealth retention and transmission. In cases involving nonrelatives, such associations served as a means of acquiring both financial as well as other forms of capital. In all cases, a deep analysis of commercial partnerships during this period is bound to yield rich material for a better understanding of commerce in Malta.
Customary commercial law, credibility, contracting, and credit in the high Middle Ages
2017
Hayek (1973, 83) pointed out that: “It is in the … law merchant, and the practices of the ports and fairs that we must chiefly seek the steps in the evolution of law which ultimately made an open society possible.†A large literature has examined this medieval Lex Mercatoria, or Law Merchant, much of it supporting Hayek’s contention, but there also is a growing literature criticizing the Law Merchant story. One criticism is that during the high Middle Ages, and even the late Middle Ages, non-simultaneous trades were virtually nonexistent, so issues such as credibility of promises and enforcement of contracts were not relevant. Some critics go so far as to argue that the Law Merchant literature is grossly inaccurate, and that those who have written about the system have intentionally misused evidence in order to support a particular political view. Some of these criticisms are addressed in this chapter. The medieval Law Merchant was customary law, and many of the criticisms of...
Contract Enforceability and Economic Institutions in Early Trade The Maghribi Traders' Coalition
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. This paper presents an economic institution which enabled 11th-century traders to benefit from employing overseas agents despite the commitment problem inherent in these relations. Agency relations were governed by a coalition -an economic institution in which expectations, implicit contractual relations, and a specific information-transmission mechanism supported the operation of a reputation mechanism. Historical records and a simple game-theoretical model are used to examine this institution. The study highlights the interaction between social and economic institutions, the determinants of business practices, the nature of the merchants' law, and the interrelations between market and nonmarket institutions. (JEL N75, D23, J41) Without the ability to exchange, the potential for growth is rather limited. Indeed, the historical process of European economic growth is marked by ever-expanding exchange relations. The contribution of an enhanced ability to exchange went beyond its direct economic impacts as, for example, the late-medieval European commercial revolution from the 11th to the 14th centuries led to fundamental social and political changes (see e.g., Robert S. Lopez, 1976;). Yet not much is
2006
The emergence of medieval markets has commonly been seen in the literature as hampered by lack of contract enforcement and archaic institutions like merchants' communal responsibility. Merchants traveling to a different marketplace to trade there could be arrested and held liable for any debts incurred by any merchant from their hometown. We revisit a traditional literature in legal history, which argued that market making and market privileges arose precisely in the context of communal responsibility and its regulation through trade treaties between cities. Communal responsibility was effective in enforcing credit contracts and enabled merchants to use bills of exchange in long distance trade even if reputation effects were absent. We implement communal responsibility in the Lagos and Wright (2005) matching model of money demand, assuming that preference shocks follow a two-state Markov chain. We derive conditions under which cash and credit in the anonymous matching market coexist. For fixed but sufficiently low cost of credit, agents will pay with cash in low-quality matches, and use cash and credit in high-quality matches. The use of credit in the communal responsibility equilibrium reduces the money holdup in the matching market and thus leads to Pareto improvements. We argue that historically, financial market making using communal responsibility was effective in overcoming the cash constraints in cross-city trade, while locking traders into a de-facto firm with their own merchant guild's members.