supply and command

Ritschl and Kamm on Greece

LSE economic historian Albrecht Ritschl and TIMES columnist Oliver Kamm have both made the case for a Greek bailout. In a SPIEGEL interview, Ritschl points to the fact that restructuring the debt of a bankrupt country can be the basis of a successful restart and a more prosperous future. According to Ritschl, no country exemplifies this better than Germany, whose fast post-war recovery was buttressed by generous US aid programs, debt relief and the putting-on-hold of reparation payments to countries who had fallen victim to German occupation (that includes Greece). Similarly, Oliver Kamm recalls that Germany’s export-oriented economy has been one of the big beneficiaries of the single currency. Kamm notes that a Greek exit from the Eurozone could trigger a domino effect that could eventually lead to the dismantling of the Euro. Compared to this scenario a new Greece bailout package would incur only minor costs.

Both points are, I think, important. If the bankruptcy of a member state of a currency union is not answered with aid programs and debt relief, the only real options left are debt default and eventually monetary reform followed by a massive devaluation of the new currency. This, however, would have disastrous consequences to the monetary union’s remaining countries, especially to those also suffering from severe structural debt problems. As these countries will find it increasingly difficult to finance themselves through the capital markets, exiting the union will look more and more like an attractive option. Step by step, this will lead to the union’s erosion.

The current eurozone debt crisis reveals once more that EU policy makers are caught in an “elitism trap”. European finance minister must be aware of the dire ramifications of further delay on the Greece issue, yet they keep playing tactical games in order to appease the angry man in the street. And who can blame them? When doing the right thing is bound to trigger an electoral backlash caused by irrational popular sensitivities (some two thirds of German voters oppose financial aid to Greece), doing nothing until the issue gets out of the media spotlight must seem like an attractive option. If anything has ever presented a convincing case for a European Monetary Fund (i.e. an institution that can react adequately to sovereign default without having to fear being voted out of office), the Greek tragedy certainly did!

Business Networks as Complex Systems

Here's an abstract of the paper I presented at the EBHC in Glasgow:

In late medieval Venice, family business networks complemented strong formal institutions of capital generation. Yet the interdependence of public- and private-order institutions has thus far only rudimentarily been explored. This paper interprets a micro-historical case study on a late medieval Venetian family network in terms of complex systems analysis. Comparing the incentive structures of intra-family, intra-Venetian, and transcultural trade partnerships, it devotes particular attention to the respective roles of family representatives and non-kin trade agents. Whereas the latter seem to have profited from individual transactions either by receiving commissions or by being given the benefit of membership in a wider trade coalition, the utility streams of family agents appear to have been internalised to the family enterprise. I propose an internalisation hypothesis that characterises the Venetian merchant family as an institution of collective liability that allowed members to increase their expected future utility streams by resorting to the collective reputation of the family.

Merchant Networks Panel at EBHC

The 14th ANNUAL CONFERENCE OF THE EUROPEAN BUSINESS HISTORY ASSOCIATION 2010 is coming up soon. This time the meeting will be held in lovely Glasgow, Scotland.

Andrea Caracausi has organised a panel on business and merchant networks to which I will be contributing a paper. The aim of the meeting is to explore methodological overlaps between economic  network theory and the historical study of networks. Here's the panel abstract:

"BUSINESS AND MERCHANT NETWORKS IN HISTORICAL PERSPECTIVE: TOWARDS A FORMAL APPROACH

During the last decades, the concept of “network” has fascinated historians. Using approaches drawn from other social sciences, business historians, as well as scholars in economic and social history, have tried to explain in terms of network analysis the rise and fall of businesses, families and also institutions such as the State or financial markets. However, the same concept of “network” remains too vague, and the dialogue between scholars of different backgrounds is very poor.

The aim of this session is to fill this gap in economic and business history. Our idea is to start a confrontation of the formal models in use to study and compare networks in history, trying to extend the usual approach to graph statistics (centrality etc.) using a measure of complementarities (drawn from organisational studies) and inserting (or adding) a consideration for conflict and power (asymmetries, inclusion/exclusion) via vectors and similar tools. We propose four exemplary case-studies on different periods (from the pre-modern to the contemporary period) and topics (merchant networks and social networks in the pre-modern period; business networks in 19th and 20th centuries) in order to discuss how a common formal approach could be useful both in the study of business networks and in the dialogue between history and the social sciences."

ESSHC Talk

And this is what I ended up talking about at the ESSHC. More soon!

This paper uses early fifteenth century Venetian merchant letters to compare the incentive structures of intra-family, intra-Venetian, and transcultural trade partnerships. Particular attention is given to the respective roles of both family representatives and non-kin trade agents. Whereas the latter seem to have profited from individual transactions either by receiving commissions or by being given the benefit of membership in a wider trade coalition, the utility streams of family agents appear to have been internalised to the family venture. I propose an internalisation hypothesis that characterises the Venetian merchant family as an institution of collective liability that allowed members to increase their expected future utility streams by resorting to the collective reputation of the family.

Upcoming Talk

This is what I will talk about at the European Social Science History Conference in Ghent, Belgium, 13-16 April 2010:

"This paper examines the institutional basis of transcultural trade relationships in the early fifteenth-century Eastern Mediterranean. The notion of transculturality describes the continuity of informational flows between perceived separate cultural areas (e.g. “Latin Europe”, “Islamic Levant”, “Byzantium” etc.), which impact upon economic interaction by shaping mercantile techniques and contractual dispositions. Integrating this concept to institutional theory may shed new light on the formation of informal institutional arrangements. Sources used in this study come from the private archive of the Venetian diplomat and merchant Biaggio Dolfin (c. 1370-1420), which contains a number of documents dealing with aspects of transcultural trade (to be found in the Archivio di Stato di Venezia, ASVe). An example highlighting potential gaps in institutional structure is given by a legal quarrel between the Venetian Vice-Consul of Damietta, Michael Papadopolo, and Nichita Zamisi, a ship captain from Candia. Zamisi was accused of having embezzled the cargo entrusted to him by Arab merchants from Jaffa, who had requested the Vice-Consul of Damietta to act as a guarantor for his compatriot. This document, alongside similar sources from the same collection, highlights the consequences of insufficient informal institutional support to trade. In order to commit their Italian business partner ex ante to be honest ex post, the Arab merchants had to rely on the legal system as the ultimate means of contract-enforcement. Yet the use of informal contract-enforcement mechanisms was widespread on both sides, as relying purely on the legal system was an unnecessarily costly option. This research aims at explaining the basis of informal institutional efficacy, while also describing the circumstances under which formal economic institutions had to be called upon as a last resort. Based on the named body of sources, a theoretical framework of transcultural trade shall be developed, focusing specifically on the generation of trust between Venetian traders and business partners of different ethno-religious backgrounds. Combining institutional theory with a game-theoretic approach, the paper describes the institutional conditions that gave rise to various informal mechanisms."

A New Economic History?

I have been thinking a lot recently about what I want to achieve in my doctoral studies from a methodological point of view. My PhD thesis is a project in medieval economic history, yet it presents a methodological challenge to the typical modus operandi in medieval studies. This stems mainly from the inclusion of social-scientific concepts and methods that are not commonly used in descriptive historical research. It is my hope that, by highlighting the mutual dependence of historical narrative and theory, their inclusion may contribute towards the solution of an ongoing Methodenstreit in economic history. This post provides a short recap on this debate before outlining my own stance (in still rather rudimentary form).

Document of Commercial Agency

This is a transcription of a fifteenth century merchant letter that I dug out in the State Archive in Venice (I know, it's a bad transcription but my paleographic skills are still rather basic). It's a business representative of a Venice-based merchant reporting back to his superior. Unfortunately, the letter does not reveal where the agent is based.

I won't translate the document for now, instead leaving my readers with the fun of sorting out the late medieval Italian. It's an interesting (and partly entertaining) document that indicates the significance of personal bonds in principal-agent business relationships. 

Al nome de Christo 1418 a die 22 Febraio

da poy la debita salutacion chomo alo charisimo fradelo mio mazor dovi asaver ch'io som bene sano per la grazia de Christo. Ecusy aioria al dir de la vostra sanitade dovi asaver chomo ho recevudo du vy vostre letere de le qual fo molto chontento audir de vostra sanitade esi me de grande consolacion che tu me scrivi che tue guarido elevado di leto si che di questo fo molto contento. Anchora tu me scrivi che tu me mandy dui chavuty di pano e uno tavoler cum 40 tavole e uno par di quanty e duy dozien di stringe e una barila cum le chastane tutte quiste chose sio recevudo. Anchora tu me scrivi alfato de duy charatelii che me lasey che me devese inpyir de bon vino et si te respondo che el vino di qua sie plu charo ch'a Venezia el quarto denar ma nienty di mino. Io si te mando el charatelo picolo per portador de dita che moza 4 ÷ del vino in dito charatelo e si gosta £ 3 s. 10 el mozo e l'altro charatelo non te volsy mandar per amor de la charistia del vino che tu non haby [...] ma nienti di mino. Sy tu vol che ti se manda el dito charatelo e ti lo mandaro per Zorzy da Sibenicho. Scrive me pur. Anchora tu me scrivi per amor de la femena che ti la devese mandar et io te respondo che adeso si te li averia mandado ma per amor che li marinari de mala carne si e tropo zuveni, ma per Zorzy da Sibenicho centa falo si te la mandaro. Anchora tu me scrivi per fato de le martore che te devese cumprar per prizio de s. 40 l'un a quisto prizio e li trovarimo asay. Si mi sapy che ty mando la nostra barila inpyiga de fige e tre bucrilady in puterada d'intro in dita barila e questo si te mando per amor. Anchora si te mando uno scilato vivo per dito portador per questa mon digo Dio sia cum vuy amen.

saludame misser Biazio de parte mia
ere chomandame a luy chomo al mi signor

sapy che te saluda Dobrica sorela de [...]
chon charoso amante

Nicholo di Polo [...]
sempre al vostro chomando

New Social Sciences Journal

My Alma Mater University College London, Department of European Social and Political Studies, has launched a new online journal: European Social and Political Research. The first issue can be found here.

Among the contributions is an article I wrote back in 2007, which is based on my BA thesis. The economic dimension of the public sphere: Jacques Necker's public agenda in 'Compte rendu au roi' is available for download here. 

Greek Wine and Indian Pepper

Next one up at the mapping TRANS/culture lecture cycle is Georg Christ. His talk Greek Wine and Indian Pepper - Transcultural Flows Revisited will be held on Monday, November 2, in the Department of History (Lecture Hall), University of Heidelberg. Should be of interest to cultural theorists and economic historians alike.

Download ChristLectureLeaflet

O. E. Williamson wins 2009 Nobel Prize in Economic Sciences

Oliver E. Williamson has finally won his well-deserved lifetime achievement award. He shares the 2009 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with Elinor Ostrom of Indiana University. A long-time favourite to win, he is awarded the prize "for his analysis of economic governance, especially the boundaries of the firm".

Economic historians should rejoice in this decision, as Professor Williamson is the closest thing to an economic historian to be awarded a Nobel since cliometricians Robert Fogel and Douglas North won in 1993. A former student of renowned business historian Alfred Chandler, Williamson is among the founding fathers of the economics of transactions costs and the New Institutional Economics (NIE). His analysis of economic institutions is of particular value to historians interested in the long-term development and integration of markets through trade, as it distinguishes between a level of social embeddedness and succeeding levels of economic policy, corporate governance, and resource allocation. Thus, it provides a solid theoretical framework for the study of historical long-distance trade (my current research focus).

Source: Oliver E. Williamson, The New Institutional Economics - Taking Stock, Locking Ahead, Journal of Economic Literature, Vol. 38, No. 3 (September 2000), pp. 595-613 (p. 597). Click to enlarge image.