Credible Commitment Obstacles to Early Modern State-Building: A Skeptical Overview

Economists often resort to credible commitment accounts to explain fiscal capacity differences between early modern polities. In this essay, I examine the main variants of these accounts to assess whether their current popularity is warranted. To this end, I ask i) did early modern monarchs’ inability to commit to contracts harm their borrowing capacity? ii) Did this inability prevent otherwise achievable revenue increases in the long run? iii) Were institutional solutions to credible commitment problems cooperative designs agreed on by the monarchs and the elites, or were they independent developments that happened to foster fiscal capacity growth later? iv) Do credible commitment explanations account for the differences between the fiscal capacities of absolutist regimes? The overall evidence is mixed for constitutional monarchies such as England, and largely negative in the case of absolutist monarchies. In particular, I argue that credible commitment explanations cannot account for why the Ottoman Empire lagged behind French and Russian absolutisms. A glance at Ottoman revenue-farming practices shows that reputation concerns and tacit insurance payments could mitigate the sultan’s credible commitment problem. Furthermore, even in the absence of an official constitution, the elite in the Ottoman Empire had imposed significant practical constraints on the sultan’s ability to act unilaterally. This meant that the Ottoman lenders were better positioned than their French and Russian counterparts to enforce contracts on the sovereign, not the other way around. I conclude that the historical evidence weighs against credible commitment explanations, and researchers must explore alternative mechanisms to explain the differences in early modern fiscal capacity.