The Dark Side of Human Institutions: A Conversation with Sheilagh Ogilvie on the European Guilds

What role did guilds play in the economic development of Europe? Why do bad institutions persist throughout history? Join us for this conversation between Mark Pennington (King’s College London) and Sheilagh Ogilvie (University of Cambridge) for a discussion of her new 900-year history and economic analysis of the European Guilds.

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The Guest

Sheilagh Ogilvie is Professor of Economic History in Cambridge and a Fellow of the British Academy. She holds degrees from the University of St Andrews (1979), Cambridge (1985), and Chicago (1992). She has been successively Lecturer (1989), Reader (2000), and Professor of Economic History (2004) in the Faculty of Economics at the University of Cambridge.She is the author of State Corporatism and Proto-Industry (Cambridge, 1997), Women, Markets and Social Capital in Early Modern Germany (Oxford, 2003), Institutions and European Trade: Merchant Guilds, 1000-1800 (Cambridge, 2011) and the editor of European Proto-Industrialization (Cambridge, 1996), Germany: A New Social and Economic History (3 vols, London, 1996/2003), and Revolution des Fleißes, Revolution des Konsums? (Ostfildern, 2015). She has published journal articles on institutions and economic development, the economics of guilds, merchants, rural communities, serfdom, consumption, retailing, occupational structure, demography, proto-industry, banking, female labour force participation, regulation, the growth of the state, and social capital.

She is the winner of the Gyorgy Ranki Prize (1999), the Anton Gindeley Prize (2004), the René Kuczynski Prize (2004), and the Stanley Z. Pech Prize (2008). She has been the director of research projects on “Social Structure in Bohemia, 1500-1750” (British Academy, 2001-03), “Economy, Gender, and Social Capital in the German Demographic Transition” (Leverhulme Trust, 2005-07), and “Human Well-Being and the ‘Industrious Revolution’: Consumption, Gender and Social Capital in a German Developing Economy, 1600-1900” (ESRC, 2008-12). She held a British Academy/Wolfson Research Professorship (2013-16), during which she explored the relationship between human capital and long-term economic growth. Her book on the economics of guilds was published with Princeton University Press in March 2019.

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1:03: Sheilagh, why have you decided to bring your work together in a volume of this kind?

4:13: How would you define a guild? What are the key features of such an organisation?

8:40: The title of the book is The European Guilds: An Economic Analysis. Economists often disagree about things. One of the things they disagree about is the efficiency properties of these guilds. Some would argue that these guilds played an important function – they were efficiency enhancing, they might have been necessary for growth. I know that’s not a view that you hold. But could you give us an indication of what those arguments are?

14:22: These are basically arguments which are suggesting that some kind of market failures arise in these situations, and you have an institutional response to address the market failure. In this instance the guild is seen as the institutional mechanism to solve it.

15:32: Your view as I understand it is very much that guilds should be seen as rent seeking institutions which were actually seeking exclusive privileges for the members – and rather than solving a market failure, they essentially create a different sort of failure, which is that certain people are excluded from markets, there’s a lack of competition, you actually don’t get the quality control or professional certification that you might have gotten from an alternative institution. Is that a fair summary of your view?

20:14: So this is saying that guilds are about distributional matters; they’re institutions that are quite conflictual in terms of grappling with a part of the pie rather than increasing the size of the overall pie.

20:56: Can you say a bit more about the role of the state in your particular theory? Some of the work in this area that’s focused on guilds from a rosier viewpoint often depicts them as a kind of bottom-up private order institution that arises spontaneously to solve an efficiency problem. Whereas your view suggests that these institutions were embedded in political structures of power and authority which were used for these distributional purposes. Why do some people hold that rosier view?

26:45: I think in your first book you used the term ‘state corporatism.’ Would you describe guilds as corporatist institutions? They’re a kind of negotiation between a semi private organization and the state?

27:49: Given that you subscribe more to this view of guilds as rent-seeking or privilege-seeking organisations as opposed to efficiency enhancing ones, could you describe the ways in which guilds reduced efficiency?

36:02: Reading your account, this is quite a damning indictment of these institutions. There really is evidence of rent seeking—the scale of these markups is at a level where… how could anybody think that they have any beneficial properties? I guess the contrary view is that, OK, from today’s point of view, these were inefficient practices. But if you look at the context at the time, what was the alternative to providing the kind of mechanisms that would address market failures?

43:39: So in your view, you didn’t need guilds to address the kind of training market failures. What about asymmetrical information and quality controls? Did you find evidence of alternative mechanisms to deal with those?

49:41: This reminds me of a conversation I had with Barry Weingast – his argument is, yes, many of these kind of restrictions, when looked at through today’s lens, we would see them as inefficient and would want to get rid of them. But you have a slightly different take on them if you realize that the alternative might not be a free market type situation—it might actually be one where… you don’t have a market at all because you have societies embroiled in violence. And the various restrictions and privileges at least provide some rudiments of peace and order in a context where the alternative would be something worse than that… do you see cases where states seem to be able to avoid violence without having guild privileges or some of these distributional deals?

58:00: Why did guild institutions decline? As I understand your argument about why they persisted for so long, it’s basically a kind of public choice, rent seeking argument, which says that you’ve got relatively small organised groups…facilitated by public authorities through these corporatist deals, they gain privileges which are inefficient, but the reason why you don’t have …people challenging that is either because they’re politically disenfranchised or they face a huge collective action problem… If you take that kind of explanation, it implies that those privileges would be hard to break down.

01:06: I understand it’s a difficult question, but …I understand the explanation you’re giving there is a kind of accidental one. That is, by accident some factors come together and then we’re able to break free of guilds. I guess that’s not an unsatisfactory explanation in some ways, but I was wondering if you’ve thought of more positive explanations… I’m thinking of Deirdre McCloskey’s work on why we have the industrial revolution, and that’s a more ideas-based explanation…. Do you have any sympathy with that kind of view?

01:12: I want to ask you about a theme closely related with our research centre, and that’s thinking about the relationship between informal and formal institutions and how that can sometimes go wrong… there’s a tendency to see community as providing certain kinds of services in a singularly romantic view rather than seeing it as double edged, where you can recognize that there’s a positive side to traders getting together but at the same time recognize the dark side- the exclusion as the flipside of community.