4.1 The Commitment Problem and the Role of Merchant Guilds
This section not only presents the historical evidence on the merchant guild institution but intuitively introduces the main theoretical assertions. The historical evidence reveals the concern of medieval merchants with protecting their property rights abroad. Theory suggests the possible role played by the merchant guild institution in fostering trade. Historical analysis supports the conjecture that this institution prevailed.
4.1.1 Institutions and Commitment
Long-distance trade in late medieval Europe was based on the exchange of goods brought from different parts of the world to central cities or fairs located in geographically or politically favorable places. The combination of the gains from trade and of suitable locations for conducting exchange does not necessarily imply that exchange could occur without institutions securing foreign traders’ property. Rulers’ concerns about providing such security is reflected in the words of King Edward I, who noticed in 1283 that because foreign merchants' property rights were not well protected in England, “many merchants are put off from coming to this land with their merchandise, to the detriment of merchants and of the whole kingdom”.4
His words must be understood against the background of events such as the one that occurred in Boston, England, in or shortly before 1241. A Flemish merchant accused an English trader of not repaying a commercial loan. The result was
an uproar on all sides and the English merchants assembled to attack the Flemings, who retired to their lodging in the churchyard. The English threw down the pailings, broke the doors and windows and dragged out [the lender] and five others, whom they foully beat and wounded and then set in the stocks. All the other Flemings they beat, ill-treated and robbed, and pierced their cloths with swords and knives. Their silver cups were carried off as they sat at table, their