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The Secret Of Venetian Success: The Role Of The State In Financial Markets

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  • Yadira González de Lara

    (Universidad de Alicante)

Abstract

The commercial success of Venice hinged on her merchants¿ ability to do business with borrowed money. However, to raise other people¿s capital, merchants needed to commit not to embezzle the capital received. Despite this commitment problem, the evidence indicates an active financial market through which the Venetians, by and large, mobilized their savings to investments. What were the institutional foundations of this market? This paper claims that neither reputation-based institutions that did not rely on the state nor a coercive legal system provided such foundations. Instead, the state generated the rents and information required to induce merchants to refrain from acting opportunistically.

Suggested Citation

  • Yadira González de Lara, 2005. "The Secret Of Venetian Success: The Role Of The State In Financial Markets," Working Papers. Serie AD 2005-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2005-28
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2005-28.pdf
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    References listed on IDEAS

    as
    1. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    2. Hoffman, Philip T. & Postel-Vinay, Gilles & Rosenthal, Jean-Laurent, 2001. "Priceless Markets," University of Chicago Press Economics Books, University of Chicago Press, number 9780226348018.
    3. Perkins, Edwin J., 1981. "The Cost of Good Intentions: New York City and the Liberal Experiment. By Charles R. Morris. New York: W. W. Norton & Company, Inc., 1980. Pp. 256. $14.95," The Journal of Economic History, Cambridge University Press, vol. 41(1), pages 250-250, March.
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    Cited by:

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