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History Lessons: The Birth of Impersonal Exchange: The Community Responsibility System and Impartial Justice

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  • Avner Greif

Abstract

This paper describes the premodern European institution that supported impersonal exchange, in which a merchant's decision to exchange is independent either of expectations of future exchange with the same partner or of knowledge of that partner's past conduct or the ability to report misconduct to future trading partners. Economists know surprisingly little about how institutions evolved to support impersonal exchange. The standard story asserts that in the early stages of market development, exchange tends to be personal and is supported by reputation; then, after an economy becomes sufficiently large, society establishes centralized and impartial courts that, by the threat of coercively imposed sanctions, enable widespread impersonal exchange. But during the late medieval period, there was no centralized legal system capable of effectively supporting impersonal exchange among merchants from different localities; and, although local courts existed throughout Europe, they were not impartial dispensers of justice but were attentive to local interests and were controlled by the local elite. This paper describes how a particular institution, the "community responsibility system," nevertheless enabled European merchants to commit to keep their contractual obligations in impersonal exchange from the late medieval to the modern period.

Suggested Citation

  • Avner Greif, 2006. "History Lessons: The Birth of Impersonal Exchange: The Community Responsibility System and Impartial Justice," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 221-236, Spring.
  • Handle: RePEc:aea:jecper:v:20:y:2006:i:2:p:221-236
    Note: DOI: 10.1257/jep.20.2.221
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.20.2.221
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    References listed on IDEAS

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    Cited by:

    1. Paganelli, Maria Pia, 2011. "The same face of the two Smiths: Adam Smith and Vernon Smith," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 246-255, May.
    2. Alessandra Cassar & Giovanna d'Adda & Pauline Grosjean, 2013. "Institutional Quality, Culture, and Norms of Cooperation: Evidence from a Behavioral Field Experiment," Discussion Papers 2013-10, School of Economics, The University of New South Wales.
    3. van Bavel, Bas, 2016. "The Invisible Hand?: How Market Economies have Emerged and Declined Since AD 500," OUP Catalogue, Oxford University Press, number 9780199608133.
    4. Sgard, Jérôme, 2015. "Global economic governance during the middle ages: The jurisdiction of the champagne fairs," International Review of Law and Economics, Elsevier, vol. 42(C), pages 174-184.
    5. Greif, Avner & Tabellini, Guido, 2017. "The clan and the corporation: Sustaining cooperation in China and Europe," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 1-35.
    6. Guido Merzoni & Federico Trombetta, 2012. "Foundations of trust, interpersonal relationships and communities," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 120(3), pages 295-312.
    7. repec:spr:reaccs:v:23:y:2018:i:2:d:10.1007_s11142-018-9443-5 is not listed on IDEAS
    8. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, Elsevier.
    9. Bigoni, Maria & Camera, Gabriele & Casari, Marco, 2014. "Money is more than memory," CFS Working Paper Series 496, Center for Financial Studies (CFS).
    10. repec:ksa:szemle:1740 is not listed on IDEAS
    11. M. Bigoni & G. Camera & M. Casari, 2015. "Money and the Scale of Cooperation," Working Papers wp1045, Dipartimento Scienze Economiche, Universita' di Bologna.
    12. Mark Koyama, 2010. "The political economy of expulsion: the regulation of Jewish moneylending in medieval England," Constitutional Political Economy, Springer, vol. 21(4), pages 374-406, December.
    13. Börner, Lars & Quint, Daniel, 2010. "Medieval matching markets," Discussion Papers 2010/31, Free University Berlin, School of Business & Economics.
    14. Diego Puga & Daniel Trefler, 2014. "International Trade and Institutional Change: Medieval Venice’s Response to Globalization," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 753-821.
    15. Boerner, Lars, 2016. "Medieval market making brokerage regulations in Central Western Europe, ca. 1250-1700," Economic History Working Papers 66834, London School of Economics and Political Science, Department of Economic History.
    16. Edwards, Jeremy & Ogilvie, Sheilagh, 2012. "What lessons for economic development can we draw from the Champagne fairs?," Explorations in Economic History, Elsevier, vol. 49(2), pages 131-148.
    17. Ogilvie, Sheilagh & Carus, A.W., 2014. "Institutions and Economic Growth in Historical Perspective," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 403-513 Elsevier.
    18. Miletkov, Mihail & Wintoki, M. Babajide, 2012. "Financial development and the evolution of property rights and legal institutions," Emerging Markets Review, Elsevier, vol. 13(4), pages 650-673.
    19. Jochem, Torsten & Murtazashvili, Ilia & Murtazashvili, Jennifer, 2016. "Establishing Local Government in Fragile States: Experimental Evidence from Afghanistan," World Development, Elsevier, vol. 77(C), pages 293-310.

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