Guilds and the Economy

Guilds and the Economy

Sheilagh Ogilvie
Subject: Economic History Online Publication Date: May 2020
DOI: 10.1093/acrefore/9780190625979.013.538

Summary and Keywords

Guilds ruled many European crafts and trades from the Middle Ages to the Industrial
Revolution. Each guild regulated entry to its occupation, requiring any practitioner to be­
come a guild member and then limiting admission to the guild. Guilds intervened in the
markets for their members’ products, striving to keep prices high, limit output, suppress
competition, and block innovations that might disrupt the status quo. Guilds also acted in
input markets, seeking to control access to raw materials, keep wages low, hinder em­
ployers from competing for workers, and prevent workers from agitating for better condi­
tions. Guilds treated women particularly severely, usually excluding them from appren­
ticeship and forbidding any female other than a guild member’s widow from running a
workshop. Guilds invested large sums in lobbying governments and political elites to
grant, maintain, and extend these privileges.

Guilds had the potential to compensate for their cartelistic activities by creating counter­
vailing benefits. Guild quality certification was one possible solution to information asym­
metries between producers and consumers, which could have made markets work better.
Guild apprenticeship had the potential to solve imperfections in markets for skilled train­
ing, and thus to encourage human capital investment. The cartel profits generated by
guilds could in theory have encouraged technological innovation by enabling guild mas­
ters to appropriate more of the social benefits of their innovations, while guild journey­
manship and spatial clustering could diffuse new technical knowledge. A rich scholarship
on European guilds makes it possible to assess the degree to which guilds created such
benefits, outweighing the harm they caused.

After about 1500, guild strength diverged across Europe, declining gradually in Flanders,
the Netherlands, and England, surviving in France and Italy, and intensifying across large
tracts of Iberia, Scandinavia, and the German-speaking lands. The activities of guilds con­
tributed to variations across Europe in economic performance, urban growth, and in­
equality. Guilds interacted significantly with both markets and states, which helps explain
why European economies diverged in the crucial centuries before industrialization.

Keywords: guilds, entry barriers, occupational licensing, cartels, gender, quality certification, human capital in­
vestment, innovation, economic growth, economic history

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Guilds and the Economy

Introduction: What Is a Guild?

A guild, in the most general sense, is an association of people with common characteris­
tics who wish to pursue collective ends. In different times and places, guilds have includ­
ed religious fraternities, mutual welfare associations, place-of-origin lodges, dining soci­
eties, neighborhood leagues, and militia clubs. But historically, most guilds were formed
by people practicing the same occupation. These occupational guilds sometimes engaged
in sociability, processions, performances, worship, and politics. But they all acted in the
economic sphere. Their main aim was to protect and enrich their members by excluding
competitors, keeping prices high, keeping wages low, reducing threats from innovation,
and generating enough profits to pay off the political elites that enforced guild privileges.
In some cases, guilds brought certain benefits for the broader public by controlling prod­
uct quality, certifying skilled training, and creating appropriable rewards that could have
motivated innovation by guild members. Guilds’ social and cultural activities helped them
achieve these economic ends by creating internal cohesion, and their political activities
got them legitimacy and enforcement from governments. But guilds’ overriding aim was
the economic protection and enrichment of their own members (Ogilvie, 2014, 2019).

Guilds have been found for thousands of years in many economies across the world: an­
cient Egypt, Greece, and Rome; medieval and early modern India, Japan, China, Persia,
Byzantium, and Europe; and 19th-century Latin America and the Ottoman Empire. This
article focuses on European guilds, because they are much more thoroughly documented
and studied than non-European ones. Furthermore, guilds show interesting cross-country
variation during the “Little Divergence” (c. 1500–c. 1850), when the economies of the
North Atlantic seaboard outpaced the rest of Europe (Fouquet & Broadberry, 2015).

Guilds existed in European antiquity across the ancient Greek and Roman Empires and
left tantalizing traces during the so-called Dark Ages (c. 400–c. 1000). They came defini­
tively back into view with the resurgence of European trade and manufacturing, together
with public record keeping, after about 1000, and became virtually universal across Eu­
rope in the 13th and 14th centuries. After 1500, guilds gradually lost their powers in
some European societies while becoming more entrenched in others. The French Revolu­
tion triggered the abolition of guilds in France in 1791, a reform exported by French oc­
cupational governments to the Netherlands, western Germany, and northern Italy during
the Napoleonic period. But guilds survived in Austria-Hungary, most of Germany and
Switzerland, Scandinavia, and Iberia, well into the 19th century. The last guilds in Europe
were not abolished until 1883.

Behind the term “guild” lay a wide array of organizations. One key distinction is between
“merchant guilds” and “craft guilds.” Merchant guilds were organizations of wholesale
traders and differed in many ways from other guilds. Their members specialized in selling
goods and services to industrial, commercial, institutional, or other professional business
users, rather than ordinary consumers. Members of merchant guilds often traded across
long distances and political frontiers, forming branches or “communities” in foreign trad­
ing centers and sometimes organizing multicity associations called “hansas.” Merchant

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Guilds and the Economy

guilds also differ analytically from other guilds because of the distinctive challenges of
wholesale, long-distance trading: the gap in space and time between delivery and pay­
ment, the need to deal with multiple political regimes, the challenges of managing far­
away agents, and the lack of information about alien markets. So studies of merchant
guilds have focused on commercial security, contract enforcement, principal–agent rela­
tions, information transmission, and price volatility. Merchant guilds comprised a tiny and
idiosyncratic minority of guilds in Europe, raising distinctive analytical themes that space
constraints preclude discussing here. The interested reader is referred to the rich litera­
ture on long-distance trading institutions for detailed consideration of this type of guild
(see Gelderblom, 2013; Greif, 2006; Ogilvie, 2011).

Other occupational guilds, comprising the overwhelming majority, are conventionally

called “craft guilds.” This term is imprecise because it ignores the many guilds formed by
practitioners of occupations other than traditional crafts. Guilds were formed by many
service-sector practitioners, including shopkeepers, carters, porters, boatmen, painters,
sculptors, musicians, physicians, surgeons, public bath operators, and chimney sweeps.
There were also guilds of primary-sector producers, including farmers, agricultural labor­
ers, gardeners, wine growers, shepherds, miners, and fishermen. But practitioners of
crafts and “other” guilded occupations shared many characteristics and challenges,
above all the fact that they produced goods and services that were destined for (and often
directly sold to) consumers. So scholars have focused mainly on craft guilds’ activities to
erect entry barriers, maintain market privileges, certify product quality, regulate skilled
training, and control innovation.

Debates About Guilds

The effects of guilds on economy and society have always attracted controversy. Contem­
poraries held strong views about them, with guild members and their political allies ex­
tolling their virtues, while customers, employees, and competitors lamented their mis­
deeds. Guilds were praised by many early economic thinkers such as the French govern­
ment minister Jean-Baptiste Colbert and the Austrian imperial councilor Johann Joachim
Becher. Others censured guilds, as when Adam Smith called them “a conspiracy against
the public,” or the French Controller-General Anne-Robert-Jacques Turgot told the King,
“I do not believe that one can seriously and in good faith hold that these guilds, their ex­
clusive privileges, the barriers they impose to work, emulation, and progress in the arts,
are of any utility.”

Modern scholars are also deeply divided on guilds. Some argue that guilds were so wide­
spread and long-lived that they must have generated economic benefits (Epstein, 1998;
Epstein & Prak, 2008; Gustafsson, 1987; Hickson & Thompson, 1991; Prak & Van Zanden,
2013; Putnam et al. 1993). Guilds had the potential to solve information asymmetries be­
tween producers and consumers, overcome imperfections in markets for skilled training,
created incentives favoring innovation, put pressure on governments to be business
friendly, or generate social harmony by reducing competition, conflict, and inequality.

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Guilds and the Economy

Other scholars take a darker view (Acemoglu et al., 2011; Caracausi, 2017A, 2017B;
Hafter, 2007; Horn, 2015; Ogilvie, 2019; Stasavage, 2017; Van den Heuvel, 2015; Wahl,
2019). Guilds were in a position to extract benefits for their own members by acting as
cartels, exploiting consumers, rationing access to human capital investment, stifling inno­
vation, bribing governments for favors, harming outsiders such as women, Jews, and the
poor, and redistributing resources to their members at the expense of the wider economy.

The evidence suggests that a common theme underlies guilds’ activities: guilds tended to
do what was best for guild members (Ogilvie, 2014, 2019). Guilds did sometimes protect
craftsmen, guarantee quality, and foster skills; at times they even rewarded innovations.
In some cases, therefore, guilds brought certain benefits to the broader public. But in
many other cases, the actions guilds took mainly had the effect of protecting and enrich­
ing their members at the expense of consumers and non-members; reducing threats from
innovation, competition, and audacious upstarts; and generating sufficient rents to pay
off the political elites that enforced guilds’ privileges and might otherwise have interfered
with them. It is important to recognize that guilds engaged in multiple activities and to
draw a balance sheet between the benefits they had the potential to create through soli­
darity, quality, and training, and the harm they caused by excluding competitors, manipu­
lating markets, discriminating against women and minorities, corrupting governments,
and blocking innovations.

Guild Entry Barriers

It is sometimes assumed that guilds were voluntary, open-access associations—part of
“civil society,” like bowling clubs, choral societies, or parent-teacher associations (Greif,
2006; Putnam et al. 1993; Richardson, 2008). Empirical investigations of guilds’ behavior
show that this was not the case. Guilds were compulsory—and closed. If you wanted to
practice a particular occupation, you had to join the right guild. And guilds limited entry
(Ogilvie, 2019). They discriminated against applicants who did not hold town citizenship,
spoke the wrong language, had the wrong skin color, or were disliked by existing mem­
bers. Virtually all guilds excluded women, Jews, gypsies, Muslims, Orthodox Christians,
and Anabaptists. Guilds excluded Protestants in Catholic places and Catholics in Protes­
tant ones (Kluge, 2007). Guilds in German-speaking central Europe and in Iberia imposed
particularly onerous entry barriers based on ideas of honor and defilement. Thus a num­
ber of Spanish guilds excluded boys whose skin was the wrong color (in one case anyone
“darker than quince jam”), whose parents practiced a “vile” occupation, or whose ances­
tors had been slaves or religious converts (Klein, 1932; La Force, 1965). Many German
guilds excluded people who spoke other languages, descended from serfs, could not docu­
ment 8 legitimately born great-grandparents, or had social contacts with “defiling” per­
sons such as skinners or executioners (Stuart, 1999). All guilds everywhere excluded men
who could not afford the entry fees. Although German and French guilds charged the
highest fees and English and Dutch guilds the lowest ones, across European guilds as a
whole, mastership admission fees averaged more than a year’s wages for a journeyman or
laborer (Ogilvie, 2019). A guild was compulsory if you wanted to ply a trade. And guilds
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Guilds and the Economy

kept most people out—females, Jews, bastards, gypsies, former serfs, and slaves; most
members of minority religions, ethnicities, and nationalities; those without the right
parentage in the guild or community; those with an ancestor who had practiced a “defil­
ing” occupation; and anyone who could not afford the guild fees.

By limiting entry, a guild hindered competition in the market for the goods and services
its members produced. To see why, consider an occupation whose existing practitioners
are competing with one another, faced with an entrant who can produce at a lower cost
and thus charge a lower price. If there were free entry, this entrant would capture some
of the market by producing at a lower price, forcing the existing producers to respond in
some way, perhaps by reducing their own prices, perhaps by ceasing to produce. If a
guild imposes an entry barrier, it enables the legally licensed guilded producers to ex­
clude the entrant or require her to incur costs of admission, thereby increasing her pro­
duction costs and reducing her ability to compete with other producers. Entry barriers al­
so facilitate “tacit collusion,” in which competition is threatened by a number of firms en­
gaging in behavior that approximates that of a single dominant firm, even in the absence
of direct market manipulation such as price-fixing and limits on output (although guilds
also directly fixed prices and limited supplies, as discussed below in the section on GUILD
MANIPULATION OF THE MARKET). Tacit collusion was rendered easier by guild entry
barriers because reducing the number of participants lowers coordination costs and in­
creases each party’s share of any collusive profit, thereby increasing incentives to collude
(Ivaldi et al., 2003).

Women were unquestionably the largest social group affected by guild entry barriers
(Hafter, 2007; Ogilvie, 2004A; Quataert, 1985; Schmidt, 2009; Trivellato, 2008; Van den
Heuvel, 2007; Wiesner, 1986). Most guilds restricted women’s training, excluding them
from apprenticeship and journeymanship: female apprentices were virtually nonexistent
in the German lands, and even in England girls comprised less than 5% of guild appren­
tices though over 30% of non-guild apprentices. Most guilds prevented women from be­
coming independent masters, and thus from being business owners and self-employed en­
trepreneurs. Guilds usually allowed a master’s widow to continue the family workshop
but only if she satisfied certain conditions and limited her business in various ways. Dur­
ing the lifetime of the male master, it was common for a guild to restrict the work of his
female employees, servants, relatives, daughters, and even his wife.

It might be thought that guilds actually provided for women well, through all-female
guilds, widows’ rights, and the work of masters’ female family members (Clark, 1919;
Crowston, 2008). But all-female guilds were vanishingly rare. Just 55 were recorded in
Europe from the 13th to the 19th century—compared to tens of thousands of male guilds
(Ogilvie, 2019). Mixed-sex guilds were also extremely rare, with only 343 recorded across
that entire period. Usually most of their members were male, they were run by men, and
they treated female members unfairly. Over 99% of guilds were all-male clubs that just let
masters’ widows continue the workshop in a limited way. They typically made masters’
widows fulfill conditions that full male masters did not. A guild master’s widow could not
remarry, her tenure of the guild license was limited, she had to have a son, she had to pay

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Guilds and the Economy

extra fees, or she had to please existing male masters. Even then, she often faced limits
on her workforce, equipment, raw materials, output, or voice in guild decisions. These
constraints made it hard for a guild master’s widow to stay in business: from 1354 to
1861, widows headed 18% of town households but only 8% of guild workshops (Ogilvie,
2019). Many guilds responded to pressure from their male members to restrict the work
even of masters’ wives, daughters, and other female family members. German guilds of­
ten blacklisted journeymen who worked alongside females. It is difficult to conclude that
the guild system provided well for women.

By erecting barriers against women, guilds affected the wider economy. For one thing,
discrimination against women redistributes resources from females to males, reducing
the well-being of half the population. In addition, evidence from 21st-century developing
economies provides strong reason to think that discrimination against women inflicts
large economic costs on society as a whole. Preventing females from obtaining skilled
training not only reduces women’s own earnings but lowers per capita GDP. Likewise, ex­
cluding women from the labor force as workers, business owners, and entrepreneurs not
only prevents women from supporting themselves and their families but also lowers out­
put and slows growth in the economy at large (Cuberes & Teignier, 2016; Knowles et al.,
2002; United Nations, 2007).

Did guilds actually play an independent role in economic discrimination? It might be ar­
gued that the true culprit was culture: that patriarchal, xenophobic, and anti-Semitic
norms made discrimination inevitable. Such cultural norms were widespread in the Euro­
pean past. But their practical implementation relied on institutions—such as guilds.
Guilds protected their members from competition partly by discriminating against visible
minorities. They issued rules barring women, foreigners, and Jews from mastership, guild
members from employing them, and customers from buying their wares. These guild
rules would not have been needed if everyone had instinctively obeyed patriarchal, xeno­
phobic, or anti-Semitic norms. Guild masters often wanted to employ women, migrants,
and Jews. Customers wanted to buy from them. Many people did not let cultural norms
about women and Jews affect their daily decisions—especially when it hit their pockets.
Guilds did not just reflect cultural norms. They enforced these norms against people who
would not otherwise have let culture determine their economic choices (Trivellato, 2006).

Guild Manipulation of the Market

Guilds also sought to protect and enrich their members by manipulating markets directly.
Many guilds took action to influence prices, limit supplies, and restrict competition in
markets for the goods and services their members produced, and the inputs they used to
produce them (Deceulaer, 1996; Edgren, 2006; Farr, 1988; Kluge, 2007; Lipson, 1915; Lis
& Soly, 2008; Mickwitz, 1936; Ogilvie, 2019; Unwin, 1908).

Guilds were often observed agreeing internally on prices. They imposed prices that were
artificially high, forbade their members to undercut each other’s prices, and mobilized
government authority in fixing prices. Guilds also limited supplies in order to push up
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Guilds and the Economy

prices, since if a group of producers can restrict the quantity that is supplied, consumers
will have to pay a higher price without any need for the guild to fix prices formally. The
most frequent approach was to specify a volume of output that no guild member was al­
lowed to exceed. But many guilds agreed to restrict output on an ad hoc basis, without
specifying a precise quota. This approach was attractive because it could be adapted flex­
ibly to a particular situation.

Guilds also used a variety of other approaches to push up prices for what their members
produced. Many guilds forbade their members to sell goods they had not themselves pro­
duced, limited hours or days of work, closed workshops for particular periods of the year,
banned peddling and rural trading, mandated a minimum distance between shops, limit­
ed the number or duration of market visits, banned advertising, forbade enticing away an­
other master’s customers, limited the number of customers per master, or required any
master who got an order to share it with other masters. Most guilds limited each master
to just a single workshop, shop, or market stall, with no branches. Some mandated that
each member’s market stall should be of precisely equal size, should stock a maximum
quantity of wares, or should not be replenished with wares for the duration of the market
opening. Many guilds limited the amount of raw materials each master was allowed to
process—the quantity of wood for each cooper, grain for each baker, raw cotton or wool
for each weaver, hides for each tanner, and charcoal for each ironworker. Guilds frequent­
ly restricted the amount of equipment each master could have—weavers’ looms, spinners’
spindles, tanners’ lime-pits, shoemakers’ lasts, ironworkers’ hearths or furnaces, wire-
makers’ capstans. Another widely used approach was to restrict the number of appren­
tices, journeymen, or family members each master could employ—a favored approach
since it helped limit entry as well as output.

Much more research is needed on guilds’ effects on output and prices. Only in a small
number of cases is there quantitative evidence of how much output a workshop could pro­
duce when there was no guild quota. Surviving evidence suggests that a successful guild
could limit the output of a craft workshop to just one-third to two-thirds the level that was
technically feasible. Likewise, there are only a few documents recording quantitative in­
formation on how much higher guild prices were than non-guild ones, although there are
hundreds of qualitative sources describing the practice. The few quantitative records sug­
gests the median price rise imposed by guilds was 25%, and the average was 47%
(Ogilvie, 2019). This is even higher than the price rises imposed by 21st-century cartels,
which involve mean and median price increases of about 23 percentage points above the
competitive price, though they are 42.5% in Pakistan and 53.5% in Turkey (Connor, 2014;
Ivaldi, Jenny, & Khimich, 2017). The greater price rises caused by premodern guilds than
most 21st-century cartels may result from the fact that guilds enjoyed political enforce­
ment, whereas 21st-century cartels are usually illegal.

Guilds sought to shape markets not only for the goods and services their members pro­
duced but also for the inputs they used—labor, raw materials, and even shops and stalls
(Ammannati, 2014; Kluge, 2007; La Force, 1965; Mickwitz, 1936; Ogilvie, 2019; Poni,
1991). A guild’s privileges usually gave its masters the right to be the sole legitimate buy­

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Guilds and the Economy

ers of certain inputs, to influence their price, and to limit competition for them. Many
guilds used these privileges to lower their members’ production costs. In a number of
cases, guilds depressed the cost of raw materials by imposing a direct price ceiling. More
commonly, guilds sought to reduce their members’ production costs indirectly by de­
manding the right to buy raw materials before outsiders got access, forbidding exports of
key raw materials, requiring any guild member who bought such inputs to share the pur­
chase with his fellows, or making them get permission before selling raw materials to an
outsider.

The most important way guilds depressed their members’ costs was by intervening in the
labor market (Caracausi, 2011; Horn, 2015; Kaplan, 1986; Kisch, 1989; La Force, 1965;
Ogilvie, 2019). Many guilds fixed maximum wages for journeymen and maximum piece
rates for freelance spinners. One German guild even forbade guild masters to offer their
workers hot drinks in the evening, as it would force other masters to offer the same
(Ogilvie, 2019) Even more frequently, guilds pushed down workers’ wages indirectly by
forbidding any guild master from hiring away another’s employee and making it difficult
for a worker to change masters. Some guilds went so far as to allocate journeymen to
masters centrally, preventing them from shopping around among masters for better con­
ditions. By the 18th century, English guilds were too weak to do this, but French guilds
frequently coerced their workforce in this way, as shown by a journeyman tailor from
Bristol who was swept up in a Marseille journeymen’s riot against guild labor-allocation
practices, and remarked in astonishment that “in England there was no guild labor-alloca­
tion officer, the journeymen being free to take employment with the master whom they
find most appropriate” (Sonenscher, 1989). Many guilds, especially in France and Ger­
many, blacklisted employees who demanded better wages or resisted guild regulation of
the labor market.

These findings cast a sobering light on the idea that guilds were the precursors of trade
unions, protecting workers and fostering solidarity. Guilds were associations of employ­
ers. They often exerted considerable pressure to prevent their workers from setting up
their own associations. When workers went on strike, many guilds organized bands of
masters to beat them up, persuaded governments to send in soldiers, or blacklisted the
ringleaders. Guilds were the opposite of labor unions. They were employers’ clubs that
used their legal privileges to keep wages low and conditions poor. Guilds not only reflect­
ed employers’ interests but provided institutional mechanisms that helped employers
reach enforceable agreements to refrain from competing for workers, thereby keeping
employees poorly paid and dependent on employers’ favor.

Guilds and the Informal Sector

But did guilds actually enforce their regulations? Not all guilds have yet been investigat­
ed in detail. Furthermore, as discussed in the section on guilds and economic develop­
ment, guilds varied a great deal, with strong guilds in Iberia, Scandinavia, Austria, and
most German societies, medium-strength guilds in Italy, France, and Scotland, and com­

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Guilds and the Economy

paratively feeble guilds in the Northern Netherlands, the Southern Netherlands (modern
Belgium), and England. However, most guilds enforced their entry barriers and market
privileges sufficiently to have real economic effects (Cerutti, 2010; Edgren, 1998; Hafter,
2007; Heimmermann, 1998; Horn, 2015; Mickwitz, 1936; Ogilvie, 2019; Poni, 1991;
Schalk, 2017; Stuart, 1999; Van den Heuvel, 2015).

Again and again, contemporaries complained that guilds kept them out, stopped them
earning a livelihood, charged unaffordable fees, and erected other obstacles to admis­
sion. Guild entry barriers often changed people’s behavior, impelling them to pursue oth­
er types of work, stop practicing multiple occupations, migrate to other places, work in
the black market, delay marriage, go to prison, and alter other fundamental life decisions.
People regularly spent resources to satisfy guild entry conditions, paying substantial
sums for apprenticeship enrollment fees, minimum training premiums, mastership fees,
operating licenses, and extraordinary memberships. Those who could not satisfy guild en­
try requirements often spent resources circumventing them. Apprentices and journeymen
bought exemptions from guild admission barriers. Time and again, illegal producers,
Jews, rural workers, members of other guilds, and other outsiders paid guilds for permits
allowing them to produce specific wares or sell in particular markets. Non-members com­
monly paid guild masters to act as their front men. It was normal for outsiders to devote
resources to secure countervailing privileges entitling them to practice occupations in vi­
olation of guild entry barriers.

The behavior of contemporaries also reveals the real economic effects of market manipu­
lation by guilds. Customers habitually complained about high guild prices and supply re­
strictions that made their daily lives difficult. Journeymen tried to set up their own associ­
ations and periodically went on strike against oppressive guild masters. Suppliers of raw
materials and intermediate inputs protested against the low, monopsonistic prices im­
posed by guilds. Guilds spent huge amounts of money to lobby governments to grant, con­
firm, and extend their rights to intervene in input and output markets, and their oppo­
nents spent nearly as much in the attempt to block them. Guilds also regularly invested
time and money in legal conflicts to defend their privileges to manipulate markets, and
those harmed by these market machinations in turn spent time and money on litigation to
attack them. In many instances, guilds and their opponents engaged in costly and some­
times violent struggles over price fixing, supply restrictions, wage ceilings, and raw mate­
rial prerogatives. As organizations of employers, guilds intervened recurrently in labor
markets, evoking bitter conflicts with workers. Guilds habitually invested time and money
in systems of detection and punishment to enforce their market privileges. Such activities
strongly imply that guild action was effective, since people do not spend resources to se­
cure, defend, enforce, attack, and evade forms of market manipulation that have no real
economic effects.

No enforcement regime is perfect. Guild entry barriers and market privileges were violat­
ed by both free-riding insiders and encroaching outsiders. These infringements became
increasingly widespread in the Low Countries and England as guilds weakened after c.
1550, in Scotland after guilds lost their political influence in 1672, and in France in the

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Guilds and the Economy

later eighteenth century, especially after Turgot’s abortive abolition of the guilds in 1776,
although the French guilds recovered their powers after just six months and were not fi­
nally swept away until 1791. But even where a particular guild’s privileges were not per­
fectly enforced, at best this created a black-market “informal sector.” It did not mean that
guild privileges had no economic effects, just that these effects consisted partly of manip­
ulating formal markets in favor of guild members and partly of pushing economic activity
into the black market.

This guild-induced bifurcation between formal and informal economic activity reduced ef­
ficiency and harmed welfare both in the informal sector—where producers and con­
sumers moved to escape guild privileges—and in the formal sector where insiders en­
forced the guild privileges. In the informal sector, transactions are hard to enforce, own­
ership is insecure, risks are high, time horizons are short, finance is scarce, human capi­
tal is low, worker protection is nonexistent, consumer safeguards are lacking , and re­
sources are wasted evading formal-sector sanctions (Batini, Levine, Kim, & Lotti, 2010).
Guilds, by pushing consumers and producers into the informal sector, reduced economic
efficiency and increased these people’s costs and risks.

But guilds also caused harm in the formal sector where their entry barriers were en­
forced. In the formal sector, guild entry barriers gave the legally privileged producers
market power, enabling them to increase prices above marginal cost, reducing exchange
and consumer surplus (Auriol & Warlters, 2005). Market concentration increases the
prices of goods and services for everyone, of course. But it disproportionately reduces the
relative incomes of the least well off, who seldom share the oligopolistic rents and have
fewer options to substitute among different consumption choices (Rodríguez-Castelán,
2015). Guild entry barriers and market privileges, whether enforced thoroughly or par­
tially, exercised a palpable economic impact, especially on the poor.

Guild Quality Certification and Consumer Pro­

tection
It might still be possible to conclude that guilds were beneficial institutions in a wider
perspective. Even though guilds erected entry barriers, manipulated markets, and op­
pressed women, they had the potential to create countervailing benefits—for instance, by
certifying quality. A standard source of market failure is asymmetric information between
consumers and producers. Producers know whether they are selling a good- or a bad-
quality product—for example, a good or a bad cloth. But consumers do not know whether
any given cloth is good or bad. So they are only willing to pay a price for that cloth that is
the average between the value they place on a good cloth and the value they place on a
bad one. Given that uninformed consumers will only pay the average price, producers will
only sell bad cloths and will exit from the market when they have good ones to sell, since
they cannot get a good price for them. As sellers of good cloths leave the market, the av­
erage quality of cloths in it decreases, so consumers’ average willingness to pay decreas­

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Guilds and the Economy

es, leading to even more producers of good cloths leaving the market, followed by the de­
parture of even more consumers, in a vicious circle (Akerlof, 1970).

Guilds had the capacity to correct this market failure by certifying quality. First, all guilds
certified producers. As discussed below in the section on guilds and human capital invest­
ment, many guilds did not operate apprenticeship systems, but all imposed entry barri­
ers: only those licensed by the guild were allowed to provide the goods and services of
that occupation (Epstein, 1998; Lis & Soly, 2008). Second, many guilds also certified
products: they inspected goods for quality and forbade items below a certain quality level
to be sold at all (Gustafsson, 1987; Richardson, 2005, 2008). Third, some guilds engaged
in monopoly contracting with wholesale merchants, collectively guaranteeing the quality
of wares, especially where producers were dispersed in the countryside (Pfister, 1998,
2004, 2008). Fourth, some guilds operated collective sales rooms, assembling in one
place the output of multiple producers and implicitly guaranteeing its quality (Prak, 2003,
2008). Finally, guilds often professed a corporate ethos of honorable behavior, sometimes
backed by religious sanctions, which guaranteed to uninformed customers that wares
were high quality because that was the way honorable guild masters behaved (De Munck,
2018; Richardson, 2005; Richardson & McBride, 2009).

Many guilds did regulate quality. But they mainly imposed a pass-fail system. As far as
producers were concerned, it was completely pass-fail: producers excluded from the guild
could not legally sell to customers. As far as products were concerned, those guilds that
operated inspection systems typically prohibited wares that did not pass the inspection
from being sold at all, often confiscating or destroying the wares and sometimes even
smashing the equipmentused to make them. Only a few guilds operated an inspection sys­
tem with gradations, allowing some (though not all) lower-quality wares to be sold as long
as they were appropriately labeled; these were typically in more flexible guild systems
such as those of England, the Low Countries, and Prussia after the state forcibly liberal­
ized the guild system in 1712. In France, by contrast, it was not until the 1780s that the
state was able to overcome guild opposition to graduated quality certification (De Munck,
2011, 2018; Ogilvie, 2019).

Guilds justified their pass-fail system for certifying producers and products by arguing
that they protected consumers by keeping quality high. But by restricting supply and sti­
fling competition from lower-quality (but also lower-price) producers and products, guilds
also kept prices high. Poor consumers often prefer lower prices, even if this means lower
quality. If guilds had been the best way of protecting consumers, everyone should have
chosen to buy guild-certified products from guild-certified producers. Instead, many peo­
ple—especially the poor—risked prosecution to buy black market wares that cost less,
even though they might be of lower quality. Guilds’ legal monopolies meant guild masters
did not have to provide the appropriate level of quality—the level consumers wanted
(Hafter, 2007; Horn, 2015; Ogilvie, 2004B).

Guilds did not always even guarantee high-quality high-price products. All guilds certified
producers, in the sense that they prohibited sales by non-members of the guild. But not

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Guilds and the Economy

all guilds certified goods and services (Caracausi, 2017A; Cerutti, 1991; Edgren, 2006;
Epstein, 1991; Horn, 2015; Ogilvie, 2005). Most guilds did not devote much attention to
quality certification in their regulations, and many devoted none (Mocarelli, 2008). Guilds
with quality regulations often showed little will or capacity to implement them, with low
proportions of enforcement activities devoted to quality, mild sanctions, numerous quality
breaches by senior guild members, and widespread corruption inside the certification
system. Inward moral adherence to a collective ethos of honesty about product quality is
impossible to observe, but the outward behavior of guild members reveals widespread
failure to act in accordance with any such ethos (Farr, 1988; Gustafsson, 1987; Ogilvie,
2019).

Collective contracts, in which guilds guaranteed delivery of specified quantities and quali­
ties of products to groups of merchants were extremely rare, being found exclusively in a
few zones of German-speaking central Europe. Where they existed, they were widely
evaded by both producers and merchants. The rapid growth of guild-free rural “proto-in­
dustries” all over Europe from the late medieval period onward shows clearly that collec­
tive guild contracts—and indeed guilds themselves—were neither necessary nor sufficient
for dispersed rural producers to supply quality levels that satisfied export markets
(Boldorf, 2009; Cerman, 2002).

Guild sales rooms, in which guilds implicitly guaranteed the quality of wares, were also
extremely rare: they were operated almost exclusively by artists’ guilds, and even among
guilded artists only in the Netherlands. Even for Dutch artists, guild sale rooms were a
minor component of a lively ecosystem of market outlets in which consumers felt confi­
dent enough about product quality to purchase eagerly without guild quality guarantees
(Evans, 2012; Ewing, 1990).

Alternative quality-certification mechanisms—operated by merchants, town governments,

and state authorities—existed alongside guilds from the early 13th century onward and
were increasingly preferred to them by rulers, town governments, and consumers (De
Munck, 2018; Ogilvie, 2019). Consumers, rather than buying guild-certified products from
guild-certified producers, eagerly bought non-guild-certified goods and services from non-
guilded producers, despite the risks involved in using the black market (Hafter, 2007;
Horn, 2015; Ogilvie, 2005; Van den Heuvel, 2015). In many parts of Europe, consumers
and producers increasingly shifted from an emphasis on the intrinsic value of the raw ma­
terials embodied in a product, the main aspect of quality certified by the guild, to charac­
teristics such as design, decoration, diversity, fashionable style, and innovative configura­
tions, which guild rules struggled to codify and indeed often stifled (Caracausi, 2017B; De
Munck, 2011, 2018; Ogilvie, 2019). On an aggregate level, European industries without
guild quality-certification systems often outperformed ones where producers and prod­
ucts were certified by guilds. Guild quality guarantees were evidently neither necessary
nor sufficient for creating and maintaining consumer confidence in both luxuries and
everyday wares, at home and on export markets (Braun & Burger, 2008; Caracausi,
2017B; Ogilvie, 2005; Sella, 1968).

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Guilds and the Economy

This is not to say that guild quality controls had no effects (Caracausi, 2017B; De Munck,
2011, 2018; Mickwitz, 1936). Guilds used quality certification to restrict entry, by exclud­
ing producers who were not guild members and condemning products that had not been
produced by guild members. Guild quality controls often hindered industries from re­
sponding nimbly to changes in fashion and demand, which became increasingly important
relative to the intrinsic value of the raw materials, especially in the largest branch of
manufacturing, textiles (De Munck, 2011, 2018). This was because guild rules could not
adequately codify the diverse and rapidly changing characteristics of fashionable wares,
and experimenting with new products and processes not covered by the quality regula­
tions involved a cumbersome process of securing consent from all guild members as well
as the guild’s political patrons.

Things guilds did for other reasons often inflicted unforeseen harm on quality. Guilds’ re­
strictions on competition reduced their members’ incentives to maintain quality and re­
spond to changes in consumer demand. Guild price ceilings on raw materials created in­
centives for suppliers to reduce their quality. Guild wage caps made employees work
carelessly, embezzle inputs, riot and strike, reducing labor quality (Horn, 2015; Ogilvie,
2019).

Quality problems undeniably existed. Information asymmetries between producers and

consumers can arise in any market, and premodern markets were no exception. No soci­
ety has devised the perfect institutional solution to quality certification. But the historical
evidence on guilds casts doubt on the notion that privileged professional associations
were the solution. Guilds often sought to control quality, but their other incentives pre­
vented them from ensuring the appropriate product quality: the one desired by the con­
sumer, not the producer.

Guilds’ Role in Human Capital Investment

Human capital in the form of economically relevant skills is important for economic
growth, and guilds are widely regarded as having the institutional capacity to provide
such skills. For one thing, the cartel profits guilds generated had the potential to attract
people into training who might otherwise not have thought it worthwhile. Guild prescrip­
tions mandating apprenticeships longer than needed to learn the skills made it possible
for apprentices to pay for training in the form of cheap labor rather than money. Guilds
also sometimes regulated opportunistic behavior on the part of apprentices who left be­
fore completing their term or masters who neglected or abused their apprentices (De la
Croix et al., 2018; Epstein, 1998).

Many guilds did operate apprenticeship systems, but surprisingly, many did not—in the
largest available sample, covering Italy over nearly six centuries, 60% of guilds did not
even mention training in their ordinances (Mocarelli, 2008). Many guilds that did have
apprenticeship systems did not require any examination or masterpiece, so they did not
seriously certify skill. Those guilds with examinations often failed to define the skills be­
ing tested and most resisted outside pressure—for example, from governments—to clarify
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Guilds and the Economy

or improve their assessment regimes. Some guilds imposed a detailed examination but
left its requirements unchanged for centuries, during which techniques, equipment, and
commercial practices changed immensely. Still other guilds administered examinations
corruptly or openly passed unqualified candidates who possessed the requisite personal
ties, political clout, or financial means. As organizations to promote the interests of mas­
ters, guilds commonly turned a blind eye to masters who failed to provide training and ex­
ploited apprentices as cheap general laborers. This in turn encouraged apprentice oppor­
tunism. A large percentage of apprentices, often half or more, dropped out before com­
pleting their terms, a suggestive indicator of the failure or economic irrelevance of guild
training (Schalk et al., 2017; Wallis, 2008).

In fact, apprenticeships existed widely without guilds. Private apprenticeships were wide­
spread in guilded and non-guilded occupations alike, wherever guilds did not prohibit
their use. Alternative institutions regulated apprenticeships in 13th- and 14th-century
Italian and Flemish cities before guilds existed in the occupations in question (Epstein,
1991; Nicholas, 1995). Private apprenticeships were particularly prevalent in two of the
most dynamic economies in premodern Europe, the Netherlands and England, where
young people—especially girls—who were excluded from guild training often invested in
non-guild apprenticeships (Davids, 2003, 2007; Simonton, 1991). Legal, notarial, munici­
pal, and state institutions provided protections against opportunism in training contracts
in Italy, Flanders, and England from the medieval period onward (Epstein, 1991;
Nicholas, 1995; Wallis, 2012). That guilds were not necessary for providing skilled train­
ing is evidenced by the fact that many mainstream crafts were practiced successfully by
females who were prohibited by guilds from obtaining guild training. Females and other
outsiders who had been barred from formal guild training were attacked as a serious
competitive threat in most guilded crafts, indicating the adequacy of their skills in the re­
al economy.

Guilds did, however, use their local monopolies over providing training to benefit their
own members. Guilds imposed formal apprenticeship as an entry condition in a large
number of occupations generally recognized as not highly skilled, such as laboring, farm­
ing, cleaning, selling, carrying burdens, cleaning chimneys, and coal picking. Even in
mainstream crafts, guilds often mandated apprenticeships longer than needed to learn
the occupation. This widespread guild practice cannot be explained as a bond on appren­
tice opportunism given evidence that most new apprentices were already productive
enough to cover their consumption costs and alternative monetary and legal bonds were
available (Caracausi, 2017A; Wallis, 2008). Rather, many guilds imposed excessively long
apprenticeships to augment barriers to entry, as did the woollen-weavers of the Bohemian
town of Iglau (modern Jihlava) in 1510, “so that it will not be so easy to get into the
guild” (Ogilvie, 2019). Guilds also used apprenticeship requirements as entry barriers and
revenue-raising devices by denying training to otherwise capable applicants (such as Jews
and women), charging high fees to those they admitted to training, exempting masters’
relatives known to lack expertise, and selling exemptions from apprenticeship require­

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Guilds and the Economy

ments to completely untrained entrants (Ogilvie, 2019). This casts doubt on the idea that
guild apprenticeships were superior to non-guild ones.

It is therefore unsurprising that there is a lack of concrete evidence that guild apprentice­
ship requirements improved economic performance. The lower skill premium—the gap
between wages for skilled and unskilled workers—in Europe compared to Asia is some­
times held to imply that guilds enhanced aggregate skills (Epstein & Prak, 2008; Van Zan­
den, 2009). But wage differentials are caused by many labor market characteristics other
than skills, and skills are determined by many factors other than training institutions
(Blundell et al., 2016). Moreover, as already mentioned, training was provided by many
other institutions than guilds, and too little is known of Asian guilds to conclude that they
provided inferior training to European ones. Comparisons across European industries, by
contrast, show that guild training was neither necessary nor sufficient for high productiv­
ity and rapid growth. In all major branches of European manufacturing, there were indus­
tries that were either completely non-guilded or whose guilds did not mandate appren­
ticeship. Those industries in which guild apprenticeship was absent often out-performed
those in which guilds imposed compulsory apprenticeship systems (Davids, 2003, 2007,
2013; Ogilvie, 2004A, 2005, 2019).

Guilds did not just administer a training system that was open to all capable applicants.
Instead, to benefit their members, guilds decided who was allowed training and kept
most people out. Guilds denied apprenticeships not just to females but also to many males
—Jews, bastards, gypsies, former serfs, and slaves; most members of other religions, eth­
nicities, and nationalities; those without the right parentage in the guild or community;
those with an ancestor who had practiced a “defiling” occupation; and anyone who could
not afford the fees. Guilds enabled a privileged minority to obtain vocational skills but ex­
cluded large numbers of unprivileged men, and nearly all women, from investing in their
own human capital. It is therefore unsurprising that guild apprenticeship systems show
no positive relationship with economic outcomes. Guilds probably generated some eco­
nomic benefits by ensuring training for a privileged few. But they also caused economic
harm by denying training to many more young people who were eager to learn but could
not convince guilds to let them become apprentices. For the economy at large, guilds’ net
effect on training was probably negative.

Guilds and Innovation

Innovation is important for economic growth—arguably more crucial than anything else.
But new knowledge is what economists call a “public good,” with two features that make
it complicated to buy and sell in markets. First, it is non-excludable: once you communi­
cate it to one person, how do you stop it spreading to others without charge? Second, an
idea is non-rival: once you tell it to one person, you can tell it to others at no extra cost.
So the private benefits of devising and diffusing an idea may be less than the social bene­
fits. Ideas may be underprovided by private individuals transacting in markets. An innova­
tive idea may not be devised at all, since potential inventors cannot profit from their own

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Guilds and the Economy

efforts. Or a good idea may be conceived but, so that the private inventor can profit from
his own efforts,communicated only to a few paying customers, even though at zero addi­
tional cost it could benefit society more widely.

Because ideas are public goods, other institutions than markets might be better at en­
couraging their invention and diffusion. Non-market institutions might enable individuals
to appropriate more of the social benefits of their ideas, giving them better incentives to
think them up. Or non-market institutions might give inventors better incentives to dif­
fuse their innovations to everyone who might use them.

Guilds had the potential to provide these institutional solutions. For one thing, as already
mentioned, guilds generated cartel profits for their members, which might have enabled
guild members to appropriate more of the social benefits of their innovations, giving them
better incentives to invest in research and development (Epstein, 1998). Second, guilds
often mandated apprenticeship, which might have encouraged the diffusion of innovative
technical knowledge across generations (De la Croix et al., 2018; Epstein, 1998, 2004).
Third, guilds sometimes required journeymen to travel, which could facilitate the geo­
graphical diffusion of innovative knowledge (De la Croix et al., 2018; Reith, 2008). Fourth,
guilds often held assemblies of their entire membership, where their members could have
exchanged technical know-how (Unger, 1978). Finally, guilds created spatial clusters of
specific occupations in towns and even specific neighborhoods, which might have promot­
ed the transmission of technological knowledge among practitioners (Epstein & Prak,
2008; Lis & Soly, 2008).

Governments try to encourage innovators by granting them patents—temporary monopo­

lies—that let them appropriate some of the public benefits of their inventions. Guild mo­
nopolies are also sometimes seen as creating this kind of appropriability for inventors
through the monopoly profits they generated for their members. But there were crucial
differences. A guild monopoly was permanent, not temporary. All guild masters enjoyed
the monopoly collectively, whether they innovated or not. And guilds excluded competi­
tors, reducing members’ incentives to incur the costs and risks of innovation. Guild mem­
bers had a captive market, enabling them to enjoy monopoly profits without bothering to
innovate.

European societies therefore developed other tools to aid appropriability, like patents,
prizes, and pensions for inventors (Belfanti, 2004, 2006). None provided perfect incen­
tives for innovation. But inventors often preferred them to guilds—unsurprisingly, since
guilds often lobbied and litigated in order to block innovations that threatened the status
quo (Horn, 2015; Mickwitz, 1936; Ogilvie, 2019). Innovation needs both rewards for in­
ventors and pressures from competition (Aghion et al., 2005). Guilds tipped the balance
too far against competition.

What about the idea that guilds encouraged diffusion of technical knowledge across gen­
erations via apprenticeship? A first snag with this idea is that, as discussed in the section
on guilds’ role in human capital investment, many apprenticeships existed without guilds,
and many guilds had no apprenticeship regimes (Davids, 2003). A second snag is that
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Guilds and the Economy

technologically innovative premodern industries show no evidence of knowledge being

diffused by guild apprenticeships. “Mega-structures” such as Gothic churches involved
some of the greatest technological innovations in medieval Europe, yet guilds played no
role in meeting these challenges (Prak, 2011). Shipbuilding was another high-tech indus­
try, yet guild-mandated apprenticeships were not central to diffusing its technical knowl­
edge. The most innovative shipbuilding regions in Europe either lacked a comprehensive
guild apprenticeship system as in the Netherlands, or lacked guilds altogether as in Eng­
land. Comprehensively guild-regulated shipbuilding industries in Germany and France, by
contrast, were technologically backward (Clapham, 1949; Unger, 1978). Machine making
was another activity in which technological innovation was important and spilled over in­
to other branches of manufacturing. But guilds were not central to the technological ex­
pertise of millwrights, engineers, or loom builders in the most innovative European ma­
chine-building regions such as the Zaanstreek zone north of Amsterdam or the industrial
towns of northern England (Davids, 2013). The lack of discernible link between guild ap­
prenticeships and technological innovation should not be surprising given that, as already
mentioned, many guilds that had training regulations used them as entry barriers, pre­
texts for other privileges, or licenses to be sold, rather than as mechanisms for transmit­
ting knowledge. Even where guilds did effectively convey technical knowledge to those
individuals whom they permitted to enter apprenticeships, they denied training to many
more applicants than they admitted, narrowing the conduits through which technological
knowledge could diffuse across the economy by restricting such knowledge to a privi­
leged few.

Did guilds diffuse innovations by making journeymen travel? Guilds in some parts of Eu­
rope required journeymen to go “on the tramp” for several years before they could apply
for mastership. Traveling journeymen probably helped circulate techniques from town to
town. But craft labor was highly mobile anyway. Around 1750, Europe had an estimated
300,000 migrant workers, only a minority of whom were guild journeymen (Lucassen &
Lucassen, 1997). Journeymen were not required by guilds to travel in Renaissance Italy,
Golden Age Holland, or 18th-century England, where innovations spread swiftly (Cara­
causi, 2017A; Davids, 2013; Ogilvie, 2019). Conversely, Germany and Austria remained
technologically stagnant, despite strong guilds that made journeymen travel for years
(Kluge, 2007; Reith, 2008). In Germany, where guilds often compelled journeymen to trav­
el, surviving tramping books show that the young men spent much of their time wander­
ing from place to place failing to find work, while their technical knowledge decayed
(Wesoly, 1985). Guild journeymen seldom traveled outside their own cultural zone, which
reduced their probability of transmitting novel technical ideas across linguistic or cultur­
al boundaries (Reith, 2008). Guilds in the German lands often excluded journeymen who
were not from the majority religious confession, and many German guilds rejected jour­
neymen who had worked in the Netherlands, where the more flexible guild system some­
times permitted females to do craft work, a practice many German guilds regarded as de­
filing for male workers (Ogilvie, 2019). If traveling journeymen applied for mastership as
nonlocals, they ran into guild discrimination (Kaplan, 1986; Kluge, 2007). Journeymen
were quite unlikely vectors for transmitting technical knowledge.

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Guilds and the Economy

What about the idea that guild assemblies served to spread technical knowledge among
masters? Many guilds held regular assemblies, where they communicated information to
members (Unger, 1978). But there is no evidence that this information involved technolo­
gy. Instead, where records survive, guild assemblies mostly communicated information
relating to the guild’s institutional privileges. The assembly began with an oral reading of
the guild regulations. Offenses against the regulations were punished. New masters and
apprentices were registered. Existing masters were asked for their views on guild issues.
Above all, lobbying and litigation was planned—including campaigns against disruptive
technologies (Ogilvie, 1997). So guild assemblies did transmit information but seldom
about technology. When they did discuss new technology, it was more often about how it
could be opposed, not how it could be adopted.

Did guilds create “knowledge clusters,” which diffused technological innovations among
practitioners? Guilds mostly required craftsmen to work inside the city limits, sometimes
in specific neighborhoods. Such spatial clusters might have helped transmit industrial
knowledge, but concrete evidence is missing. And there are some reasons for doubt. For
one thing, European industries progressively moved from urban clusters to the open
countryside after c. 1500. This was partly because producers wanted to escape guild sur­
veillance—the downside of knowledge clusters. Inside towns, most guilds did not require
workshops to cluster (Ogilvie, 2019). Some even forbade one master to set up shop too
near another, to prevent too much competition. Where occupational clusters formed in­
side towns, it was mostly because craftsmen wanted to cluster anyway. Industrial agglom­
erations arise spontaneously—including in modern economies—where being near other
producers improves access to technical ideas, customers, suppliers, or skilled labor (Fuji­
ta & Thisse, 1996). There is no evidence that clusters needed guilds to create them.

Why Did Guilds Exist—and Why Did They Dis­

appear?
Guilds existed for such a long time in so many places, surely they must have been benefi­
cial? This argument is an example of the “efficiency” approach, which theorizes that insti­
tutions arise and survive because they benefit the whole economy, solving problems such
as market failures (Acemoglu et al., 2005; Ogilvie, 2007; Ogilvie & Carus, 2014). In princi­
ple, this argument could account for the widespread existence of guilds, since market fail­
ures are ubiquitous in developing economies.

But the empirical findings do not support the idea that guilds arose and survived because
they were efficient. As discussed in the sections on entry barriers and market manipula­
tion, guilds were cartels of producers, and there is overwhelming evidence that many of
them used their market power to overcharge customers, exploit employees, underpay
suppliers, stifle competition, oppress women, and impede innovation. Guilds do not ap­
pear to have been efficient in correcting failures in markets for product quality for the
reasons examined in the section on guild quality controls: alternative quality-certification
mechanisms existed, and guilds had characteristics thatcreated poor incentives for their
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Guilds and the Economy

members to provide the range of quality that a heterogeneous population of consumers

wanted – especially those who were budget-constrained.

Nor, as discussed earlier, were guilds necessary or sufficient for correcting failures in
markets for training: other institutions were available and were voluntarily chosen by
trainees and trainers. Indeed, guilds’ net effect on aggregate human capital investment
was probably negative, since they provided training to a privileged few but denied it to
the disadvantaged many.

Finally, guilds were not efficient institutions for correcting failures in markets for innova­
tions. Some guilds probably did enable their members who innovated to appropriate more
of the social benefits of their innovations, but guilds also restricted competition, reducing
their members’ incentives to innovate and actively obstructing the innovative activities of
outsiders. In theory, guild apprenticeship, journeymanship, assemblies, and locational
clusters had the potential to facilitate diffusion of technical knowledge; however, there is
no concrete evidence that this actually occurred in any specific premodern industry. In
fact, many guilds effectively lobbied and litigated to block or delay the adoptions of dis­
ruptive innovations, which were implemented more readily in weakly guilded Flanders,
Holland, and England than in strongly guilded Germany or Iberia. Efficiency approaches
cannot explain the historical evidence on guilds.

In a wider perspective, there is little evidence that institutions in general exist to benefit
the whole economy—think of slavery or serfdom. Instead, many institutions survive by
providing perks to the powerful, at the expense of everyone else (Acemoglu et al., 2005;
Ogilvie, 2007; Ogilvie & Carus, 2014). This “distributional” approach to explaining institu­
tions can explain why guilds existed so widely and survived for so many centuries, despite
the harm they caused: they benefited powerful and well-organized interest groups. In oth­
er words, they made the pie smaller but dished out large slices to established guild mas­
ters, with fiscal and regulatory side benefits to town governments, princes, seigneurs,
and other powerful elites. Guilds provided an organizational mechanism for groups of
businessmen to lobby political elites for market privileges that protected and profited
guild members. Guilds then redirected a share of the profits to political elites in the form
of cash gifts, taxes, favorable loans, regulatory cooperation, military services, and politi­
cal support. Neither guilds nor political elites could have extracted these resources on
their own. But by doing so, they harmed customers, workers, competitors, and the econo­
my as a whole. Guilds existed for a reason. But this reason was that they benefited power­
ful interests, not the economy at large.

The mutually reinforcing exchange of favors between guilds and political elites in pre­
modern Europe prefigured a pattern widespread in modern developing economies. Politi­
cal elites grant entry barriers to entrenched producers, giving them market power that
enables them to extract monopoly profits from consumers. Part of these profits are then
paid to political elites as fees and taxes, in return for official enforcement of the entry
barriers. This reduces political elites’ administrative costs and increases their short-term
revenues but distorts resource allocation and stifles long-term growth. Entry barriers ex­

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Guilds and the Economy

pand the informal sector, where risks are higher, and producers cannot be taxed. Entry
barriers also give formal sector producers market power, enabling them to increase
prices, reducing exchange and consumer surplus. In this way, developing economies,
whether historical or modern, can find themselves burdened enduringly by institutions
that are bad for society at large but good for political elites, who cooperate to keep them
in being (Auriol & Warlters, 2005).

So why did guilds ever disappear? Even in medieval and early modern Europe, there were
“liberties,” suburbs, towns, and even entire regions where guilds were weak or absent,
creating interstices within which anyone could practice a trade, even if she was a woman,
a non-citizen, a Jew, or a former slave (Horn, 2015). The period after c. 1500 saw a widen­
ing divergence across Europe in the relationship between guilds and political elites. In so­
cieties such as the Low Countries and England, political authorities gradually ceased to
grant and enforce guilds’ privileges, while in “corporatist-absolutist” European states,
such as France, Spain, Austria, Scandinavia, and the German territories, political elites
continued to profit from their particularistic bargain with guilds for much longer (Ogilvie,
2019).

The reasons for the gradual breakdown of the coalition between guilds and political elites
in some parts of Europe after c. 1500 are a matter of lively debate. But economic and po­
litical historians have identified a complex of factors that created a new equilibrium in
which both political authorities and businessmen gradually discovered they could do bet­
ter for themselves by renouncing identity-based, “particularized” privileges and adopting
more generalized institutional mechanisms. These factors included stronger parliaments
that increasingly constrained how rulers could raise revenues and grant privileges to spe­
cial-interest groups; a more diversified urban system in which towns did not act in con­
cert but rather competed and encroached on one another’s markets; a more variegated
social structure including prosperous, articulate, and politically influential individuals
who wanted to engage in manufacturing and objected to its being monopolized by mem­
bers of exclusive organizations; and governments that gradually made taxation more gen­
eralized and developed markets for public borrowing, reducing the attractiveness of
short-term fiscal expedients such as selling privileges to special-interest groups (Ogilvie,
2019; Ogilvie & Carus, 2014). Much further research is needed, however, to identify the
precise combination of factors that triggered this gradual transition from an economy of
coercive, identity-based privileges to one of voluntary, open-access transactions.

Conclusion: Guilds and Economic Development

How did the strength of guilds affect the development of the economy? There are many
different ways of measuring the strength of guilds. It is important to assess guild strength
not just on the basis of the characteristics of guilds themselves, such as their numbers or
their internal cohesiveness. Rather, the strength of guilds must be evaluated more com­
prehensively, in terms of “guild landscapes” (Reininghaus, 2000A, 2000B)—that is, how
guilds interacted with the entirety of the surrounding economy and society. This encom­

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Guilds and the Economy

passed guilds’ relationships with merchant groups, their links with governments and po­
litical elites, their place within the urban system, their interactions with the much larger
rural economy, and the existence of jurisdictional “liberties” and even entire towns that
were guild-free (Reininghaus, 2000A, 2000B; Ogilvie, 2019).

Guild strength varied widely across European societies in all of these dimensions. Over­
all, however, there were three main zones (Ogilvie, 2019). The strongest guilds were
found in central, southern, and Nordic Europe: the German lands, Austria-Hungary, the
Iberian Peninsula, and the Scandinavian societies. Guilds of intermediate strength were
found in societies such as Switzerland, France, Italy, and some German territories such as
the Rhineland (Kisch, 1989; Reininghaus, 2000B). The weakest guilds were found along
the North Atlantic seaboard: in the Ssouthern Netherlands (modern Belgium), especially
in the 15th and 16th centuries, but again after c. 1750; in the Northern Netherlands, es­
pecially before and during its Golden Age, from 1560 to c. 1670, but continuing to some
degree during the 18th century; and in England, especially after about 1550.

When guild strength is mapped against economic performance, it shows an inverse rela­
tionship: strong guilds were associated with economic stagnation and weak guilds with
dynamism. Our best estimates of per capita GDP between c. 1300 and c. 1850 show that
stronger guilds were associated with lower output and slower economic growth, particu­
larly after c. 1500. Holland, England, and the southern Netherlands had the weakest
guilds and the fastest growth in Europe. Germany, Spain, and Sweden had the strongest
guilds and the slowest economic growth (Ogilvie, 2019). Those German polities that were
occupied after 1789 by the French, who abolished the legal and economic privileges of
guilds, experienced faster urbanization and economic growth later in the 19th century
(Acemoglu et al., 2011). Analysis of 282 cities in German-speaking central Europe be­
tween 800 and 1800 found that, controlling for other characteristics, cities with greater
representation of craft guilds on the city council experienced zero or negative economic
growth, as proxied by demographic expansion, and that the negative effect of craft guilds
gradually intensified over time (Wahl, 2019). A study of 85 cities in Germany, the Low
Countries, Switzerland, France, and northern Italy between 1000 and 1800 found that,
controlling for other characteristics, unsuccessful revolts by craft guilds had no effect on
demographic growth, but successful revolts that secured guild membership of city coun­
cils resulted in lower economic growth, as proxied by demographic expansion (Stasavage,
2017).

However, association does not imply causation. Many factors affect economic growth.
Cross-city analyses can control for some of these factors, but comparisons at a higher lev­
el of aggregation—particularly across entire polities or societies—can seldom do so ade­
quately. It would not be fair to blame slow economic growth solely on guilds. Central Eu­
rope, Iberia, and Scandinavia had other problems besides guild strength—absolutist
states, high taxes, devastating wars, rapacious landlords, monopolistic merchants, coer­
cive towns, predatory churchmen, and stagnant villages. Guilds were just one part of a
broader institutional framework in which political elites granted privileges to powerful
groups who used them to extract profits for themselves, thus harming the whole econo­

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Guilds and the Economy

my. Guilds mainly regulated manufacturing and trade, whereas agriculture—and thus
landlords and villages—mattered more. But although many factors stifled economic
growth, there are plenty of reasons to believe that guilds were detrimental to economic
performance.

Even if guilds harmed growth, perhaps they favored economic equality? Many guilds as­
pired to maintain internal equality among their masters. In fact, guilds often used equali­
ty to justify limiting competition. Many guilds forbade any master from keeping more
than one workshop, employing more than a specified number of apprentices and journey­
men, making or selling above a particular output quota, exceeding statutory business
hours, subcontracting to poorer masters, or advertising his wares. Guilds often forbade
their members to introduce innovative products or practices that might entice customers
away from their fellows. Such rules probably reduced inequality inside guilds—though
many guilds were still dominated by rich oligarchies (Lis & Soly, 2008).

But equality in the wider society is of more concern than equality inside occupations.
Guilds excluded wide swathes of would-be producers, especially women, minorities, mi­
grants, and people who could not afford to buy guild licenses. Guilds often enabled their
members to overcharge customers and underpay workers. This inevitably widened the
gap between the small group of privileged guild masters and the larger population of
workers and outsiders. A study of 297 German towns between 1300 and 1850 found that,
controlling for other urban characteristics, stronger guilds were associated with higher
economic inequality (Schaff, 2018). This is not surprising, given the politically sanctioned
market power that guilds created for their members. A study of eight OECD countries in
the early 21st century found that market power, by driving up prices of goods and ser­
vices, increases the wealth of the richest 10% of householdsby 10 to 24%; this implies
that public action to reduce market power, by either enhancing enforcement of competi­
tion law or reducing government-sanctioned barriers to entry, can substantially reduce in­
equality (Ennis & Kim, 2017). Where medieval and early modern guilds were strong
enough to enforce their market power, therefore, guilds almost certainly increased in­
equality in the wider society, because the benefit to guild members was surpassed by the
harm to the less well-off.

So what is the bottom line? Were guilds completely harmful? Or is there a middle course
we can steer in assessing the economic effects of guilds? Guilds varied a lot. There were
some that crushed competition and others that struggled to contain it. There were places
such as Florence or Lyons where a single guild might include multiple occupations, so in­
ternal squabbles impeded harmful collusion. In cities such as Bordeaux, half of all crafts­
men never formed guilds. In London, any member of any guild could practice any occupa­
tion he chose, and in Amsterdam guilds charged comparatively low fees and sometimes
even admitted women and Jews. But this did not mean those guilds were good. They still
aspired to block entry, restrict competition, overcharge customers, and underpay workers
—they were just not particularly effective in doing so. Even in places where guilds were
weak, the most dynamic industries escaped to guild-free enclaves and the open country­
side. Weak guilds struggled to stifle competition, which meant they caused less harm. But

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Guilds and the Economy

they were not actually beneficial. It is akin to asking whether there is a middle course we
can steer in assessing slavery or serfdom: these were good systems for slaveowners and
serf-landlords but bad for the economy as a whole. Some guilds were certainly less harm­
ful than others. But hardly any generated positive economic effects.

Further Reading
Davids, K. (2013). Moving machine-makers: Circulation of knowledge on machine-build­
ing in China and Europe between c. 1400 and the early nineteenth century. In M. R. Prak
& J. L. Van Zanden (Eds.), Technology, skills and the pre-modern economy in the East and
the West: Essays dedicated to the memory of S. R. Epstein (pp. 205–224). Leiden, The
Netherlands: Brill.

De Munck, B. (2018). Guilds, labour and the urban body politic: Fabricating community in
the southern Netherlands, 1300–1800 (1st ed.). London, UK: Routledge.

Epstein, S. A. (1991). Wage labor and guilds in Medieval Europe. Chapel Hill: University
of North Carolina Press.

Epstein, S. R. (1998). Craft guilds, apprenticeship, and technological change in preindus­

trial Europe. Journal of Economic History, 58(3), 684–713.

Gustafsson, B. (1987). The rise and economic behavior of medieval craft guilds: An eco­
nomic-theoretical interpretation. Scandinavian Economic History Review, 35(1), 1–40.

Heckscher, E. F. (1994). Mercantilism. London, UK: Allen & Unwin.

Horn, J. (2015). Economic development in early modern France: The privilege of liberty,
1650–1820. Cambridge, UK: Cambridge University Press.

Kisch, H. (1989). From domestic manufacture to industrial revolution: The case of the
Rhineland textile districts. Oxford, UK: Oxford University Press.

Ogilvie, S. (2014). The economics of guilds. Journal of Economic Perspectives, 28(4), 169–
192.

Ogilvie, S. (2019). The European guilds: An economic analysis. Princeton, NJ: Princeton
University Press.

Pfister, U. (2004). The introduction of the engine loom in the European silk ribbon indus­
try (17th–18th centuries). In N. Coquery, L. Hilaire-Perez, L. Teisseyre-Sallmann, & C.
Verna (Eds.), Artisans, industrie: Nouvelles révolutions du Moyen Age à nos jours (pp. 41–
54). Paris, France: ENS Editions.

Poni, C. (1991). Local market rules and practices: Three guilds in the same line of produc­
tion in early modern Bologna. In S. Woolf (Ed.), Domestic strategies: Work and family in
France and Italy, 1600–1800 (pp. 69–101). Cambridge, UK: Cambridge University Press.

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Privacy Policy and Legal Notice).

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Guilds and the Economy

Quataert, J. H. (1985). The shaping of women’s work in manufacturing: Guilds, house­

holds and the state in central Europe, 1648–1870. American Historical Review, 90(5),
1122–1148.

Wallis, P. (2008). Apprenticeship and training in premodern England. Journal of Economic

History, 68(3), 832–861.

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